How prop firm challenges work
See how evaluation phases, profit targets, drawdowns, and rules fit together so you can assess challenges more clearly.
1. Challenge phases
Prop firm challenges are structured evaluations designed to test whether you can follow rules and protect capital before trading a larger account. While each firm is slightly different, most share common building blocks.
- Phase 1: Higher profit target, standard drawdown and daily loss rules, minimum trading days.
- Phase 2: Lower profit target with similar or identical rules, often with no extra fee.
- Instant funding or one-step models: Simplified evaluations with different risk trade-offs.
2. Key metrics and rules
When you compare challenges, pay close attention to the definitions of each rule, not just the headline rate.
- Profit target: The percentage gain you must reach during the evaluation.
- Maximum drawdown: The largest allowed drop from the initial or peak equity (static vs trailing).
- Daily loss limit: The maximum you can lose in a single day, often including open and closed trades.
- Minimum trading days: The minimum number of days you must trade, even if you hit the target early.
- Consistency or lot-size rules: Extra constraints on position sizing or trade behaviour.
3. Rules that catch traders out
Many challenge failures come from misunderstanding small details in the terms and conditions. Always read the FAQs and examples on the firm's site.
- Whether news trading is allowed and which events are restricted.
- Whether you can hold positions overnight or over the weekend.
- How partial closes and hedging are treated in the daily loss calculation.
4. How to compare challenges
Use the comparison page to filter by challenge type, profit target, drawdown, minimum trading days, and other key rules. Then open a few individual firm pages to read the highlights before checking each firm's official documentation.
5. Next steps
Once you understand the structure, move on to the guides on how to get funded and risk management for prop firm traders.
Frequently asked questions
How long do prop firm challenges last? Many evaluations provide 30–60 days per phase, sometimes with extensions. Some firms offer no time limit but still require minimum trading days.
Can I hold trades overnight or over the weekend? Policies vary by firm; some restrict overnight, weekend, or news trading. Violating these rules can breach the challenge even if your equity is positive.
What happens if I hit the daily loss limit? In most prop firm programs, the account is breached as soon as you cross the daily loss threshold, even if it recovers later in the day.
What is the difference between one-step and two-step challenges? One-step evaluations require hitting the target in a single phase, often with stricter risk limits or higher fees, while two-step challenges split the evaluation into two smaller targets.
Compare prop trading firms
When you are ready to evaluate specific programs, use the comparison tools on Prop Firm Compass to see rules, platforms, and challenge structures side by side.