Inside a prop firm challenge: the rules and why they exist
Almost every challenge uses the same three rules: a profit target, a daily loss limit and an overall loss limit. Here's what each one means and why it's there.
The three rules
Profit target: how much you need to gain to finish a phase, for example 8% or 10%. It shows you can make money.Daily loss limit: the most you're allowed to lose in a day, for example 4% or 5%. It shows you can stop a bad day.Overall loss limit: how far the account can fall in total, for example 8% or 10%. Touch either loss limit and the challenge is over.Phases
A challenge might have one, two or three phases. On a 2-Step, phase one usually asks for 8–10% and phase two for 5%. When you finish the last phase, you receive the funded account.
Some firms also sell instant accounts with no challenge. Our 1-Step vs 2-Step guide compares the formats.
Minimum days and deadlines
Some firms want you to trade a minimum number of days, such as 3 or 4. Deadlines have mostly disappeared, but some firms will close an account that hasn't traded for 30 days.
What happens after you pass
The firm reviews your trades and asks you to verify your identity (KYC), usually with a national ID card or passport and a proof of address. You then get the funded account, with the same loss rules but no target, and every profit is split at the agreed rate.
Questions people ask
How long will a challenge take?
That's up to you. Without a deadline, most traders take somewhere between two weeks and two months.
What happens if I fail?
You lose the fee. Some firms offer a discount or a free second try.