Evaluation Phase
Evaluation & FundingA simulated trading period where aspiring funded traders must demonstrate profitability and risk management within defined rules. Passing the evaluation earns access to a funded account.
Evaluations come in 1-step and 2-step formats. In a 1-step evaluation (TopStep, Apex), you trade one simulated phase and pass directly to a funded account. In a 2-step evaluation (FTMO, FundedNext), Phase 1 has a higher profit target and Phase 2 has a lower one, both with the same drawdown limits.
During evaluation, you trade on a demo account with real-time market data. The firm monitors your compliance with drawdown limits, daily loss limits, consistency rules, and other restrictions. A single violation typically results in immediate failure.
The evaluation fee is paid upfront and most firms refund it after your first funded payout. Some firms (TopStep) use a monthly subscription model instead. Failed evaluations can be retried by purchasing a new challenge or continuing the subscription.
FTMO 2-step on $100K: Phase 1 requires $10,000 profit (10%) with no time limit. Phase 2 requires $5,000 profit (5%). Both phases enforce $5,000 daily loss limit and $10,000 max drawdown. Fee is EUR 540 (refunded after first payout). If you fail Phase 1, you restart with a new EUR 540 fee.
Evaluation Phase directly affects whether you pass or fail a prop firm evaluation. Unlike trading your own account where you can recover from mistakes over time, prop firm rules create hard boundaries -- violate them once and you lose your challenge fee and have to start over. Evaluation rules determine the path from paying a challenge fee to receiving funded capital. Getting this wrong means wasted money and time. Many traders cycle through multiple evaluation attempts because they misunderstand these mechanics.
Practical example across firms: FTMO and TopStep handle this differently. FTMO is a 2-step firm with static drawdown and a 5% daily loss limit, starting from €155. TopStep is a 1-step firm with trailing drawdown and a 2% daily loss limit, starting from $49. These structural differences mean your approach to evaluation phase must adapt to whichever firm you choose.
Common mistake: Many traders rush through evaluations trying to hit the profit target as fast as possible. This leads to overleveraging and blowing accounts. The firms with no time limit (most of them) give you the freedom to be patient. Use it. A slow, consistent pass rate beats a fast blowup every time.
Profit Target
The minimum profit a trader must generate to pass an evaluation phase or qualify for a payout. Once hit, the trader advances to the next phase or receives their funded account.
Challenge Fee
The upfront cost paid to a prop firm to attempt an evaluation. This fee grants access to the simulated trading environment and is typically refunded after the trader passes and receives their first funded payout.
Funded Account
A trading account provided by a prop firm after passing the evaluation, where the firm supplies the capital and the trader keeps a percentage of profits. The trader does not risk their own money beyond the challenge fee.
Consistency Rule
A rule requiring that no single trading day accounts for more than a certain percentage of total profits. Designed to prevent lucky one-day windfalls from passing evaluations.
Daily Loss Limit
The maximum amount you can lose in a single trading day before your account is flagged or terminated. This resets each day and is separate from your overall maximum drawdown.