Evaluation Fundamentals
The two key risk thresholds in any prop evaluation, how they are calculated, when they reset, and how breaches may end the evaluation.
A simulated evaluation uses two risk thresholds, a daily loss limit and a maximum overall drawdown, to define how much a participant may lose in a single day and across the evaluation as a whole. Both limits are designed to encourage disciplined, consistent risk management and to keep account performance within a defined range.
The daily loss limit caps how much an evaluation account may lose within a single trading day, including realised and unrealised losses. It typically resets at a defined time each day. Reaching or exceeding the daily loss limit may end the trading day and, depending on the program, may end the evaluation itself.
The maximum overall drawdown defines the largest peak-to-trough decline allowed across the evaluation. It is generally measured against either the starting balance or the highest balance reached, depending on the program rules. Breaching the overall drawdown typically ends the evaluation regardless of progress toward the profit target.
Some programs apply a static drawdown anchored to the starting balance. Others apply a trailing drawdown that follows the account's highest balance up to a defined point. The mechanic chosen affects how much of unrealised profit is protected and how aggressively a participant can scale risk after reaching new equity highs.
Loss thresholds are typically calculated using account equity rather than just the closed balance, so floating losses on open positions also count. A participant may breach a limit intraday even before a position is closed. Reviewing equity, not balance, is therefore important when sizing positions or holding trades through volatile periods.
Position sizing, stop-loss placement, and exposure across correlated instruments can help keep daily and overall losses within the program's thresholds. Stop-loss orders are not guaranteed at the specified price during fast or illiquid markets. Avoiding oversized positions, news events, and overlapping correlated trades may reduce the risk of an unexpected breach.
Select your evaluation account to apply these concepts in a simulated evaluation program built around discipline, consistency, and risk management.