Proprietary (prop) trading firms provide traders with capital to trade in exchange for a profit split. These firms aim to recruit the most skilled traders while minimizing risk. One of the most common evaluation models used by the best prop firms is the 2 Step Challenge. This structured process allows firms to assess a trader’s ability before granting them access to a funded account.

What is a 2 Step Challenge?

A 2 Step Challenge is a structured evaluation process that prop firms use to test traders' skills before funding them. The challenge consists of two phases, each with specific rules and targets.

Key Features of a 2 Step Challenge:

• Phase 1: Traders must achieve a set profit target within a defined time while adhering to risk management rules.

• Phase 2: A second evaluation phase with more lenient targets but requiring consistency.

• Drawdown limits: Firms impose both daily and total loss limits to ensure disciplined trading.

• Profit target requirements: Traders must hit a specific percentage gain to pass each phase.

• Time constraints: Most firms set a duration (e.g., 30 days per phase) to complete the challenge.

• No-cost funded account: Once a trader passes both phases, they receive a fully funded account without risking their own capital.

Why Prop Firms Use a 2 Step Challenge

The best prop firms implement the 2 Step Challenge as a means to filter out unqualified traders while identifying those who demonstrate consistency, discipline, and risk management. The structured approach ensures that only traders with proven strategies are granted funded accounts.

1. Testing a Trader’s Profitability

• A trader must show they can generate profits in both phases of the challenge.

• The best prop firms set realistic profit targets, ensuring that only skilled traders succeed.

2. Assessing Risk Management Skills

• Firms enforce strict drawdown rules to evaluate how traders handle losses.

• The ability to manage risk is often considered more important than hitting high-profit targets.

3. Ensuring Trading Consistency

• A 2 Step Challenge tests whether a trader can sustain profitability over multiple weeks.

• Consistency in position sizing, strategy execution, and risk control is essential.

4. Reducing Firm’s Risk Exposure

• By using a 2 Step Challenge, prop firms avoid funding reckless traders.

• The challenge acts as a risk filter, ensuring only disciplined traders receive capital.

Key Differences Between a 2 Step Challenge and Other Evaluation Models

Factor	2 Step Challenge	One Step Challenge	Instant Funding
Number of Phases	2	1	None
Evaluation Time	Longer	Shorter	Immediate
Risk Rules	Moderate	Strict	High
Profit Target	Reasonable	Higher	None
Trader Suitability	Consistent, disciplined traders	Aggressive traders	Experienced traders

How the Best Prop Firms Structure Their 2 Step Challenges

Each prop firm has its own version of the 2 Step Challenge, but most follow a similar structure. Below are some of the best prop firms offering 2 Step Challenges:

1. FTMO

• Profit Target: 10% (Phase 1), 5% (Phase 2)

• Drawdown Limit: 10% total, 5% daily

• Time Limit: 30 days (Phase 1), 60 days (Phase 2)

• Refundable fee after passing

2. My Forex Funds (MFF)

• Profit Target: 8% (Phase 1), 5% (Phase 2)

• Drawdown Limit: 12% total, 5% daily

• Time Limit: 30 days (Phase 1), 60 days (Phase 2)

• Scaled-up accounts for long-term traders

3. The 5%ers

• Profit Target: 6-10% (varies by program)

• Drawdown Limit: 4% daily, 6% total

• Time Limit: No time limit for some programs

• Low-risk approach for conservative traders

Tips for Passing a 2 Step Challenge Successfully

Passing a 2 Step Challenge requires a combination of skill, discipline, and risk management. Here are some essential tips:

1. Develop a Solid Trading Plan

• Choose a strategy that fits the challenge rules.

• Backtest your approach before starting the challenge.

2. Maintain Strong Risk Management

• Use a maximum 1-2% risk per trade to stay within drawdown limits.

• Never over-leverage your positions.

3. Focus on Consistency Over Quick Gains

• Avoid trying to hit profit targets in a few trades.

• Aim for steady, incremental growth instead of high-risk moves.

4. Choose a Prop Firm with Favorable Conditions

• Look for reasonable profit targets and drawdown rules.

• Avoid firms with hidden fees or unrealistic conditions.

Conclusion: Is a 2 Step Challenge Right for You?

The 2 Step Challenge remains one of the most reliable ways for prop firms to find skilled, disciplined traders. If you are a consistent trader with strong risk management, the best prop firms offering this model can provide you with significant funding opportunities.