A testing period during which a trader must demonstrate profitability and risk management skills by meeting specific targets while following the firm's rules. Most evaluations consist of one or two phases before a trader receives a funded account.
Why It Matters
- 1The evaluation phase is the gateway to funded trading.
- 2Each phase has its own profit target, drawdown limits, and sometimes minimum trading day requirements.
- 3Understanding the rules of each phase is critical because failing any single rule — even after hitting the profit target — means starting over or purchasing a reset.
- 4Multi-phase evaluations are generally cheaper but take longer to complete.
Example
- 1A two-step evaluation usually has Phase 1 with an 8% profit target and Phase 2 with a 5% profit target.
- 2You pass Phase 1 in 12 trading days by earning $8,000 on a $100,000 account.
- 3You then enter Phase 2, where you need $5,000 in profit.
- 4Both phases share the same drawdown rules: 5% daily loss limit and 10% max drawdown.
Common Mistakes
- ✖Assuming rules are identical across phases — some firms tighten drawdown limits in later phases
- ✖Not realizing that your account balance resets between phases at some firms
- ✖Treating Phase 2 casually after passing Phase 1 and taking excessive risks