7 Prop Firm Myths New Traders Should Stop Believing
Prop firm rules look short on the page, but the detail is in how each rule is measured. Here are seven prop firm myths about…
Prop firm rules look short on the page, but the detail is in how each rule is measured. Here are seven prop firm myths about that detail. Each one is checked against FXIFY rules, using example numbers.
Prop Firm Myths About Drawdown and Daily Limits
Myth 1: “Trailing Drawdown Follows My Open Profit”
You have $250 of profit on an open trade. Does your breach level move up with it? No, it does not.
Your breach level is the level your account must stay above. On a trailing program, it follows your highest closed balance only. Profit on open trades does not count. The breach level moves up only when a closed trade raises your highest closed balance.
Here is how this works on One Phase, which has a 6% trailing max drawdown. On an example $10,000 account, the breach level starts at $9,400. Your loss allowance is $600. This is the gap between your $10,000 balance and the $9,400 breach level.
Now you close some trades in profit, and your highest closed balance goes up. Your breach level moves up too. Closed profit moves it, and open profit does not.
There is one more detail. The breach level stops moving at your starting balance of $10,000. This happens when profit reaches 6%, at a highest closed balance of $10,600. It also happens when a payout is processed.
Myth 2: “A Trade That Closes in Profit Cannot Reach a Limit”
Your trade closed in profit. So how did it reach a limit? The answer is in how the daily loss limit is measured.
The daily loss limit is set from your balance at 5PM EST (Eastern Standard Time) the day before. It is measured against your equity. Your equity is your balance plus or minus the profit or loss on open trades.
Look at One Phase, which has a 3% daily loss limit. Your balance at 5PM EST yesterday was $10,000. So your daily limit level is $9,700 in equity.
You open one trade, and it is your only trade that day. The trade falls $300, then recovers and closes in profit. The limit was already reached while the trade was open.
So the final result does not tell you everything. Watch your equity during the day, not only your closed trades.
Max drawdown has its own level. On a static program, that level is set from your starting balance and does not move. On a trailing program, it moves up with your highest closed balance, until it reaches your starting balance.
Myth 3: “My Daily Loss Limit Is the Same Every Day”
Writing “$300” on a note can feel safe. You use that number every day and stop checking it. The problem is that the number changes.
The daily loss limit is a percentage, not a fixed dollar amount. It is calculated again each day from your balance at 5PM EST. Here is a $10,000 One Phase account, with a 3% limit:
| Balance at 5PM EST | Daily loss limit | Equity level for the next trading day |
|---|---|---|
| $10,200 | $306 | $9,894 |
| $10,000 | $300 | $9,700 |
| $9,800 | $294 | $9,506 |
If your balance at 5PM EST is higher, your dollar limit goes up. If your balance is lower, your limit goes down. Check your number after 5PM EST each day.
Myth 4: “A Bigger Account Gives Me More Room”
A bigger account sounds like more room. In dollars, that is true. In percent, nothing changes.
In one program, the drawdown limits are the same percentage at every account size. Here are two example accounts on One Phase, which has a 3% daily loss limit:
| Example account | Daily loss limit (3%) |
|---|---|
| $10,000 | $300 |
| $100,000 | $3,000 |
A trade that risks 1% of the account uses one third of the daily limit on both accounts. The dollar amounts are bigger. The share of the limit that each trade uses stays the same.
Static drawdown works the same way. On Two Phase Classic, the max drawdown is 10% and static. On an example $100,000 account, your breach level is $90,000, and your loss allowance is $10,000.
The $90,000 breach level does not move, because your starting balance sets it. Your loss allowance grows as your balance grows. At a balance of $105,000, your loss allowance is $15,000.
Myth 5: “I Need Big Trades to Hit the Target Fast”
The profit target can feel far away, so you may think about taking bigger trades. Before you do, look at the numbers. Here is the example $10,000 One Phase account again, with a $300 daily loss limit:
- If you risk $150 per trade, two losing trades reach the limit.
- If you risk $100 per trade, three losing trades reach the limit.
- If you risk $50 per trade, six losing trades reach the limit.
Any strategy can have several losing trades, one after another. The smaller your risk per trade, the more losing trades you can have before the limit.
Open trades also count together. Two open trades that are each down $150 reach the $300 limit. Neither trade has to close.
A stop loss can also close your trade at a worse price than you planned. So a planned $100 loss can become bigger.
None of this is a rule for how much you should risk. That choice is yours. The numbers only show you what each choice costs.
Myths About Payouts and Account Terms
Myth 6: “My First Payout Will Take Weeks”
It is easy to expect a long wait between passing and getting paid. On the One Phase, Two Phase Standard and Three Phase programs, FXIFY offers First Payout On Demand. It works like this:
- Pass the evaluation and get your funded account.
- Close your first trade in profit on the funded account.
- Request your first payout.
The first payout has no minimum targets. Your share of the profit, called the performance split, is up to 90%.
Later payouts follow the schedule for your program. Other programs have their own first payout timing, shown on each program page. On Instant Funding, the first payout is available 14 days after your first trade.
A payout is never guaranteed. It depends on a funded account that stays within its program rules.
Myth 7: “Only the Loss Limits Matter”
Drawdown is not the only set of terms on your account. Other terms cover how you trade and which tools you use.
Expert Advisors (EAs) are programs that place trades for you. EA use is allowed on One Phase, Two Phase and Three Phase accounts and their funded accounts. It needs review and pre-approval by FXIFY support first.
If you use an EA without pre-approval, you can break the Terms of Service. The account can then be suspended, and its profits may not qualify for payout.
Do you plan to add an EA or change how you trade? Read the FAQs and your program terms first.
Rules can change. Check your program page before each new account. This guide explains how the rules work. It is not financial or trading advice.
