What is Evaluation (Challenge)?
The paid test phase a trader must pass to earn a funded prop firm account — hit a profit target without breaching the drawdown rules.
A prop firm evaluation — also called a challenge — is the qualifying test a trader pays for before being given a funded account. The trader must reach a profit target, typically 8-10% of the account, while staying inside the maximum drawdown and daily loss limits. Pass, and the firm issues a funded account; fail, and the fee is lost.
Evaluations come in one-phase, two-phase, and occasionally three-phase formats. A two-phase evaluation has a Phase 1 and a Phase 2, each with its own profit target — the Phase 2 target is often smaller. Fewer phases mean a faster route to funding but usually a higher fee.
The evaluation fee is small relative to the funded account size precisely because it is a filter — most buyers do not pass. Reputable firms refund the fee in full with the trader's first payout, and a partner discount lowers the upfront cost, so a passed evaluation can end up close to free.