When you signup for a prop fund they all have specific rules they require you to follow to pass your evaluation and ultimately keep your funded account. They will tell you that these rules are intended for the purpose of helping you be consistent but some of them ironically actually promote inconsistency.
PropFund Judge
A rule that breeds inconsistency is a chain that binds one to the chaos of uncertainty, eroding the bedrock of principles essential for the pursuit of consistent profitability.
Drawdowns
Contrary to popular belief, a drawdown limit can be beneficial. Even a daily pause limit, like the one imposed by The 5ers, which doesn’t fail your account but prevents revenge trading, is a good rule. These rules, though frustrating when breached, serve a valuable purpose in curbing reckless and overleveraged trading.
However, not all drawdowns are created equal. Although a drawdown limit is generally beneficial, the manner in which many Prop Funds implement drawdowns is often designed to set traders up for failure.
Static drawdowns: Trusted prop firms like The 5ers and FTMO, among others, implement static drawdowns. ‘Static’ means it doesn’t change. For example, if you purchase a $100k account and your prop fund assigns a static drawdown of 10%, you will breach your account if it falls to $90,000. This threshold remains constant; regardless of any profits you make, your drawdown limit will never change.
Trailing or dynamic drawdowns: Unlike static drawdowns, a dynamic drawdown, also known as a trailing drawdown or trailing stop loss, moves every time you make profit. Depending on the prop fund, this trailing drawdown may halt once it reaches your original account balance. The issue with dynamic drawdowns is that they always move in a way that amplifies the odds against you. Regardless of your strategy, experiencing a losing streak is inevitable, and even the most successful strategies go through periods of consecutive losses. During such times, with the trailing drawdown moving against you, your buffer for absorbing losses disappears. For example:
Let’s use the prop fund Fx2Funding as an example. You purchase a $100k which requires a 10% profit to pass and has a 6% trailing drawdown. So your drawdown starts at $94,000. Your strategy is based on a fixed r:r of 1:3 and you only move your trade to breakeven once profit hits 1.5% This is a strategy you have back-tested thoroughly know the probabilities are in your favor. When you first started trading you struggled to maintain consistency and always exited winning trades early. Now you are consistent but the prop fund wants to make you inconsistent. Let’s see how.
You take your first trade it’s a winner, you hit your 3% profit target for the trade and exit. For simplicity of example we will not factor in commissions or spreads. Your account now sits at $103,000. Your drawdown has now moved from $94,000 to $97,000. The following day you take two trades on two different pairs. The first trade moves to 1.7% then retraces taking you out for a breakeven. At the same time you had another trade open that moves up to 2.7% then retraces to breakeven. You have taken zero losses, you have managed your account well but your prop fund is trying to fail your account.
Even though you are still 3% in profit, and you have consistently followed your strategy which you know will play out overtime, your trailing drawdown has moved further against you from $97,000 to $100,000. Now your drawdown has been reduced from 6% to 3%, even though your account balance has not diminished since the previous day and you haven’t taken a single loss.
On the third day you see two perfect setups and again take two trades on two different pairs, as per your strategy. They both impulse up in your favor passing 1.5%, so you move stop losses to breakeven. Because both trades moved to 1.5% in profit your trailing drawdown has now moved to $100,000. Unfortunately, after breaking 1.5% both the trades move back to breakeven and get stopped out. Your account remains at 3% profit, you have not taken any losses but your prop fund just terminated your account for “breaching their rules.” A rule that they will tell you ensures you are a consistent trader. Yet, the reason you breached the rule is because you are a consistent trader that knows his edge. Dynamic drawdowns are always created to benefit the prop firm and have zero benefit for the trader.
“Simulated” Slippage
Dynamic trailing drawdowns are the most common rule used by prop funds to encourage failure, but there are others. Some prop funds such as MFF actually manipulated the market introducing their own “simulated volatility” which is both unethical and a conflict of interests. Many newer prop firms use Eightcap, which is a broker that gives prop firms complete access to “simulate” slippage in individual accounts. If you happen to be doing really well they can just slip a few trades which will make you lose. We highly discourage the use of any prop firm using Eightcap for this reason.
Arbitrary lot size “consistency”
Consistency is important, but enforcing uniform lot sizes across different currency pairs is not just illogical—it’s scammy. A 5-lot position might equate to a 1% risk for one pair, yet increase to a 20% risk for another, especially when you factor in disparities in leverage between instrument types. Despite this, some prop firms insist on this “consistent lot size” policy, which lacks any sound justification and is nothing more than a scheme to excuse account terminations.
