Prop firm challenge
A prop firm challenge is a paid evaluation in which you trade a simulated account under strict rules; reach the profit target without breaching any loss limit and you qualify for a funded account.
The most common format is the two-step challenge. The evaluation phase commonly requires an 8% gain, and the verification phase 5%, each under a daily loss limit of commonly 4–5% and a maximum drawdown of commonly 10%. One-step challenges compress this into a single phase, usually with a smaller target and a tighter, often trailing, drawdown; the trade-offs are compared in one-step vs two-step challenges.
Attempts are priced by account size, commonly $50–$600, and the fee is often a refundable fee returned after you reach the funded stage or a first payout. Most firms also require minimum trading days per phase, and some apply a consistency rule that caps how much of the total profit a single day may contribute.
Commonly cited industry figures put pass rates low: a large majority of attempts fail, most often by crossing the daily loss limit during a losing streak rather than by missing the target. The recurring patterns are examined in why traders fail prop firm challenges.
Example
On a $100,000 two-step challenge with typical numbers, phase one requires $8,000 of profit while equity never falls $5,000 in a day or $10,000 overall; phase two requires $5,000 under the same limits. Passing both grants a funded $100,000 account; breaching either phase ends the attempt and the fee is spent.