Futures Trading: Prop Firm Playbook

1. The Concept

A prop firm is a company that provides capital to traders so they can trade futures (and sometimes other markets) without risking their own money.

• You trade their money.
• You share the profit (profit split) according to the firm's rules.
• You are responsible for following risk limits; breaking them can end your account.

Logic: Prop firms exist because retail traders need leverage and capital, and the firm makes money from evaluation fees and trading agreements. Understanding this clears misconceptions—the firm is not giving free money, they have rules to protect themselves.

2. Examples of Popular Firms

• Topstep: Large US firm, standardized rules. Evaluation Cost: $150-$200. Funded futures account.
• Tradeify: Focuses on quick funding. Evaluation Cost: ~$100. Funded account with daily payouts.
• Alpha Futures: Flexible programs. Evaluation Cost: $100-$200. Futures and options.
• Lucid Trading: Longer evaluation, steady growth. Evaluation Cost: ~$150. Funded futures account.

Logic: Every firm has its own limits, evaluation style, and payout rules. Knowing the differences before signing up prevents surprises.

1. Two-Phase Evaluation

Most prop firms use a two-step system:

Evaluation

• You trade a simulated account to show discipline.
• You must hit a profit target without exceeding daily or total drawdown limits.

Funded Account

• Once you pass, you trade a real funded account under the same rules.
• Profit is split according to the firm's agreement.

Logic: The evaluation exists to ensure risk control. You are proving you can follow rules, not predicting the market.

2. Common Rules

• Daily Loss Limit: Maximum you can lose in one day.
• Total Drawdown Limit: Maximum cumulative loss allowed in the account.
• Profit Target: Minimum gain required to pass evaluation.
• Consistency Rules: Many firms require profits over multiple days to avoid spikes.

Logic: These rules are designed to protect the firm's capital. Understanding them prevents beginners from accidentally failing.

3. Beginner Mistakes

• Ignoring daily or total drawdown limits.
• Trying to hit the profit target too fast.
• Trading without knowing the firm's rules.

Checkpoint: If you can explain the evaluation process and limits for at least one firm, you understand Module 2.

1. Trading with Rules

Once funded:

• You can trade real profits.
• You are still bound by daily loss, total drawdown, and consistency limits.
• Profit withdrawals may be daily, weekly, or bi-weekly depending on the firm.

Logic: Funded accounts are not a license to trade without discipline. They reward rule-following rather than intuition or luck.

2. Common Funding Rules

• Daily Loss: If you hit this, account is locked for the day.
• Maximum Loss: Hitting this ends the account.
• Profit Withdrawal: May require multiple consistent profitable days.
• Contract Limits: Some firms limit the number or type of contracts per trade.

Logic: Every rule is about capital preservation. Funded accounts are a privilege, not a free ride.

3. Beginner Mistakes

• Treating the funded account like a demo.
• Ignoring contract limits or position sizing.
• Mismanaging withdrawals and consistency rules.

Checkpoint: If you can describe how a daily loss or total drawdown works in a funded account, you are ready for Module 4.

1. Key Factors

When choosing a prop firm, consider:

• Cost of evaluation – Can you afford the fee?
• Daily/Total Loss Rules – Tighter rules are harder to pass.
• Payout Frequency – Daily, weekly, or bi-weekly.
• Contract Limits – Some firms allow more contracts, some restrict minis only.
• News & Market Restrictions – Some firms forbid trading during major economic releases.

2. Firm Profiles

• Topstep: Bi-weekly payouts, strict consistency rules, high contract limits.
• Tradeify: Daily payouts, fast evaluation, smaller evaluation fee.
• Lucid Trading: EOD trailing drawdown, slower evaluation, focus on long-term consistency.
• Alpha Futures: Flexible program, can start smaller, emphasizes risk management.

Logic: Matching your trading style and risk tolerance to the firm's rules increases the chance of success and prevents frustration.

3. Beginner Mistakes

• Choosing a firm only based on marketing claims.
• Ignoring small print in the rules.
• Starting multiple evaluations without understanding limits.

Checkpoint: If you can compare two firms based on rules, payout, and evaluation cost, you understand Module 4.

1. Discipline is Everything

• Always follow daily loss limits.
• Respect profit withdrawal and contract rules.
• Track all trades carefully.

2. Record-Keeping

• Keep a simple journal of trades, profits, and rule compliance.
• Helps identify mistakes and ensures you stay within firm rules.

Logic: The prop firm system rewards discipline over risk-taking. Compliance is as important as profit.

3. Beginner Mistakes

• Forgetting to track daily losses.
• Exceeding allowed contracts.
• Missing withdrawal requirements and consistency rules.

Checkpoint: If you can explain your responsibilities in a funded account, you are ready for Module 6.

Common Pitfalls

• Misunderstanding evaluation rules.
• Chasing profits instead of following rules.
• Ignoring contract size, leverage, and loss limits.
• Treating funded accounts like personal money.

Logic: Many beginners fail not because they can't trade, but because they ignore structural rules. Avoiding these mistakes improves your chances of long-term success.

Next Steps and Certification

You understand what a prop firm is, evaluation process, rules, and funded account management.

You know the differences between Topstep, Tradeify, Lucid, and Alpha Futures.

You can identify common mistakes and avoid them.

Certificate Earned: Futures Trading: Prop Firm Playbook – Understanding Funded Accounts

Next Step: Once certified, you can safely enter evaluations with knowledge and confidence.