What is a prop firm, in plain words

A prop firm (short for proprietary trading firm) is a company that lets you trade its money instead of your own. You do not deposit a trading balance. You pay a fee to take a test, and if you pass it, the firm gives you an account funded with its money and you keep most of what you make on it.

That is the deal. The catch is that the firm protects its money with rules, and breaking one rule can end the account immediately: not reduce it, end it. Most traders who lose a funded account do not lose it by trading badly. They lose it by breaking a rule they had read and forgotten.

The words you keep seeing

Challenge / evaluation

The paid test. Hit a profit target without breaking any rule.

Phase

One stage of the test. Many firms have two: phase 1, then phase 2 with an easier target.

Funded account

What you get after passing. Real firm money, same rules, and now you get paid.

Profit target

How much you must make to pass, often 8 to 10% of the account size.

Payout / withdrawal

Taking your share of the profit out. The firm sets your share, often 80 to 90%.

Account size

The number the rules are measured against: $50,000, $100,000. It is not your money.

Equity

Your balance plus the profit or loss of the trades still open, right now.

Drawdown

How far the account has fallen from a reference point, such as its start or its highest value.

The rules that actually end accounts

There are many rules. These are the ones that catch people, in the order they catch them.

1. 1Daily loss limit. The most you may lose in one trading day. Open trades count while they are open, so a position deep in the red can break it before you close anything. At some firms the day is measured from the higher of the day's starting balance or equity, which means giving back profit you carried into the day counts as a loss. Read more.
2. 2Maximum drawdown. A floor your account may never fall below. If it is trailing, the floor rises as you make money and never comes back down, so a profitable week permanently raises the level that would end you. Read more.
3. 3News rule. On many funded accounts you may not open or close around a big release. Some firms count a stop loss filling inside the window as a breach, which is not something you can control once you are in.
4. 4Holding past the close. Some funded forex accounts may not hold a trade over the weekend.
5. 5Consistency. One huge day can block a payout or raise your target, because the firm wants steady trading rather than one lucky punt.

Where FxMind fits

FxMind keeps your firm's published rules for your account type, phase and size, checks your live account against every one of them, and tells you the room you have left before you run out. *You can lose $420 more today.* *Your floor is $98,400 and you are $1,600 above it.*

It warns you at 70% and 90% of a limit. If you linked the account with the master password and gave permission, it can also close or reduce a trade for you at a level you choose. It never opens a trade, never adds to one and never moves a stop further away.

What to do first

1. 1Link the account you trade: Start here, step 2.
2. 2Open Guards, pick your firm, account type, phase and size, and save: Set your prop firm rules.
3. 3Read your firm's own rules page next to FxMind and check each number.

Next: what the daily loss limit really means.