GLOSSARY · PROP FIRMS
What is evaluation challenge?
An evaluation challenge is the paid assessment phase in which a trader must hit a profit target within rule limits to qualify for a funded account.
Also called: Prop firm challenge
What it means
Typical parameters are an 8% to 10% profit target, a 5% daily loss limit and a 10% maximum drawdown, sometimes across two phases with a lower target in the second. Time limits were once universal and many firms have now removed them.
Why it matters
The structure rewards consistency far more than aggression, and this is where most attempts fail. Reaching 10% is not difficult with size; reaching it without ever losing 5% in a day is a different problem, and it is the one the rules are actually testing.
What this changes in practice
For a bot the challenge phase is where risk settings should be at their most conservative, not their most aggressive. Halving the default risk roughly doubles the number of consecutive losses the account can absorb, and surviving the drawdown rule is the binding constraint — see passing a prop firm challenge.
Related terms
- Prop firmA prop firm, short for proprietary trading firm, gives traders an account to trade in return for…
- Profit targetA profit target is the gain you must make in a prop firm evaluation to pass it, usually 8% to 10…
- Daily drawdown limitA daily drawdown limit, also called a daily loss limit, is the most a prop firm account may lose…
- Funded accountA funded account is the trading account a prop firm gives you after you pass its paid evaluation…
- Consistency ruleA consistency rule limits how much of a trader's total profit may come from a single day or sing…
Further reading
Educational information only, not financial advice. Trading leveraged products carries substantial risk of loss. Last updated 2026-09-09.