Position Sizing for Prop Firm Evaluations and Funded Accounts

Why a funded account breaks differently

On a personal trading account, the only person who decides whether your risk is too large is you. On a prop firm evaluation or funded account there is a second party, and it writes the limits into the contract: a maximum daily loss, a maximum total drawdown, sometimes a minimum number of trading days, and a profit target. Break any one of them and the account is gone, usually without a refund.

That changes what position sizing is for. On your own account, sizing keeps losses survivable. On a funded account, sizing is how you make sure a normal losing streak does not trip a hard rule. The arithmetic is the same arithmetic — the number of constraints just goes from one to three.

Every firm writes its own rules, and they differ on the details that matter most: whether the drawdown is static or trailing, whether the daily loss is measured on closed balance or equity including open positions, and whether there is a consistency rule on how your profit is distributed. Read the terms you actually signed. This page covers the arithmetic those rules force you to do; it cannot tell you your firm's specific numbers.

The three budgets, and why the smallest one wins

Your per-trade risk has to satisfy three separate constraints at once:

1. Your own percentage. Whatever you decided to risk per trade on any account, typically 0.5% to 1%.
2. The daily loss limit. Risking half of it on one trade means two bad trades end your day, and possibly your account.
3. The remaining distance to the maximum drawdown. This one shrinks every time you take a loss, which means the correct size shrinks too.

Taking the minimum of three numbers instead of one feels conservative, and it is. That is the point: the failure mode in an evaluation is not "I made too little money", it is "I breached a rule on day four and lost the fee". The tables below show how quickly one choice eats through a daily limit.

How many losses does each choice buy you?

Take a 100,000 USD evaluation account with a 5% daily loss limit (5,000 USD), a 10% maximum drawdown (10,000 USD) and an 8% profit target (8,000 USD). These figures are illustrative; substitute your own firm's numbers.

Read the 2% row carefully. Two consecutive losses and you are at 4,000 against a 5,000 daily limit — a third losing trade of the same size is no longer available to you, even though the setup may be perfect. And five consecutive losses takes the full drawdown. Losing streaks of five are not rare events; they are what ordinary variance looks like. There is no study needed to see this: it is division.

The right-hand column is the counterweight. Smaller risk means more winning trades to reach the target. This is the genuine trade-off in an evaluation, and choosing your per-trade percentage is choosing a point on that curve. The risk-per-trade arithmetic page covers the general version of the same decision.

The budget that shrinks while you use it

The piece most traders miss: after a losing trade, your distance to the maximum drawdown is smaller than it was an hour ago, so the size that was correct before the loss is too large after it. Suppose you decided beforehand that you want to be able to take five more consecutive losses before hitting the drawdown floor. Then your next trade gets one fifth of whatever room is left:

The most counter-intuitive part is the top row: with a full 10,000 of room and a five-loss plan you may risk up to 2,000, which is 2% of the account — larger than the 1% you started with. That is the arithmetic being honest, not permission. Whether you use it is a different question, and most traders answer it by keeping their own percentage as the binding constraint and treating the drawdown room as a safety buffer they never intend to reach.

Recomputing this before every entry is the whole discipline. It is also why "I risk 1%" is not a complete answer on a funded account: 1% of what, measured against which remaining budget?

Turning the budget into lots: EUR/USD example

Say the planned risk for this trade is 1,000 USD, and you are buying EUR/USD at 1.1000 with a stop at 1.0950, a 1-pip spread, commission of 7 USD per standard lot round turn, and a broker that deals in 0.01-lot steps.

Step by step

1. Effective stop distance: 0.0050 + 0.0001 = 0.0051.
2. Loss per standard lot, excluding commission: 0.0051 x 100,000 = 510.00 USD.
3. Add commission: 510.00 + 7.00 = 517.00 USD per standard lot at the stop.
4. Lots: 1,000.00 / 517.00 = 1.934 lots.
5. Round down to the step: 1.93 lots.
6. Check the worst case: 1.93 x 517.00 = 997.81 USD. Inside the 1,000.00 budget.

A 3.4% overshoot looks negligible on one trade. It is not: the reason to hold yourself to a number is so that the twentieth trade is still held to it. Twenty trades each risking 3.4% more than planned is a drawdown budget consumed about two thirds of a trade faster than you think.

Static versus trailing drawdown changes your inputs

Two firms with the same quoted "10% maximum drawdown" can behave completely differently.

Static drawdown. The floor is fixed at 10% below the starting balance and never moves. On a 100,000 account the floor sits at 90,000 for the life of the account, and your room is simply current equity minus 90,000. You can be down 8,000 on Monday and still have 2,000 of room on Friday.

Trailing drawdown. The floor follows your equity high. Start at 100,000 with a 10% trail and the floor is 90,000. Push equity to 108,000 and the floor rises to 108,000 x 0.9 = 97,200. Your room is now 108,000 - 97,200 = 10,800 — larger than at the start, because the room is measured from where you are to where the floor now sits. Profits raise your floor, which means an unsecured open profit that reverses can put you below it.

Whichever type you have, the practical rule is the same: compute your size against the distance from current equity to the current floor, not against the starting balance. On a trailing account halfway through a good month, those two numbers are thousands apart.

One more detail worth checking in your own terms before it bites: some firms count unrealised loss on open positions against the daily limit, others only count closed trades. If floating loss counts, a position that dips well below your stop before recovering has already consumed part of the budget, which argues for smaller size and a stop you actually place rather than hold in your head.

Rules that are not about size but are enforced through it

• Consistency rules. Some firms require that no single trading day accounts for an outsized share of your total profit, which effectively prohibits betting the target on one oversized trade. If your firm has such a rule, a big position that wins is as dangerous to the account as one that loses. Read the clause and size to stay inside it.
• Minimum trading days. A floor on how long the evaluation must run. It rewards steady small size and punishes trying to hit the target in three sessions.
• Restricted instruments and news windows. Some firms forbid holding positions through certain announcements. A flat instruction, not a sizing instruction — but sizing down does not help you here; being out does.
• Time limits. Some evaluations expire. An expired evaluation has no position size that rescues it.

None of these are arithmetic, and all of them are reasons the "correct" size for a personal account is the wrong size for a funded one.

Do the arithmetic before the entry, not after the breach

Three numbers to know before every trade on a funded account: your own percentage of the current balance, the daily loss you have left today, and the distance from your current equity to the drawdown floor. Take the smallest of the three, subtract spread and commission, round down, and check the worst case still fits.

The position size calculator does cost-aware sizing and shows the recomputed worst-case loss after rounding, which covers the last part. Your broker platform's lot step, and your firm's current floors, are the two things only you can supply.

Open the position size calculator

Related guides

• How much should you risk per trade? — losing streaks and drawdown recovery, pure arithmetic.
• How to calculate position size in forex — the four inputs and the full formula.
• Position sizing for crypto futures — contract size, funding rate and liquidation.
• Forex, stock and crypto position size calculator