The gain required to pass a prop-firm evaluation, usually 6% to 10% of the account size.
The target is set relative to the max-drawdown. A target that is two to three times the allowed loss forces traders toward either a high win-rate or a high risk-reward-ratio, and often toward taking more risk than they would with their own money.
Some firms also require the target to be earned across a minimum number of days and within a consistency-rule.
Example: $25,000 account, $1,500 target (6%), $1,000 trailing drawdown. A trader risking $100 per trade needs +15R net to pass without ever being down 10R from a peak.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Risk and reward on one trade. One trade on a price scale: the entry sits 2.00 points above the stop and 6.00 points below the target, so the shaded reward band is three times the risk band. The ratio compares what is lost if the stop is hit with what is gained if the target is reached.Equity curve and drawdown. An account balance plotted month by month. The fall from the $16,000 peak to the $12,000 trough is a 25% drawdown, and the shaded area lasts until the balance climbs back to the old peak.
Educational only, not advice. Spotted an error? Post in Site Feedback.