Proprietary trading firms (prop firms) offer traders an opportunity to trade with firm capital in exchange for a share of the profits. To gain access to this capital, traders must pass an evaluation process, with the 2-step evaluation model being one of the most popular. This article explores how the best prop firms implement the 2-step evaluation process and why it is beneficial for aspiring traders.
What is a 2-Step Evaluation in Prop Firms?
A 2-step evaluation is a structured process where traders must meet specific profit targets and risk management criteria over two distinct phases. Unlike instant funding models, this method ensures that only disciplined and skilled traders gain access to firm capital.
Step 1: The Initial Challenge
In the first step, traders must demonstrate their ability to generate consistent profits while adhering to strict risk management rules. The typical requirements include:
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Achieving a predefined profit target (e.g., 8-10%) within a set period (e.g., 30 days).
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Maintaining a maximum daily drawdown limit (e.g., 5%).
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Following leverage and position sizing restrictions.
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Trading a minimum number of days to prove consistency.
Step 2: The Verification Phase
Once traders pass the first challenge, they enter the verification phase. This step is designed to confirm that the trader’s success was not due to luck. Requirements often include:
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Achieving a lower profit target than in Step 1 (e.g., 5%).
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Maintaining disciplined risk management similar to the initial challenge.
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Avoiding reckless trading or excessive drawdowns.
Why the Best Prop Firms Use the 2-Step Evaluation Process
1. Ensuring Consistency and Risk Control
The 2-step evaluation filters out traders who rely on high-risk strategies that may not be sustainable in the long term. By requiring traders to prove profitability twice, firms can identify those with solid risk management skills.
2. Encouraging Responsible Trading
The structure of the evaluation process promotes responsible trading habits. Traders learn to respect drawdown limits, avoid emotional trading, and refine their strategies.
3. Providing a Fair Assessment for Traders
Compared to single-step evaluations, the 2-step model reduces the chances of passing based on luck. It creates a more level playing field, ensuring that only traders with genuine skills advance.
Features of the Best Prop Firms Offering 2-Step Evaluations
1. Realistic Profit Targets
The best prop firms keep profit targets within a reasonable range (typically 8-10% for Step 1 and 5% for Step 2). Unrealistic targets can lead to overtrading and reckless strategies.
2. Flexible Trading Conditions
Top firms allow traders to use various strategies, including scalping, swing trading, and day trading. They also support different platforms such as MetaTrader 4/5, cTrader, and TradingView.
3. Low Fees and Refundable Deposits
The best prop firms charge reasonable evaluation fees, often with a refund upon successful completion of the challenge. This reduces the financial burden on traders.
4. Payouts and Profit Sharing
Reputable firms offer high profit splits (up to 90%) and fast withdrawals, ensuring traders receive their earnings promptly.
Tips to Pass a 2-Step Evaluation Successfully
1. Develop a Trading Plan
Having a structured trading plan helps maintain consistency and discipline. This includes setting stop-loss levels, defining position sizes, and identifying high-probability setups.
2. Focus on Risk Management
Managing risk is crucial. Stick to the firm’s daily drawdown limits, avoid revenge trading, and use appropriate lot sizes.
3. Trade Selectively
Avoid overtrading by focusing on high-quality setups rather than forcing trades. Patience is key to passing the evaluation.
4. Stay Emotionally Disciplined
Trading can be stressful, especially under evaluation conditions. Maintaining emotional discipline and avoiding impulsive decisions is critical for success.
Conclusion
The 2-step evaluation process is a rigorous yet fair way for prop firms to identify skilled traders. By proving profitability and discipline over two phases, traders gain access to substantial capital and the opportunity to grow their careers in proprietary trading. The best prop firms ensure that the evaluation process remains realistic, structured, and rewarding for those who successfully meet the criteria. Aspiring traders should approach this challenge with a well-thought-out strategy and disciplined mindset to increase their chances of success.
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