Choosing a prop firm for an EA, and the rules that matter

By Otto Research 3 min read Article 86 of 95

The prop firm page explained how an evaluation works. Choosing a firm for an EA is a narrower question: which firm's rules can this system live inside, and what does the firm do when it passes.

Automation rules

Most firms permit EAs. Some ban specific approaches: high-frequency trading, tick scalping, latency arbitrage, and sometimes grid or martingale. Some restrict trade copiers, or identical trades across several accounts. Some require that the strategy be yours rather than a purchased one. Read the prohibited-strategies list before paying, and expect a firm to enforce it after a payout request rather than before.

How loss is measured

The daily loss limit may be measured from the previous day's balance or from its equity, and it may include or exclude floating losses. The overall limit may be static, fixed at the starting balance, or trailing, rising with the account's high-water mark so that profits cannot be given back. A trailing limit is much harder for a system with ordinary drawdowns. Ask which, and read the exact definition, because the firm's measurement is the one that counts.

The other rules

Minimum trading days before a pass. Consistency rules that cap how much of the profit may come from one day. Weekend holding rules that require positions closed by Friday. News rules that forbid trading in a window around releases. Each is a constraint on the EA's design, and a multi-market system holding positions for days may be unable to satisfy the weekend rule at all.

Structure and payout

One-step evaluations have a single target and usually a tighter loss limit; two-step evaluations are longer and more forgiving per phase. Instant funding skips the evaluation for a higher fee and a lower profit split. Payouts vary in frequency, minimum, and split, and the conditions attached to the first payout are where firms differ most. Resets and scaling plans decide what a failure costs and what success leads to. Almost all funded accounts are simulated; the firm pays from its own funds, and several firms have paused or withdrawn payouts. The fee is spent the day it is paid.

Worked example

An EA holds positions for two to six days across indices and currencies. Firm A has a static 10 per cent overall limit, a 5 per cent daily limit measured on equity, permits EAs, and allows weekend holding. Firm B has a trailing limit, requires all positions closed on Friday, and forbids trading in a thirty-minute window around every high-impact release. The EA can run at Firm A in its prop mode. At Firm B it cannot run at all.

What this means when an EA is trading

Compare firms on the rules that bind an EA, not on the profit split, and check the EA's own settings against them: total open risk against the daily limit, holding period against the weekend rule, news filter against the news rule. A firm whose rules the EA can meet, with a margin, is the only kind worth paying, and the fee should be treated as the cost of an experiment rather than an investment.

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