How long does it take to complete a two-step challenge?

Most traders complete two-step challenges within 2-8 weeks, depending on their trading frequency and the firm's time limits. Some firms impose 30-day limits per phase, while others allow unlimited time for Phase 1. Active day traders typically finish faster than swing traders who hold positions longer.

What happens if I fail Phase 2 of a two-step challenge?

If you fail Phase 2, you must purchase a new challenge and start over from Phase 1. There's no option to retry just Phase 2, as firms want to see complete consistency across both phases. Some traders find this more frustrating than failing Phase 1 since they were closer to funding.

Can I change my trading strategy between Phase 1 and Phase 2?

While there's no rule preventing strategy changes between phases, it's generally inadvisable since you want to demonstrate consistent methodology. Many successful traders stick with the same approach that got them through Phase 1, only adjusting position sizes if needed to meet the different profit targets.

Are two-step challenges harder than one-step challenges?

Two-step challenges aren't necessarily harder, but they require sustained performance over a longer period. The profit targets are often lower per phase than one-step challenges, but you must prove consistency twice. They're typically less expensive upfront, making them more accessible for newer traders.

Challenge Rules

Two-Step Challenge: The Standard Prop Firm Evaluation Model

The most common prop firm evaluation structure with two sequential phases, each requiring profit targets to be hit before funding is granted.

Last updated: 2026-04-01

Full Explanation

A two-step challenge is the evaluation model that most prop firms use to assess whether you deserve access to their capital. Instead of giving you a funded account immediately after a single test, this structure requires you to prove your trading skills twice through two distinct phases, each with its own profit target and risk parameters. The logic behind this approach is straightforward: prop firms want to see consistent performance over time, not just one lucky streak that could indicate gambling rather than skill.

When you purchase a two-step challenge, you're essentially buying the opportunity to demonstrate your trading ability under controlled conditions. The first phase typically requires you to achieve a higher profit target within a set timeframe while adhering to strict risk management rules. Common Phase 1 targets range from 8-10% profit within 30 days, though some firms allow unlimited time. Once you hit this target without violating any rules, you advance to Phase 2, which usually has a lower profit requirement of 4-5% but maintains the same risk restrictions.

The risk parameters remain consistent across both phases and are designed to protect the firm's capital while testing your discipline. You'll face a maximum daily loss limit, typically 4-5% of your starting balance, and an overall maximum loss limit of 8-12%. These aren't trailing drawdowns in most cases, meaning they're calculated from your initial balance rather than your highest equity point. Breaking either rule results in immediate failure, regardless of your profit performance.

What makes the two-step structure particularly challenging is that each phase resets certain aspects of your performance tracking. Your profit target in Phase 2 starts from zero, not from where you left off in Phase 1. This means if you made 10% in Phase 1, you still need to make another 5% in Phase 2 to complete the evaluation. This reset mechanism ensures you can replicate your success rather than relying on one exceptional trading period.

The psychological aspect of navigating two phases cannot be understated. Many traders who excel in Phase 1 struggle with Phase 2 because they either become overconfident or overly cautious. Phase 1's higher profit target often encourages more aggressive trading, but Phase 2's lower target can lead to complacency or overthinking. Successful candidates learn to maintain consistent risk management and trading psychology throughout both phases.

One crucial misconception is that Phase 2 is easier because of the lower profit target. In reality, many experienced prop traders find Phase 2 more challenging because the pressure to complete the evaluation can lead to forced trades or deviation from proven strategies. The lower target doesn't mean you should reduce your position sizes or change your approach; it means you need fewer profitable trades to succeed.

Time limits vary significantly between phases and firms. Some companies impose strict 30-day limits on both phases, while others allow unlimited time for Phase 1 but require Phase 2 completion within 60 days. Understanding these timeframes is critical for planning your trading frequency and strategy. If you're a swing trader who holds positions for days or weeks, you need to ensure the time limits accommodate your style.

The cost structure of two-step challenges typically ranges from $100 for smaller accounts to $1,500 for larger ones. Most firms offer refunds of this fee once you complete both phases and receive your first profit split from the funded account. This refund mechanism aligns the firm's interests with yours, as they only profit when you succeed and begin generating returns on their capital.

Successfully completing a two-step challenge requires treating each phase as a separate goal while maintaining consistent risk management throughout. Focus on your proven strategies rather than trying to accelerate your timeline, and remember that the firms designed these challenges to identify traders who can generate steady returns while protecting capital. Your goal isn't just to pass the evaluation but to demonstrate the skills that will make you profitable with a funded account.

Worked Examples

Example 1

Scenario:You purchase a $100,000 two-step challenge with a 10% Phase 1 target and 5% Phase 2 target, both with 5% daily loss and 10% maximum loss limits

Phase 1 requires $10,000 profit within the time limit. You achieve this in 15 trading days. Phase 2 resets your profit requirement to $5,000 from your new starting balance. Your risk limits remain $5,000 daily and $10,000 maximum throughout both phases

→After hitting the $5,000 Phase 2 target in another 12 days without violating risk rules, you pass the evaluation and receive access to a funded $100,000 account

Example 2

Scenario:You're in Phase 2 of a $50,000 challenge needing $2,500 profit (5% target). You're currently up $2,200 and take a trade that moves against you by $3,000, bringing your daily loss to the $2,500 limit (5%)

Despite being $200 away from passing Phase 2, you've hit the maximum daily loss limit of $2,500. Your account balance dropped from $52,200 to $49,200 in a single day, triggering the daily loss rule

→The challenge immediately fails due to the daily loss violation, requiring you to purchase a new evaluation despite your strong overall performance

Example 3

Scenario:You complete Phase 1 of a $25,000 challenge by making $2,000 (8% target) but had drawdown to $22,500 at your lowest point. Phase 2 starts with your account at $27,000 needing $1,250 more profit (5% target)

Your Phase 2 profit target is calculated from the original $25,000 balance, requiring $1,250 total profit. Since profit tracking resets, you need to make $1,250 from your new $27,000 starting point. Maximum loss limit remains $2,500 from original balance

→You must earn $1,250 in Phase 2 while ensuring your balance never drops below $22,500 (original balance minus 10% maximum loss), giving you a buffer above the maximum loss threshold

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How This Applies at Prop Firms

FTMO uses a classic two-step structure with 8% Phase 1 and 5% Phase 2 profit targets, combined with 5% daily loss and 10% maximum loss limits. The Funded Trader employs a similar model but offers unlimited time for Phase 1, while MyForexFunds requires both phases to be completed within 30 days each. Most major firms like FTUK and Apex Trader Funding follow this two-phase approach as their primary evaluation method.

Related Terms

These concepts are closely connected to Two-Step Challenge

One-Step Challenge→Phase 1→Phase 2→Challenge→Evaluation→

Frequently Asked Questions

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