DEFINITION

Challenge

The evaluation phase of a prop firm account. Traders must meet a profit target while respecting drawdown rules to pass and receive a funded account.

In depth

A challenge typically has 1 to 2 phases. Phase 1 has a higher profit target (10%) and Phase 2 has a lower one (5%). Pass both, you get a funded account with the same drawdown rules but real capital backing the trades.

Related terms

Funded Account

A trading account backed by a prop firm's capital. Traders keep a share of profits (typically 80–90%) after passing the evaluation phases.

Profit Target

The percentage or dollar profit required to pass a prop firm evaluation phase. Common targets: 10% for Phase 1, 5% for Phase 2.

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