Evaluation Challenge

The paid skills test a trader must pass to earn a funded account — typically one, two, or three phases with profit targets and drawdown rules.

Definition

An evaluation challenge is the multi-phase test a trader pays to attempt in order to earn access to a funded account. The trader must hit a profit target (usually 6-10% in phase 1, 4-6% in phase 2) while staying inside the firm's drawdown rules. Each phase has its own rules, time limits (or none), and profit targets. Failing any phase ends the challenge; passing all phases moves the trader to the funded-account stage. The evaluation is simulated — no real money is traded during the challenge.

Example

A trader pays $500 for a $100K two-step evaluation. Phase 1: reach 8% profit ($8,000) without breaching a 5% daily drawdown or 10% max drawdown. Phase 2: reach 4% profit ($4,000) with the same drawdown rules. The trader passes phase 1 in 12 days, phase 2 in 8 days, and is funded. Another trader hits 7.5% in phase 1 and takes a 5.1% daily drawdown loss the next day — evaluation over, fee forfeited.

Why It Matters

The evaluation's structure determines how hard it actually is, and structure details matter more than headline profit targets. A firm with an 8% target and a 5% trailing drawdown is dramatically harder than a firm with a 10% target and a 10% static drawdown — even though the second has a higher target. Traders comparing firms on fees alone miss the structural difference between evaluations and get surprised by pass rates.

Related Terms

Prop Firm
A company that provides trading capital to retail traders who pass an evaluation, splitting profits between the trader and the firm.
One-Step Challenge
A single-phase evaluation with one profit target — pass once and the account is funded, with no phase 2.
Two-Step Challenge
The most common evaluation model — two phases, each with its own profit target, usually 8% in phase 1 and 4-5% in phase 2.
Three-Step Challenge
An evaluation with three sequential phases, adding a verification step on top of the standard two-step model — rarer and typically cheaper.
Funded Account
The trading account granted after passing the evaluation — almost always simulated, with real profit splits and real payouts.
← All termsLast updated 2026-04-21