Challenges: 1 step, 2 steps and instant
Lesson 3 of 12 in the course “Prop Trading”. Free, with animations and a quiz.
The two-step challenge
The most common format. Phase 1: make, usually, 8–10%. Phase 2, verification: about 5% more. Limits apply in both phases, most often 5% loss per day and 10% overall. Many firms no longer set deadlines, but there may be a minimum number of trading days, say 4.
The one-step challenge
One exam instead of two: a target around 10%. But the limits are tighter: 3–4% per day, and the overall one is often trailing, it moves up as you profit (more in lesson 5). It’s faster, but easier to slip: there’s less room for a bad day.
Instant funding
Instant funding is a funded account right away, no exam. It costs noticeably more, accounts are smaller, the limits are the strictest and the profit share is often lower. It suits people who already trade consistently and don’t want to wait. For a beginner a regular challenge is almost always the better deal.
Futures prop firms
Some props trade exchange futures (on CME): the S&P 500 and Nasdaq indices, oil, gold. There’s usually one evaluation step, and the limit is almost always trailing in dollars: say $2,500 on a $50,000 account. The floor rises after the account’s peak. Same logic as forex: a target plus a limit you can’t break.
How to pick a format
For a beginner the two-step challenge with a static drawdown usually fits best: the limits are gentler and one early mistake doesn’t kill the account. One-step if you can already keep your risk steady. Instant if you’re short on time, not money. And above all: choose by the rules, not by the account size.
Check yourself
- Mira is picking her first challenge. What most likely suits her?
Correct answer: Two-step with a static drawdown. Two-step limits are gentler and a static floor doesn’t move: there’s room for mistakes while you learn. - How does phase 2 usually differ from phase 1?
Correct answer: A lower target, about 5%, with the same limits. Verification confirms the result wasn’t luck: a smaller target, the same rules. - Why does instant funding cost more?
Correct answer: The firm skips the exam, so it charges more and sets tight limits. Without an exam the firm knows less about the trader, so it protects itself with price and strict rules.
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