Prop Firm Challenges Explained – Definition, Types & Process
How Prop Firm Challenges Work
- Registration: Traders sign up for the challenge by paying a one-time fee to the prop firm.
- Trading Platform: The prop firm provides the trader with access to a demo trading account with virtual funds, usually on the NinjaTrader TradingView, or Tradovate platform. Rithmic is often the data feed provider for futures trading challenges.
- Challenge Rules: Each challenge has a set of rules that the trader must follow. These rules usually include:
- A profit target the trader must reach
- A maximum drawdown or loss limit the trader cannot exceed
- A time limit to complete the challenge (e.g., 30 days)
- Acceptable trading instruments (e.g. futures contracts) and contract sizes (e.g. 5 E-Mini futures contracts simultaniously tradeable).
- Trading Phase: The trader begins trading on the demo account, aiming to meet the profit target without breaching the drawdown limit or violating any other rules.
- Evaluation: If the trader successfully meets the challenge objectives within the given timeframe, their trading performance is verified by the prop firm.
- Funding: Upon passing the challenge, the trader receives a funded live trading account with real money provided by the prop firm. The account size can vary depending on the challenge level and firm, typically ranging from $25,000 to $250,000 or more. Yet, some prop firms let trade traders only in a simulated account once funded. However, traders can then still withdraw the profits made, even if only a simulated account has been traded, as long its in the funded account and not in the evaluation or challenge period.
- Profit Sharing: The trader trades on the funded account, keeping a significant amount of the profits they generate (often 80%-90%). The prop firm takes the remaining percentage as its share. For example, with a profit share of 90%, the traders can withdraw 90% of the profits he made.
- Scaling: Many prop firms offer traders the opportunity to increase their account size by achieving additional profit milestones, allowing them to trade with more capital and potentially earn higher profits. Scaling means, that your account size, buying power and tradable contracts increase once you meet certain profit targets.
The specific rules, account sizes, profit targets, and other details may vary between different prop firms and challenge levels. However, the general concept remains the same: traders prove their skills in a controlled environment and, if successful, receive funding to trade with and keep a significant portion of the profits they generate.
Types of Prop Firm Challenges
One-Step Prop Firm Challenges
One-step prop firm challenges have a simplified evaluation process.
- Single Phase Evaluation: Traders only need to pass a one trading challenge trading to receive a funded account.
- Simplified Rules: One-step challenges often have fewer restrictions and rules compared to their two-step counterparts (e.g. regarding the time limit, daily loss, and profit targets).
- Quicker Funding: With only one phase to complete, traders can potentially receive a funded account faster through a one-step challenge.
| # | Prop Firm | Trustpilot Rating | Type | Profit Split | Platforms | Account Sizes | Challenge Type | Discount | Details |
|---|---|---|---|---|---|---|---|---|---|
| 1 | TopStep |
Futures | 90%-100% | TopstepX, NinjaTrader, Quantower, TradingView, Tradovate, 10+ more | $50K - $150K | 1-Step | 70% Off | Review | |
| 2 | Earn2Trade |
Futures | 80% | NinjaTrader, Finamark, R|Trader, 10+ more | $25K - $200K | 1-Step | No | Review | |
| 3 | TradeDay |
Futures | 90%-100% | NinjaTrader, TradingView, TradingView, Jigsaw | $10K - $250K | 1-Step | No | Review | |
| 4 | Apex Trader Funding |
Futures | 90%-100% | NinjaTrader, Tradovate | 25K - 300K | 1-Step | No | Review | |
| 5 | Take Profit Trader |
Futures | 80% | NinjaTrader, Tradovate, TradingView | $25K - $150K | 1-Step | No | Review | |
| 6 | UProfit |
Futures | 80%-100% | NinjaTrader, 10+ others via R|Trader | $9K - $200K | 1-Step | No | Review | |
| 7 | Elite Trader Funding |
Futures | 90%-100% | NinjaTrader, TradingView | $10K - 300K | 1-Step | No | Review | |
| 8 | My Funded Futures |
Futures | 90%-100% | NinjaTrader, R|Trader Pro, Tradovate, 3 more | $50K - $150K | 1-Step | No | Review | |
| 9 | OneUp Trader |
Futures | 90%-100% | NinjaTrader, R|Trader, 10+ others | $25K - $250K | 1-Step | No | Review |
Two-Step Prop Firm Challenges
Two-Step prop firm challenges require that traders successfully omplete two challenges or evaluations.
Once the first step is completed, the trader begins a new challenge, where once again, it is not possible to withdraw profits made, still its still the evaluation and challenge phase.
After completing both challenges, the trader gets funded and can withdraw the profits he makes in the then funded account.
Statistically is is less likely that both challenges can be completed. That’s why the participation costs are typically lower for those challenges relative to the one-step challenge.
Three-Step Prop Firm Challenges
Three-Step prop firm challenges only exist rarely these days becaus customers know about the unlikelyness of successfully making it through three challenges in order to get funded by a prop firm.
The logic of a three step prop firm challenge or evaluation is that the traders completes three challenges by reaching the profit target three times, to then earn the funded account where its possible to withdraw profits based on the profit split agreement.
Free Prop Firm Challenge
Free prop firm challenges do not realy exist. Pure demo accounts are sometimes promoted as free prop firm challenges, but there is no chance of earning a funded account without paying participation fees for a challenge.
Remember the old saying, if something is free, you are the product. That means it is likely that the prop firm that promotes a free challenge will likely send you marketing mails with invites to join a paid challenge in order to get funded.
No Challenge Prop Firms
There are prop firms who do not require traders to go through a challenge in order to earn a funded account. Those are called instant funding prop firms, or no challenge prop firms. However, the participation fees for those account are high, making it an expensive undergo.
Think about it this way, why should a firm let trade you their funds if they don’t know anything about your skills and trading qualification?
Those looking for instant funding may consider a regular futures broker account, which has account minimums as low as $500. Chances of success are higher with such an account than with an instant funded account, because of the combination of fees, rules and payout requirements you have with no challenge prop firms.