Rules 12 min read
The rules that actually close accounts
Rules are not equal. Some end the account the moment you cross them, some hold a payout until you fix something, and some are judgement calls made by a person after the fact. Knowing which is which is most of what risk management at a prop firm means.
The four outcomes
A breach closes the account. Daily loss limits and maximum drawdown are the usual causes, and at firms running their own platform the close is automatic and immediate, with no review and no appeal.
A payout rule holds your money without ending the account. Consistency requirements and minimum trading days sit here. You keep trading, you keep the account, you wait.
A profit rule voids some or all of the gain but leaves the account alive. News trading restrictions often work this way: the trade is struck rather than the account closed.
A judgement call is decided by a person reading your trading afterwards. Prohibited strategy clauses are mostly these, and they are the hardest to plan around because there is no number you can stay under.
Sort any firm’s rulebook into these four before you trade it. The exercise takes twenty minutes and it tells you which rules need a number in your trading plan and which need a habit.
The loss limits in detail
The daily loss limit is the most common cause of a closed account anywhere in this industry. The detail that catches people is what it is measured from: your balance at the start of the day, or your highest equity during it. Under the second, a day that goes $2,000 up and then $3,000 down has lost $5,000 against the limit, not $1,000.
The reset time matters as much as the number. Limits usually reset at 5pm New York, not at midnight where you live, so a trade opened in your evening may be sitting in yesterday’s allowance or today’s depending on which side of that line it falls.
Maximum drawdown is the account ending floor and behaves differently again, trailing your balance or your equity depending on the firm. It is covered properly in its own guide, because how it is measured changes the account more than any other single clause.
Both limits usually include open positions. A trader who is down against the limit on paper and intends to hold until it recovers may not get the chance, because the platform will close the account first.
Why the automatic ones deserve more respect
A rule enforced by the platform has no grace period. On firms running a branded risk engine, crossing a daily loss limit by a single tick closes the account in the same second, including on a position that would have come back.
This is worth more attention than the headline percentage. A generous limit enforced automatically can be more dangerous than a tighter one reviewed by a person, because the tighter one occasionally gets a second look and the generous one never does.
Enforcement style tends to follow the platform. Firms on their own branded platform generally enforce in software. Firms on MetaTrader more often run a separate risk process that sweeps periodically, which is why you occasionally read about accounts closed some minutes after the breach. Neither is better for you. They just fail differently, and slippage on a fast release can put you through a limit before any system of either kind reacts.
The ones nobody plans for
Inactivity clauses close accounts that go untraded for a period, commonly thirty days, which catches traders who step back after a drawdown or take a holiday. It is the easiest rule in this entire guide to avoid and one of the most common ways funded accounts are quietly lost.
Identity clauses close accounts where the verified holder is not the person trading. This is aimed at account sharing and sold accounts, and it also catches a trader who let a friend take over for a week.
Country clauses close accounts that should never have been opened, sometimes months after the fee was paid, and they are usually enforced at the first KYC check rather than at signup.
Prohibited strategy clauses cover arbitrage, exploiting stale quotes and hedging the same instrument across accounts. Some are written broadly enough to catch ordinary trading done at speed, which is why the specific wording matters more here than anywhere else in the rulebook.
None of these involve losing money in the market, and all of them end funded accounts. They are the clearest argument for reading the terms rather than the pricing page.
Reading a rulebook in ten minutes
Search the terms for a short list of words rather than reading start to finish: drawdown, daily, consistency, inactive, prohibited, discretion, void, and the name of your platform. Those eight searches surface most of what can end an account.
Read every sentence containing the word discretion. That is where the unmeasurable rules live, and their breadth tells you how the firm intends to behave when something ambiguous happens.
Write down the actual numbers, not the percentages: your daily limit in dollars, your floor in dollars, your consistency ceiling in dollars. Percentages are easy to misapply under pressure and a dollar figure on a sticky note is not.
Then check the date the terms were last updated. Recent changes with no announcement are worth knowing about before you fund, and they are the best single predictor that the rules will move again.
After a breach
Ask which rule, at what time, on which trade. A firm enforcing automatically can answer instantly, and an answer that takes days or never names a trade is worth pursuing.
Check the reset time and the measurement basis against your own records before accepting it. Genuine disputes do happen, most often where a limit was measured from peak equity and the trader had been calculating from the opening balance.
Resets are usually available and usually cheaper than a new evaluation. Whether that is worth buying depends on whether you breached because of variance or because the rule was structurally wrong for how you trade. The second will happen again.
Common questions
Can I get a funded account back after a breach?
Occasionally. Some firms sell a reset, and some restore an account where the breach was caused by a platform or data error. A breach of a hard loss limit in normal conditions is usually final.
What is the most common reason funded accounts are closed?
Crossing a loss limit, by a distance. The rules in this guide matter because they close accounts that were otherwise trading well, but the ordinary cause is still risk, and the trailing drawdown is the version of it people misjudge most.
Does slippage count against my daily loss limit?
Yes. The limit is measured on your actual balance or equity, so a fill worse than your stop counts in full. This is why trading a high impact release close to your limit is dangerous even with a stop in place.
What time does the daily loss limit reset?
Usually 5pm New York, which is the market day rollover rather than midnight anywhere. Check it, because a position held across that line is counted in a different day than most traders assume.
Can a firm close my account without telling me why?
The contract often permits closure under a discretionary clause without a detailed explanation. Whether a firm does that anyway is one of the clearest signals available about how it treats traders, and it is worth checking before funding rather than after.
Check it against the firms
Written from the firm terms we have read and dated. Rules change without notice, so treat anything here as the shape of the problem rather than the current wording at any one firm, and check that firm’s own page before you pay. Nothing here is financial advice.