Practitioner course in trader judgement
Prop Trading Firms: Evaluations, Rules and Payouts
Prop trading firms offer traders a funded account after a paid evaluation. This course explains how the evaluations and their rules work, why trailing drawdown rules fail so many traders, what the fees and payouts mean for your expected return, and how to use your own record to decide whether, and how, to attempt one.
Prop trading has changed. Alongside the traditional firms that hire and train traders, a large industry now sells evaluations: pass a trading test under strict rules and trade the firm’s capital for a share of the profit. Most people who attempt these evaluations fail, and the rules are a large part of the reason. This course shows you how the rules work and how to judge your chances honestly.
How do prop trading firms work?
A funded-trader firm charges a fee for an evaluation with a profit target, a daily loss limit and an overall drawdown limit. Traders who pass trade a funded account and keep a share of the profit. The firm earns from fees as well as from successful traders. The course explains the economics so you understand what you are buying.
Why do most traders fail prop firm evaluations?
Because a profit target and a tight drawdown limit together reward large size and punish ordinary losing runs. A trailing drawdown rule can end an attempt after a profitable start. The course has you simulate the rules against your own record to see how often you would pass, before you pay.
Who is this course for?
Traders considering a funded account, and funded traders who want to keep theirs. No programming is needed.
What you will be able to do
- Explain the business model of funded-trader firms and where their revenue comes from.
- Read an evaluation's rules and calculate the effect of profit targets and trailing drawdowns.
- Estimate your probability of passing from your own trading record, with a spreadsheet simulation.
- Plan an evaluation attempt with sizing and daily limits suited to the firm's rules.
Syllabus, module by module
The funded-trader industry
Evaluation fees, funded accounts, profit splits and how the firms make money.
Reading the rules
Profit targets, daily loss limits, static and trailing drawdown, and consistency rules.
Your odds
Simulating an evaluation from your own trade record to estimate the chance of passing.
Sizing for the rules
Position size and daily stops that respect the drawdown rule rather than fight it.
Fees and payouts
The expected cost of attempts against the expected payout, and when it is not worth it.
Choosing a firm
Rules, reputation, payout history and the warning signs of a firm to avoid.
How the certificate is earned
Weekly exercises and two graded problem sets: a comparison of four firms' rules and costs, and a simulated evaluation run on your own record with a written plan. On a pass you receive the Course certificate in Prop Trading, issued by the Institute with a verification code. Read how certification works.
Before you start
The Trading Plan: Ideas, Information and Rules.
This course counts toward
- Advanced Certificate in TradingThe third semester of the trader path, for a certified trader at advanced level: order flow, futures, momentum and breakouts, global macro, fundamental analysis, how desk traders think, prop trading firms and overtrading, with a desk-style simulated book as the capstone. No programming.
- Diploma in Professional TradingThe top credential on the trader path and the Institute's trading certification for people who do not write code. Three semesters, 24 courses and a 160-hour capstone, from a first lesson on how markets work to a six-month simulated trading business reviewed like a desk.
Questions applicants ask
Are prop firm challenges worth it?
For a trader whose record shows a real edge and controlled drawdowns, they can be. For most traders the fees add up faster than the payouts. The course has you calculate your own expected value from your record before you pay for an attempt.
Does the Institute recommend particular firms?
No. The course teaches you how to compare firms on their published rules and history, and the Institute has no commercial arrangement with any of them.