How Do Prop Trading Challenges Work?

Getting funded by a prop trading firm is an exciting opportunity, but it doesn’t happen instantly. 

Before traders can access company capital, they must prove their skills through a prop trading challenge. 

This challenge is designed to test a trader’s profitability, risk management, and consistency, ensuring they have what it takes to handle real funds responsibly.

For traders, passing a prop firm challenge is the gateway to bigger opportunities, allowing them to trade with significantly more capital than they could on their own. 

Let’s break down how prop trading challenges work step by step so you know what to expect and how to succeed.

How Do Prop Trading Challenges Work?

A prop trading challenge is a structured test that traders must pass before receiving a funded account. Prop firms use these challenges to evaluate a trader’s ability to generate profits while managing risk effectively.

• You are given a simulated trading account with a set balance, typically ranging from $10,000 to $200,000+.
• To pass, traders must hit a specific profit target while staying within daily loss and drawdown limits.
• Once a trader successfully completes the challenge, they move on to a real funded account and begin earning a share of their profits.

Steps to Pass a Prop Trading Challenge

Passing a prop trading challenge isn’t just about making profitable trades – it’s about proving consistency, discipline, and solid risk management. 

Each step of the challenge is designed to test a trader’s ability to grow an account responsibly while staying within set rules. 

Here’s a step-by-step guide to help you navigate the process and increase your chances of passing.

Step 1 – Choosing a Prop Firm and Challenge Type

Before getting started, traders need to choose the right prop firm and challenge option. 

Most firms offer multiple account sizes and evaluation structures, allowing traders to pick a challenge that suits their capital needs and trading style.

• Some firms have one-phase challenges, where traders must reach a profit target in a single step.
• Others require a two-phase process, where traders must pass an initial evaluation followed by a verification phase before getting funded.
• The best firms provide flexible challenge conditions, letting traders take their time to trade comfortably and consistently.

Step 2 – Meeting the Profit Target

The primary goal of any challenge is to reach the profit target within the required timeframe. 

Most firms set this between 5% and 10% of the account balance. 

Some challenges have strict deadlines, while others allow more freedom to trade at a steady pace. 

Success isn’t just about making profits – it’s about staying within risk limits and proving the ability to manage capital responsibly.

Step 3 – Following Risk Management Rules

One of the biggest reasons traders fail these challenges is ignoring risk management. 

Prop firms set strict rules to protect their capital, and breaking them can lead to immediate disqualification.

• Daily Loss Limits – Traders can only lose a certain percentage of their account in a single day.
• Drawdown Limits Overall – The total amount one trader can lose across all trades is capped.
• Consistency Rules – Some firms require traders to trade a minimum number of days to ensure they aren’t just getting lucky with a few big wins.

Step 4 – Completing the Evaluation Without Breaking the Rules

Even after hitting the profit target, passing the challenge isn’t guaranteed.

Some firms allow immediate approval, while others require additional trading days to confirm consistency.

Breaking a rule at any point, even after meeting the goal, can mean instant failure and a full restart. Staying disciplined until the end is key.

Step 5 – Moving to a Funded Account

After successfully completing the challenge, traders are upgraded to a real funded account where they begin trading with actual capital.

• Funded traders earn a percentage of their profits, typically ranging from 70% to 90%.
• At this stage, traders no longer risk their own money – all potential losses are absorbed by the firm.
• Some firms scale up account sizes over time, allowing traders to increase their capital as they prove their consistency.

Common Reasons Traders Fail Prop Trading Challenges

While many traders have the skill to pass a challenge, mistakes in discipline and risk management often lead to failure. 

Prop trading firms aren’t just looking for traders who can make money quickly – they want traders who can manage risk effectively and remain consistent.

Overtrading and Emotional Trading

One of the biggest reasons traders fail is overtrading – taking too many trades in an attempt to chase profits or recover losses.

• Revenge trading – After a loss, some traders immediately place another trade to try and “win back” their money, often leading to even bigger losses.
• Overconfidence after wins – A winning streak can make traders feel unstoppable, leading them to increase position sizes beyond safe limits.
• Emotional decision-making – Fear and greed often take over, causing traders to abandon their strategies and make impulsive trades.

Ignoring Risk Parameters

Risk management is the foundation of successful trading, and ignoring firm-set limits is one of the fastest ways to fail a prop challenge.

• Daily loss limits – Prop firms cap how much traders can lose in a single day. If this limit is exceeded, the trader automatically fails the challenge.
• Maximum drawdown limits – Traders are only allowed to lose a set percentage of their total account balance. If they exceed this limit, they’re out.
• Risk-to-reward imbalance – Some traders risk too much for small rewards, making it harder to recover from losses.

Rushing to Meet Profit Targets

Many traders fail their challenges simply because they rush to hit their profit goals instead of letting trades develop naturally.

• Forcing trades – Some traders enter positions just to be active in the market, even if there’s no solid setup.
• Taking excessive risks – In an attempt to reach the target faster, some traders increase position sizes or go all-in on high-risk trades.
• Ignoring the time available – Some challenges allow multiple weeks or even months to complete, yet traders still feel the need to hit targets in just a few days.

Best Prop Trading Firms for Challenges

Not all prop firms offer the same fairness and flexibility when it comes to trading challenges. 

Some have unrealistic profit targets, excessive fees, or strict rules that make it difficult for traders to succeed. 

The best firms create a fair environment where traders have a real chance to pass and get funded.

1. FunderPro – Best Overall for Passing Challenges

For traders looking for the best shot at getting funded, FunderPro stands out as a top choice. 

The firm offers a fair and flexible challenge structure, giving traders the freedom to trade at their own pace while working toward their profit targets.

👉 Get Started Here

Key features

• No time limits on evaluations – Unlike other firms that require traders to pass within a strict timeframe, FunderPro lets traders take their time, reducing pressure and allowing for more strategic, consistent trading.
• High profit splits – FunderPro rewards successful traders by allowing them to keep up to 90% of their profits, ensuring that traders get the majority of their earnings.
• Refundable challenge fees – The evaluation fee is returned to traders who pass, making it a risk-free investment for skilled traders who are confident in their abilities.

2. Apex Trader Funding – Best for Futures Traders

Futures traders looking for an affordable and straightforward funding process will find Apex Trader Funding to be a standout option. 

The firm is built for futures traders, offering a cost-effective challenge with minimal ongoing fees.

👉 Get Started Here

Key features

• Low-cost evaluation fees – Apex Trader Funding offers some of the most affordable challenges, making it easy to get started without a big upfront cost.
• No monthly fees once funded – Unlike many prop firms that require recurring payments, Apex Trader Funding allows traders to trade freely without worrying about ongoing charges after passing.
• A great choice for future traders – The platform is optimized for indices, commodities, and forex futures, making it one of the best options for traders who specialize in futures markets.

Frequently Asked Questions

Conclusion 

Understanding prop trading challenges is key to successfully securing funding from a prop firm. 

These challenges aren’t just about making profits – they test a trader’s discipline, risk management, and consistency. 

The best way to pass is by sticking to a solid strategy, respecting risk limits, and avoiding emotional trading. 

By approaching the challenge with patience and discipline, traders can increase their chances of earning a funded account and long-term trading success.