Prop Firm Evaluation: What the Assessment Phase Is

Prop Firm Evaluation: How the Assessment Works

By PropTrader1 2 min read Published October 29, 2026

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A prop firm evaluation is the assessment phase used to decide who gets funded: an account with a profit target, risk limits and behavioural rules, traded until you qualify or breach. "Evaluation" and "challenge" are the same thing; firms alternate the words.

Two formats dominate. A one-phase evaluation asks a single target - commonly 10% - and funds you on passing. A two-phase evaluation asks a harder Phase 1, then a Phase 2 at roughly half the target with the same risk rules, on the logic that one good month proves less than two consecutive ones. Some firms add minimum trading days per phase (The 5%ers asks for three profitable days at 0.5%+ on its High Stakes plan, per its plan page, checked 27 October 2026); FundedNext's Stellar 2-Step asks five calendar days per phase (help.fundednext.com, checked 28 October 2026).

Why it matters: evaluation rules are the product. Two evaluations with identical targets are different purchases if one trails tick-by-tick and the other is static. The full structure and variants: the challenge, explained; the rule terms: drawdown hub.

For the wider regulatory frame, see the ESMA investor corner.

Part of the beginner glossary cluster and the full prop firm glossary.

Frequently Asked Questions

Why is a 50% drawdown harder to recover than a 10% one?

A 50% drawdown requires a 100% gain to recover, while a 10% drawdown only needs 11.1%. Recovery math is exponential. At 30% drawdown you need 42.9% to break even. This is why prop firms cap drawdown at 10-12% rather than higher percentages.

What is the 3-5-7 rule in forex?

The 3-5-7 rule suggests risking 1-3% per trade, keeping total open risk at 5% or less, and limiting single market exposure to 7%. It is a general risk guideline, not a prop firm rule, but following it naturally keeps you within most max drawdown limits.

What is a good maximum drawdown?

For prop firm trading, keeping your actual drawdown under 5% is excellent. Most firms allow 10-12%, but staying well below the limit demonstrates strong risk management and gives you a buffer for unexpected market events.

Is maximum drawdown calculated on balance or equity?

It depends on the firm and drawdown type. Static drawdown is typically calculated on starting balance. Trailing drawdown follows your highest equity. Some firms include floating losses in their calculation, making equity the relevant measure.

What happens when you breach maximum drawdown?

Breaching maximum drawdown results in immediate and permanent account closure. All positions are closed automatically, the challenge is terminated, and there is no refund or appeal. It is the final rule with no second chances.

What is the difference between daily drawdown and maximum drawdown?

Daily drawdown resets every day and limits your loss within a single session. Maximum drawdown is cumulative across the entire challenge or funded period. You can breach max drawdown through many small daily losses that accumulate over time.