Prop Firms: 90% Fail the Evaluation, and One Firm Was Sued for Making Sure of It
Instrument: Forex, metals, stock indices (FTMO & The 5ers) · September 9, 2026
Prop firms are marketed hard to retail traders: pay for an evaluation, pass it, and receive hundreds of thousands of dollars in 'capital'. This report is interesting not for its strategy but because the author actually went through the process — 21 weeks across two providers at once, FTMO and The 5ers, $100,000 per account, trading Smart Money Concepts in the Inner Circle Trader style, with ChatGPT used as a prop against the psychological pressure of drawdowns.
First, its standing. This is not a journal paper but an Interactive Qualifying Project report at Worcester Polytechnic Institute. Its own cover page states that 'WPI routinely publishes these reports on the web without editorial or peer review'. The sample is one person and the results are self-reported. Read it as a well-documented account of an experience, not as evidence.
The number most worth remembering sits in the chapter 'Why Traders Fail Prop Firm Evaluations': roughly 90% of evaluation participants fail (citing Dapo, 2024). The obstacle, the report argues, is not a shortage of capital or opportunity — it is the psychological demand and the severity of the risk rules.
The typical rules run like this: on a $100,000 account, maximum drawdown is capped at 10% of account value and no more than 5% on any single trading day. That is the entire margin for error. Six causes of failure are listed: weak risk management, psychological pressure during drawdown, an untested strategy edge, over-leveraging to recover losses, misreading the evaluation rules, and inexperience.
But the most important part of the report is its regulatory chapter, and it rarely appears in prop-firm marketing. In 2023 the US Commodity Futures Trading Commission (CFTC) took action against My Forex Funds (Traders Global), one of the largest prop firms at the time.
The allegations are severe. The CFTC alleged the firm acted as the COUNTERPARTY to its own traders rather than routing orders to a liquidity provider. From that position it was accused of engineering price slippage against successful traders, imposing commission structures that systematically eroded account equity, and using specialised software so customer orders filled at worse prices than those displayed. The CFTC described it as 'handicapping the extremely small number of successful customers to decrease customer profits and increase customer losses'.
The scale was large: more than 135,000 customers signed up from November 2021, paying at least $310 million in fees. The complaint further alleged proceeds were used to buy luxury homes and cars. Which means that in a business model like this one, evaluation fees can be the primary revenue — not a share of what successful traders earn.
The reasonable conclusion is not that prop firms are a scam. FTMO and The 5ers ran their evaluations by the stated rules and a payout was requested. The reasonable conclusion is: treat the evaluation fee as money you may simply lose, check whether the provider routes orders to the market or takes the other side of them, and remember that a 5% daily drawdown rule punishes one emotional decision far harder than your own account ever would.
Inspect the MQL5 illustration
//+------------------------------------------------------------------+
//| NOT A STRATEGY — a prop-firm rule guard |
//| Derived from the limits described in the report |
//+------------------------------------------------------------------+
// The report provides no EA. What can be reused are the rules: the
// loss limits that wash out 90% of participants.
//
// Two limits run at once, and the DAILY one usually kills the account
// first:
// - Total drawdown : 10% of the starting balance
// - Daily drawdown : 5% of that day's opening balance
input double StartBalance = 100000.0;
input double TotalLimitPct = 10.0;
input double DailyLimitPct = 5.0;
input double RiskPerTradePct = 0.5; // conservative; many use 1-2%
double dayOpenBalance = 0.0;
datetime recordedDay = 0;
void RefreshDailyAnchor() {
MqlDateTime t; TimeToStruct(TimeCurrent(), t);
datetime today = StringToTime(StringFormat("%04d.%02d.%02d", t.year, t.mon, t.day));
if (today != recordedDay) {
recordedDay = today;
dayOpenBalance = AccountInfoDouble(ACCOUNT_BALANCE);
}
}
//+------------------------------------------------------------------+
//| Returns false when opening a position would risk breaching either |
//| limit. Call it BEFORE every order. |
//+------------------------------------------------------------------+
bool MayOpenPosition() {
RefreshDailyAnchor();
double equity = AccountInfoDouble(ACCOUNT_EQUITY);
double totalFloor = StartBalance * (1.0 - TotalLimitPct / 100.0);
double dailyFloor = dayOpenBalance * (1.0 - DailyLimitPct / 100.0);
if (equity <= totalFloor) {
Print("TOTAL drawdown limit reached. Evaluation failed.");
return false;
}
if (equity <= dailyFloor) {
Print("DAILY drawdown limit reached. Stop until tomorrow.");
return false;
}
// Distance to the nearer floor sets what position size is reasonable.
double roomLeft = equity - MathMax(totalFloor, dailyFloor);
double plannedRisk = StartBalance * RiskPerTradePct / 100.0;
if (plannedRisk > roomLeft * 0.5) {
Print("Position size too large for the remaining loss headroom.");
return false;
}
return true;
}
// Note: sizing up to recover losses is failure cause number 4 in the
// report. The function above shrinks as headroom shrinks — the opposite
// of the natural impulse.