Prop trading firms have become immensely popular, which perfectly explains why the prop firm trading industry has grown significantly and provided traders with more ways to get funded. Selecting the right prop trading firm comes down to several aspects, such as the challenge type, profit splits, and drawdown rules. Also, assessing the special features of the instant-funded programs and the respective challenges makes each of the instant-funded programs unique.
What is a Funded Challenge
When it comes to getting a funded account with a prop firm, you have to pass a funded challenge. With an instant funded account you get an account immediately with a fee, which requires verification. Since the prop trade firm takes higher risks, the profit split is usually low. Also, when it comes to effective risk management, the rules are quite strict, which means that if you trade too aggressively, your account might get closed.
What is the 1-Step Challenge?
As a prop firm trader, you should try to complete the one-step challenge in one go. While the rules may vary from one prop trade firm to another, the fact remains that most prop trade firms require the traders to complete the one-step challenge before they can qualify for a funded account. The profit split in the one-step challenges is usually higher than the instant funding, but the profits are lower than in the two-step challenges. Also, the one-step challenge is more flexible than instant-funding; however, this challenge requires discipline. When it comes to evaluation, the traders must reach profit targets with potential drawdown limits.
What is the 2-Step Challenge?
This challenge type is exactly what it sounds like. The traders of the two-step challenge have to successfully complete two evaluation phases to qualify for funding. The evaluation for the two-step challenge includes traders hitting a profit target while respecting the established drawdown rules. The profit split in the two-step challenge is the highest out of the three models, which are instant funding, one-step challenge, and two-step challenge.
Further Comparison Between the Funded Challenges
Instant funding is immediate. The profit split will be the lowest as the prop trading firm is at the highest risk. With instant funding, your profit split will be lower than fifty percent. When it comes to risk tolerance, strictness is involved. Rest assured, you will have no challenge phases with instant funding. Instant funding also comes with the highest upfront costs.
Compared to the funded challenge, with the one-step challenge, you will get the funds after you pass the challenge. The profit split will be above seventy percent but below eighty percent. Risk tolerance with the one-step challenge will be moderate. The upfront cost is medium in the one-step challenge.
Compared to the instant funding and the one-step challenge, in the two-step challenge, you get funding after you have passed the two steps of the challenge. The profit split will be higher, such as up to 90%. Also, out of the three, the risk tolerance with the two-step challenge is more flexible. With the two-step challenge, you will be paying a lower initial fee.
Conclusion
If you want to access funds instantly, then the option of instant funding is ideal for you. However, if you wish to seek a reasonably fast, challenging evaluation, the one-step challenge is perfect for you. If you are exclusively looking to maximize your profits, the two-step challenge is definitely your ideal route.