A prop firm evaluation process is a way to test how well you can trade before the prop firm can risk offering you access to significant capital in your own funded account. Typically, prop firms ask you to undertake a one to three-step challenge. These challenges have well-defined profit targets, drawdown limits and strict management rules.
What is the Prop Firm Evaluation Process?
How do proprietary trading firms decide that you’re worth offering a funded trading account? The answer is simple: they ask you to undergo a thorough prop firm evaluation process.
You are offered a trading test, complete with fake money to see if you have actual skills to earn money without losing it all through reckless trading decisions. Think of it like a driving test, but for traders.
Here’s what happens. You’re asked to pay an entry fee, depending on the size of the account you are planning to trade. The prop firm assigns you a simulated funded account (or sim for short). The account lets you trade virtual capital. You are tasked with meeting specific profit targets within a certain amount of time, while ensuring that you do not exceed predefined risk limits and drawdowns.
The firm monitors your ability to:
- Make money
- Manage risk appropriately
- Do both of these consistently
Using this system of demo accounts saves prop firms a lot of trouble (and their own money). The financial markets are far too risky to let a novice handle the firm’s capital without any testing. This evaluation process helps them avoid significant risk before letting traders access their money.
If you pass the process, you’re in. You get to trade with real money, keep 70-90% of the profits from the trading, and enjoy the benefit of trading without risking your own funds.
Breaking Down the Evaluation Models
Different prop trading firms structure their evaluations differently, and knowing these nuances helps.
Here is how they generally work:
One-Step Challenges
The simplest process is the one-step challenge model. The idea is to hit a single profit target (which is typically around 8 to 10%) while following the risk management rules.
It’s the cleanest way to get access to a funded trading account. But the problem is that these challenges have very tight rules. You need a lot more expertise to crack them, unlike the 2-step and 3-step challenges. Moreover, firms charge higher evaluation fees. If you’ve perfected your trading strategy and just want to get an account quickly, this could be a good option for you.
Two-Step Challenges
The next process is a two-step challenge. In most cases, the second challenge almost always has a more relaxed target, because they’re trying to judge consistency and ability to manage financial risk rather than competence.
Three-Step Challenges
Some firms, such as Seacrest Markets, also offer a three-step challenge program. The idea here is to add one more verification layer to reduce the risk for the firm, but as a trader, you can also view it as one more chance to prove your competence and risk management capabilities. Why would you want to choose a three-step challenge? Because the payout structures and scaling plans offered in these challenges are often better than those offered in the 1-step and 2-step challenges.
Comparing 10 Prop Firms’ Evaluation Processes
Here’s how some of the biggest prop firms structure their challenges.
1. Seacrest Markets (formerly MyFundedFX)
Seacrest Markets’ prop firm evaluation program is one of the best. Their most popular funding option is the three-step challenge process with no time limit. The profit split after passing the evaluation is 80%.
In Phase 1, you need to earn 8% profit. The drawdown limits are 5% every day and 8% maximum. In Phase 2, you get a live sim account. If you normally follow a range trading strategy or prefer swing trading, you will find their program one of the best in the industry.
The biggest benefit of Seacrest Markets is the lack of psychological pressure to achieve the required targets. You don’t have to rush and feel pressured due to the strict time limits in other cases. Moreover, their scaling plans that allow you to manage significant capital (up to $1 million) fairly quickly are very important for those looking to level up in their trading career.
They also offer significant flexibility around trading style, whether it be swing trading, scalping, or day trading. Their plan discourages taking excessive financial risk, such as their complete ban on news trading (where trading around major economic announcements), as this can cause huge losses in a very short period.
2. FTMO
FTMO is one of the more well-known prop trading firms. They offer a two-step evaluation process where you need to demonstrate at least a 10% profit in the first phase, followed by a 5% profit in the second phase. Their drawdown limits are 5% daily and 10% max. Their process, however, is more difficult because they require four minimum trading days. FTMO is a decent choice for more skilled traders.
3. FundedNext
This prop firm offers multiple paths to getting a funded account. Their Express 1-step model requires a 10% profit, whereas for the Evaluation (2-step) model, you need to achieve an 8% and then a 5% profit. Their risk parameters are comparatively friendly, and they allow news trading, which is often restricted by prop firms. Depending on the plan you’ve opted for, the profit split is in the 80-90% range.
4. The 5%ers
The 5%ers have a very different evaluation model. Their Hyper Growth program lets you start out with a small ($5,000) account. Every time you achieve the profit target (10%), your funded account doubles, right up to $4 Million. Their stop-out level is 6% and the daily pause is 3%.
They allow news trading and do not have time limits on their challenges, but if the account remains dormant for more than 30 days, they remove it from their system. The 5%ers account is best suited to traders who are able to demonstrate consistent profitability.
5. Apex Trader Funding
Apex Trader Funding offers a single-step challenge model with zero daily loss limits. You get to keep 100% profit splits until you reach $25,000. After that, the split is 90%. If you prefer a more volatile trading style, this is one of the best deals you can get.
6. City Traders Imperium
This prop firm offers both 1-step and 2-step challenges. They also have an instant funding option where you get a funded account with zero challenges (but the upfront payment is obviously higher).
Their challenges do not have a time limit, and their rules are fairly relaxed. The profit splits are between 70-100%.
7. Blue Guardian
Blue Guardian allows traders to quickly scale from almost nothing to $400,000. They offer three evaluation plans: 1-step, 2-step, and 3-step. Profit splits are 90% across the board, but the 3-step challenge has lower profit targets, higher drawdown limits, and is more affordable than the other two. Their program emphasizes consistency and risk management.
8. E8 Markets
E8 Markets also offers 1-step, 2-step, and 3-step challenges. For 1-step, the profit target is 9% with a trailing drawdown of 6%. For the 2-step, the profit target is 8% but there’s a 4% daily loss criterion and an 8% initial balance loss criterion. The 3-step challenge rules are the simplest: 5% profit and 5% daily loss. Profit splits are 80-100% after evaluation challenges are completed.
9. Funding Pips
Funding Pips has 1-step and 2-step challenge programs with relatively low drawdown limits (10% max, 5% daily) and flexible evaluation requirements. They are popular for their quick payout.
10. Maven Trading
Maven Trading has a 1-step evaluation process where the profit target is 8% the trailing drawdown is 5%. You can scale your account up to $200,000, and the profit splits are 90%. They have stricter rules around position sizing as compared to other prop firms.
How Do You Actually Pass a Prop Firm Evaluation?
Step-by-Step Challenge Strategy
Passing prop firm evaluations requires careful planning and a strategic approach, which is different from regular trading. Here’s a step-by-step guide on what you need to do.
Step 1: Selecting Your Account Size and Model
A good idea is to start small. Most traders think they should start with a bigger account size, but a more logical idea is to pass the evaluation first and then scale.
For example, an account size of $10,000 with an 8% profit criterion would require you to generate just $800 in profit, but a $10,000 account would require an $8,000 profit. The percentages are the same, but psychologically, the absolute number matters.
Moreover, if you’re new to prop trading, choose a 2-step or even a 3-step because they have easier criteria to manage.
Step 2: Prepare a Trading Plan
A well-defined trading plan is an absolute must. Choose one path: whether it be breakout trading, swing trading, or a range trading strategy, and then stick to it. Also, fix your risk-to-reward ratio and maximum loss per trade beforehand. Typically, a 1:2 reward ratio and 1% max loss is recommended. Learn about the trading platform setup by reading guides and watching educational videos.
Step 3: Backtest and Refine
Most major trading platforms like MetaTrader 4/5 or cTrader have built-in backtesting capabilities, and you should make full use of them. Try out your chosen strategy by running a backtest on at least 100 trades from historical data, and see if it is working out. Successful traders often do 500 or even 1000 trades in backtesting before they actually begin trading.
Step 4: Initially Focus on Consistency, Not Speed
Perfect your risk management strategy first. During the first week of the challenge, limit the number of trades and instead see if you can manage risk appropriately before trying to hit your profit targets. Learn the environment and tools. Many traders drop out after the first week because they go for quick profits and end up blowing their drawback criteria.
Step 5: Scale Up
Once you’re comfortable with risk control, increase position sizing. Increase risk per trade gradually, going up from 0.5% to 0.75% to 1% over trades. Keep your portfolio protected from market volatility while still working towards the profit goals.
Step 6: Adapt to Drawdown Rules
Once you start scaling up, it's important to keep track of the firm’s risk management rules.
Some use static drawdowns (a percentage of the opening balance), whereas others use trailing drawdowns (a percentage from the highest account value), which are harder to track. Be aware of the rules followed by your prop firm and manage risk accordingly. In most platforms, you can set alerts for when you are nearing the drawdown limit.
Step 7: Ensure Minimum Trading Days are Met
Firms prefer to see traders who are active and make consistent profits, so they keep minimum trading day requirements in their firm evaluation criteria. For example, four minimum trading days is a common practice for most prop firms. But this doesn’t mean that you need to keep trading every day. Remember to pursue quality over quantity. Trade only your best setups, not all, keeping your overall trading plan in mind. Do not try to force trades in order to ensure trading rules are met.
Step 8: Document Your Path.
Trading evaluation is just the beginning. Prop trading is a long journey where your experience and insights from every step along the way matter more and more as time passes. So right from day one, make sure you maintain a journal that logs every trade, every entry, exit, your trading rationale, and other significant factors. When things become tougher later on, your journal will stand you in good stead.
What Are Some Common Mistakes That Can Kill a Prop Firm Evaluation?
This is an important section, because even experienced traders can slip up because of these mistakes. Below are some of the more common reasons traders slip up in their prop firm evaluation process.
Revenge trading
Losses are hard to deal with, but what’s worse is trying to recoup them by abandoning your trading plan and jumping back in the market. If you find yourself itching to “make it up.” 15 minutes after you make a loss, shut down your machine and go for a coffee break. It’s a common mistake, and the worst possible thing to do at that moment. Avoid revenge trading at all costs.
Poor Risk Management
When you’re confident about a setup, you can be tempted to risk 3% instead of the 2% max your trading plan dictates. You tell yourself it’s “just this once.” Bad idea. Prop firm challenges are extremely unforgiving when it comes to poor risk management, even if you have a high win rate. One miss, and you can find yourself on the sidelines.
Ignoring Consistency Rules
Some firms build in consistency rules into the trading evaluation process that are meant to ensure that you’re not a one-hit wonder. For example, they might say you can’t have more than 30% of your profit from a single day’s trade. These kinds of rules can be difficult to manage. Even if you’re sure of a trade setup, spread your wins across multiple sessions.
Trading During Restricted Times
News trading is strictly prohibited by most prop trading firms. Events like the FOMC meeting, NFP announcements, etc, can cause market volatility and your trades to hit their stop losses, so even if your trading strategy does not revolve around news trading, make sure you factor it into your setups to ensure you don’t end up violating the challenge rules.
Overtrading Due to Boredom
Overtrading is bad, but when you do it out of boredom, it is worse. You might be near to hitting all your targets but still have some time to go in the challenge, so you decide a few small trades won’t hurt - big mistake. A solid trading plan works only when it is followed to the hilt. Wait for the right opportunity, don’t force it.
Position Sizing Mistakes
It’s a common mistake to be tempted to increase your position size, but it can hurt you big time. In forex trading, position size depends on pip values, which change as per the pair and the lot size, so do the hard work and calculate the numbers before setting up your trade.
The Psychology of Evaluation Trading
Evaluation trading requires you to remain calm and focused under a lot of psychological pressure.
In normal trading, you win some and lose some, but always have a chance to win your losses back. You make your own rules; no one can tell you what to do because it's your capital.
Evaluation challenges are different. If you want to gain (and maintain) access to the prop firm’s capital, you need to demonstrate steady performance, follow strict risk management rules, and follow a proper challenge trading strategy to succeed.
One bad day, and you could fail, lose out on your initial entry fees, and have to start over again. For this reason, you need to abide by the risk rules and practice effective risk management strategies at all times.
Emotional control is key here. The evaluation trading challenge process means that you can’t just do what you want. That means no “I feel lucky today.” Set objective rules for trading, and ensure you stick to the trading plan at all times. You can’t control the outcome, but you can control the process - so that’s what you need to focus on.
Profit maximization seems to be the logical objective of all trading, but that’s not true for evaluation challenges. Here, capital preservation is equally—if not more important. Finishing your challenge with 8.5% profits is a better idea instead of crashing out with 12% profit, but one bad day when you hit your drawdown limits. Only disciplined traders who understand the value of patience can win at this game.
Another important part is managing the fear of failure. For example, many traders quit after the first few days simply because they’re too nervous about hitting their drawdown targets, rather than actually planning to recover the profits and working as per their plan.
How to Scale a Funded Account?
Prop firms offer scaling plans that let you multiply your trading capital once your initial evaluation is complete. In most cases, these plans are milestone-based.
You need to achieve profit targets specified by the form in order to grow your capital. Typically, this also includes your ability to ensure consistent performance and follow risk management rules. If everything goes right, successful traders can handle accounts of $500,000 or more in a matter of less than a year.
Scaling is much harder than evaluation. It’s easy to hit profit targets when you know the money isn’t real, but once you start making serious money from a big account, every trade and decision you make starts to feel more “real.”
Experienced traders understand the fear psychosis that drives poor decisions. Instead of worrying, they focus on executing their trading strategy while applying the principles of risk control that helped them win their evaluation challenges. After all, the principles remain the same, no matter what the account size.
In some cases, scaling plans also included “Add-on accounts.” After you’ve completed the process of achieving your first funded account, firms will typically let you purchase more accounts, since you have demonstrated your ability to deliver profits while managing risk.
This way, your trading capital can go up several multiples of the maximum scaling cap set by the prop firm.
Scaling is a very important step in your trading journey. Your ability to consistently deliver on winning trades and display superior risk management capabilities can give you access to a good amount of capital in a very short time.
Your Path Forward
If you want to trade significant capital without risking your own money, prop firm trading is a great way to go. Think of these evaluation challenges as a stepping stone to your future success. While success rates are low, anyone with a good head on their shoulders, the ability to manage risk, and a robust trading strategy has a reasonable chance of completing them.
Choose a challenge program that matches your temperament and ability. Look for strong payout structures, flexible timeframes, and clear scaling plans. While there are many prop firms to choose from, all challenges require you to have a solid trading plan, master risk management, maintain emotional control, and treat the evaluation process as a professional assessment of your trading skills.
Your trading journey starts with that first evaluation. Make it count.
