What is evaluation?
An evaluation is the phase during which a trader demonstrates the ability to reach a profit target while respecting risk limits. It precedes access to a funded account and takes place on a simulated account.
The word is often used as a synonym for challenge. The useful nuance is that evaluation refers to the phase, while challenge refers to the product bought.
The formats
A one-phase evaluation asks you to reach a single target, generally 6 to 10 %. It is the dominant format on futures and increasingly common on forex.
A two-phase evaluation adds a second step with a reduced target, often half the first. It is the industry’s historical model, meant to verify that the performance was not a fluke.
A three-phase evaluation splits the path further, with low targets at each step. The route is longer but each stage is more attainable.
Instant funding removes the evaluation entirely, in exchange for higher fees and a tighter risk framework.
What really separates the formats
It is not the number of phases, but the ratio between the cumulative target and the drawdown allowed.
A three-phase route asking 3 % per step with 5 % drawdown is harder than a one-phase route asking 10 % with 12 % drawdown, appearances notwithstanding: in the first case the margin for error is narrower at every stage.
Always measure the target against the drawdown. That ratio is what gauges difficulty, never the number of steps.
The pass rate
Few firms publish it, and those that do quote figures between 5 and 40 % depending on format and segment.
That rate is the number your budget should rest on: if two thirds of candidates fail at least once, the real cost of your route is the entry price multiplied by two or three, not the advertised price.
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Related terms
- Challenge A challenge is the paid evaluation a prop firm sells. The trader must reach a profit target without crossing the imposed loss limits, on a simulated account. Passing it gives access to a funded account.
- Drawdown Drawdown is the maximum loss allowed on a prop firm account before it is closed. It is expressed as a percentage or a fixed amount, and calculated under three models — static, end-of-day trailing or intraday trailing — with very different consequences.
- Funded account A funded account is the trading account a prop firm allocates once the evaluation is passed. The trader operates under continuing risk rules and keeps a share of the profits, without ever holding the nominal capital.
- Minimum trading days A minimum trading day requirement forces you to record a set number of active sessions before passing a phase. Generally 1 to 5 days, it rules out passes obtained on a single position.
- Profit target A profit target is the gain a trader must achieve to pass an evaluation phase. Expressed as a percentage of nominal capital, generally 6 to 10 % in the first phase, it is often halved in the second.