One-Step Challenges: Pros and Cons

🎓 PROP TRADING TERMINOLOGY

Prop firms use evaluation accounts to assess the skills of traders before providing them with access to the firm's capital. These evaluations come in various formats, commonly categorized as one-step, two-step, and three-step processes. In today's newsletter, we'll be explaining how one-step evaluation works.

The main advantage of a one-step evaluation is the potential for quick funding 🏦. Usually, one-step evaluations are cheaper. The downside is that the profit targets are usually higher 📈, and the allowed drawdowns are smaller 📉, making it more difficult to pass the challenge.

For example, a prop firm may have a profit target of 8% with a maximum of 5% daily drawdown and an 8% overall drawdown for a two-step evaluation.

In a one-step evaluation, the profit target may be 10% with a maximum 4% daily drawdown and a trailing drawdown of 6%. The trailing drawdown means it follows the profits you’ve made, which can add complexity if you go through a losing period.

Ultimately, the choice depends on personal preference. Some may prefer the speed and simplicity of the one-step challenge, while others might favor the stability of the two-step challenge. Consider what works best for you and your trading style.. 🎯📈