# Prop Evaluation Rules and Account Constraints Translate an evaluation rulebook into explicit accounting and operational constraints. Use this workbook alongside the course. Write your answers before opening the solutions. Practical work is self-reviewed; scored knowledge checks are in the Academy. ## 1. Rulebook literacy ### Account type and legal terms An evaluation account may be simulated, funded under specific arrangements or subject to stages with different terms. Identify the legal entity and contract. Marketing use of funded does not by itself explain whose capital is traded or how payouts are determined. ### Balance versus equity Balance and equity differ when positions remain open. A rule may use one or both and may include fees or financing. Reproduce the provider's definitions rather than substituting a familiar dashboard field. ### Permitted instruments Permitted instruments, order types and strategies can be restricted. A technically accepted platform order may still breach an account agreement. Keep the applicable rule version and clarify ambiguous provisions through official channels. ### Payout and consistency conditions Payout and consistency conditions can depend on days, concentration or other defined metrics. A positive account result does not automatically mean immediate payout eligibility. Read the conditions as accounting rules that must be tested. ### Worked example A hypothetical evaluation reports a balance of 50,500 and open loss of 700, giving simplified equity of 49,800. A rule based on equity can be breached even while closed-trade balance shows a gain. ### Independent exercise Explain what records are needed to evaluate that rule at the time it is measured, without using a later closed-trade result. My inputs and assumptions: My calculation or decision: Evidence that would change my conclusion: ## 2. Loss rules ### Static drawdown A static drawdown boundary is fixed by a stated reference under the rulebook. A trailing boundary moves according to a defined peak or balance measure. The words static and trailing are insufficient without formulas and measurement times. ### Trailing drawdown A trailing rule can use intraday equity peaks, end-of-day balance or another reference. These produce different thresholds. Model each event that changes the reference rather than checking only the final balance. ### Intraday equity calculations Intraday equity calculations need price marks and timing. A brief open-profit peak can raise a trailing threshold under some hypothetical rules, leaving less room after the position retraces even if the trade remains profitable. ### Daily boundary and timezone Daily loss boundaries depend on reset time, timezone and included costs. The calendar day on the learner's computer may not be the provider's rule day. Store the relevant timezone and date-aware reset convention. ### Worked example Under a hypothetical rule with a 2,000 trailing allowance, a peak equity of 52,000 sets a boundary at 50,000. A later equity of 49,900 breaches it even though it is near the original 50,000 starting account. ### Independent exercise Calculate the boundary after a peak of 53,500 under the same simplified rule. Explain why this is not a statement about every provider. My inputs and assumptions: My calculation or decision: Evidence that would change my conclusion: ## 3. Operational restrictions ### Event restrictions Event restrictions may apply to entry, holding, exit or a window around specified releases. Record the exact action and interval covered. A vague personal rule to avoid news may not match the contractual definition. ### Overnight exposure Overnight and weekend restrictions depend on the instrument and account terms. An unfilled order that remains active can also matter. Check working orders as well as positions before a required cutoff. ### Position limits Position limits can be gross, net, per instrument or account-wide. Opposite positions may not offset under the rule's definition. Convert quantities consistently and include pending orders if the terms require it. ### Copying and automation conditions Copying and automation conditions concern behavior and account relationships, not merely software capability. Verify the applicable permissions before assuming that a technically possible workflow is permitted. ### Worked example A hypothetical account forbids holding after a cutoff. The learner closes the position but leaves a working order that fills later. Position-only checking failed to address the order that recreated exposure. ### Independent exercise Write a cutoff checklist covering positions, working orders, acknowledgement and subsequent reconciliation. My inputs and assumptions: My calculation or decision: Evidence that would change my conclusion: ## 4. Scenario workbook ### Replay rule breaches Replay the rulebook against an event sequence, not only a final account balance. Include deposits, payouts, fees and open-equity changes where relevant. A rule breach can occur and later disappear from the final snapshot. ### Reconcile provider calculations Compare your calculation with the provider's reported values and investigate differences in timestamps, marks or definitions. Do not quietly adjust the formula to produce the desired answer without identifying the actual rule. ### Compare fees and eligibility Evaluation fees and eligibility conditions affect the economics of participating. Treat repeated resets and purchases as costs in the decision record. A nominal account size is not equivalent to unrestricted capital owned by the participant. ### Recognize that passing is not evidence of an edge Passing an evaluation demonstrates meeting particular conditions over a particular period. It does not establish a durable trading edge, future payout eligibility or personal suitability for larger risk. ### Worked example A strategy ends an evaluation above its target but crossed an intraday loss boundary earlier. A final-profit-only report misses the rule breach and gives the wrong eligibility conclusion. ### Independent exercise Create a replay table with timestamp, balance, open P&L, relevant peak, boundary and breach flag. State how uncertain marks should be handled. My inputs and assumptions: My calculation or decision: Evidence that would change my conclusion: ## Course project Model a hypothetical evaluation rulebook and identify paths that breach it despite positive P&L. ### Self-review rubric - Concepts and reasoning: 25% - Calculations, data and evidence: 30% - Process and risk controls: 25% - Limitations and communication: 20% Record one correction and one next practice task. This rubric is not automatically graded. ## Worked solutions ### Exercise 1 Use contemporaneous balance, open marked-to-market P&L, charges and the rule's measurement time and definition. A later recovery does not retroactively change whether the earlier threshold was crossed. ### Exercise 2 The boundary is 51,500. Actual rules may cap trailing, use different peaks or reset conventions and include additional terms. The exercise illustrates why the exact formula must be obtained rather than generalized. ### Exercise 3 Inspect and resolve both positions and pending instructions under the terms, wait for relevant acknowledgements and verify the account state after the cutoff. Preserve the evidence rather than assuming that a local click completed the action. ### Exercise 4 Calculate each boundary from the rule's available inputs and preserve the first breach event. Mark missing or uncertain observations explicitly; do not declare compliance when the required evidence is absent. ## Further reading - https://www.investor.gov/introduction-investing - https://www.cftc.gov/LearnAndProtect/forexfrauds