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.

Definition

A two-step challenge is the standard prop firm evaluation model: the trader passes two sequential phases before the account is funded. Phase 1 typically requires an 8% profit; phase 2 requires 4-5%. Drawdown rules apply across both phases, and failing either phase ends the challenge. The two-step structure exists to confirm that the trader can repeat their performance and was not lucky in phase 1 — a trader who passes phase 1 but fails phase 2 does not get funded.

Example

A trader buys a $100K two-step challenge. Phase 1: reach 8% ($8,000) without breaching a 10% max drawdown or 5% daily drawdown. They pass in 15 trading days. Phase 2: reach 4% ($4,000) with the same drawdown rules. They hit the target in 6 days. The account is funded at 80% profit split. A trader who passes phase 1 but takes a drawdown-breaching loss in phase 2 loses the challenge — phase 1 progress does not carry over to a new attempt.

Why It Matters

Two-step is the standard because it balances pass difficulty with repeatability: roughly 10-15% of traders pass both phases. The second phase is often where accounts fail — traders who passed phase 1 with aggressive risk are forced into a more conservative posture in phase 2 and sometimes cannot adjust in time. Firms like FTMO, E8 Funding, and Funded Next are the classic two-step operators.

Firms Using This (3)

FTMOE8 FundingFunded Next

Related Terms

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.
One-Step Challenge
A single-phase evaluation with one profit target — pass once and the account is funded, with no 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.
Profit Target
The percentage gain a trader must hit to pass a challenge phase — typically 6-10% in phase 1 and 4-5% in phase 2.
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