Last updated: 1 October 2026. The FTMO Challenge 2-Step rules referenced here were checked on 23 September 2026.
Learning how to pass a prop firm challenge starts with controlling your losses. This guide gives you a lot-sizing table, a daily stop level and a 30-day practice plan to apply across phase 1 and phase 2. Before you pay for a prop firm challenge, use that plan to test whether your system can hit the target while keeping daily drawdown inside the limit.
- What does a prop firm challenge actually test?
- Five reasons traders fail the challenge
- The 30-day plan for phase 1
- Trading strategy for phase 2
- The terms people miss
- What to do after you pass
- Frequently asked questions
- Conclusion
What Does A Prop Firm Challenge Actually Test? Reference Rules For Phase 1 And Phase 2
A prop firm challenge asks you to reach a profit target without breaching the programme’s risk limits. In a two-stage model, phase 1 tests whether you can hit the higher target; phase 2 confirms you can keep trading under the same rules. Clearing both stages does not mean you can withdraw immediately: you still have to complete the formalities and meet the conditions attached to the post-evaluation account.
The table below uses FTMO Challenge: 2-Step as a concrete example. These are one programme’s rules, not universal rules for every firm. Per the FTMO Trading Objectives page, the objectives published at the time of checking were:
| Item | Phase 1: FTMO Challenge | Phase 2: Verification |
|---|---|---|
| Profit target | 10% of initial capital | 5% of initial capital |
| Maximum Daily Loss | 5% of initial capital | 5% of initial capital |
| Maximum Loss | 10% of initial capital | 10% of initial capital |
| Minimum trading days | 4 days | 4 days |
| Time limit | None | None |
The 10% Maximum Loss is a static floor: on a simulated $100,000 account, equity must not fall below $90,000. The 5% Maximum Daily Loss resets every day against the balance at 00:00 CE(S)T; equity, including the profit and loss of open positions, must not fall below that day’s threshold. If the balance at reset is $102,000, the new daily loss threshold is $97,000. So you cannot judge your remaining risk budget from closed trades alone.
Static Drawdown Versus Trailing Drawdown
With a static drawdown, the overall loss floor does not rise as the account profits. A 10% floor on a $100,000 account stays at $90,000 even after the balance climbs to $105,000.
With a trailing drawdown, the floor follows the balance peak. FTMO runs both types in one system: per the Trading Objectives page, the 2-Step programme uses a static Maximum Loss of initial capital minus 10%, while the 1-Step programme uses a daily trailing Maximum Loss.
The trailing threshold is recalculated at 00:00 CE(S)T from the highest balance recorded at 00:00 on previous days, minus 10% of initial capital, and it only rises, never falls. Misreading which type of max drawdown applies can void your whole plan even when every individual trade had a stop loss.
Why Traders Fail: 5 Problems To Fix First
There is no public dataset good enough to rank failure causes across every firm. Even so, each of the problems below can either breach a rule or make a trader abandon their own plan.
1. Hitting The Daily Drawdown
A 5% daily loss limit looks generous, but five losing trades in a row at 1% risk uses all of it — before spread, commission and slippage. Many programmes measure equity, so an open losing position can trigger the breach too.
To keep a buffer, stop yourself at around 2–2.5% of initial capital in a day when the firm allows up to 5%. That is a risk management choice of our own, not a threshold the firm sets. When you reach your stop, end the trading day — do not move to another instrument looking to make it back.
2. Oversizing To Reach The Target Early
One big winner can push the account close to the target, but the same size wipes out that progress when the market turns. Define where the setup is invalid and place the stop loss first, then calculate the lot: double the stop width and the lot must halve.
For a plan to pass a prop firm challenge, 0.5% per trade usually leaves more room than 1% per trade. That is a risk management choice, not a promise that you will hit the target within a fixed number of days.
3. Switching Systems Halfway Through
Two or three losses do not prove a strategy has stopped working, and constantly rotating between breakout, reversal and scalping leaves you without consistent data to judge. Pick one or two backtested setups and only change system after the evaluation ends.
4. Missing A Programme Rule
Rules on news, EAs, copy trading or holding over the weekend can differ between firms, between packages, and between the challenge and the post-evaluation account. Read the terms for the exact package you bought; where a rule is unclear, ask support to confirm it in writing.
5. Revenge Trading And Overtrading
After a loss it is easy to raise the lot or take a setup that does not qualify; near the target, the “just a bit more” pressure causes the same mistake. Capping yourself at two or three trades a day creates a clear stopping point. A prop firm challenge also tests how you handle a bad day.
Phase 1 Strategy: A 30-Day Plan And A Lot Table Based On Daily Drawdown
The 30-day schedule below is a practice framework, not a guaranteed path to profit. If the market does not produce a qualifying setup, a day on the sidelines still fits the plan.
Step 1: Fix Your Risk Per Trade And Your Daily Stop
Say a $50,000 account has a 5% daily loss limit, which is $2,500 of initial capital. You can set an internal limit at half that: $1,250 per day. Risking 0.5% of the account, or $250 per trade, divides into five losing trades. In practice you should stop earlier to leave room for fees and slippage; a cap of two to three trades a day is easier to control.
Before the first trade, write down four numbers: the balance at the firm’s daily reset, the current daily loss threshold, your personal stop, and the total risk across all open positions. Two trades in the same direction on correlated pairs create more combined risk than you think.
Step 2: Size The Lot From The Stop Loss, Not From The Target
The formula: Lots = dollars you accept losing ÷ (stop loss in pips × dollar value per pip of 1 lot).
The table uses EUR/USD, assumes a USD account and a pip value of $10 per pip on one standard lot, and excludes fees, spread and slippage. The three lot columns correspond to stop losses of 20 / 30 / 50 pips.
| Account size | Risk per trade | Dollars at risk | SL 20 pips | SL 30 pips | SL 50 pips |
|---|---|---|---|---|---|
| $10,000 | 0.5% | $50 | 0.25 lots | 0.167 lots | 0.10 lots |
| $10,000 | 1% | $100 | 0.50 lots | 0.333 lots | 0.20 lots |
| $50,000 | 0.5% | $250 | 1.25 lots | 0.833 lots | 0.50 lots |
| $50,000 | 1% | $500 | 2.50 lots | 1.667 lots | 1.00 lots |
| $100,000 | 0.5% | $500 | 2.50 lots | 1.667 lots | 1.00 lots |
| $100,000 | 1% | $1,000 | 5.00 lots | 3.333 lots | 2.00 lots |
Worked example: on a $10,000 account, 0.5% risk is $50. With a 20-pip stop, each lot loses $200, so the size is $50 ÷ $200 = 0.25 lots. When you place the trade, round down to the platform’s lot step.
You can cross-check with our position size calculator, and read more on setting the risk percentage in forex money management and lot sizing. For gold or indices, enter that product’s actual contract specification — do not reuse the $10 per pip per lot default from EUR/USD.
Step 3: Split The 30-Day Plan Into Four Weeks
| Stage | Internal checkpoint | What to do |
|---|---|---|
| Week 1 | Capital preservation first; 2–3% gain as a reference | Trade familiar setups, two trades a day maximum; log every near-breach |
| Week 2 | If conditions allow, cumulative gain around 5–6% | Keep the size unchanged; review the win rate and your actual losses |
| Week 3 | If conditions allow, work toward 8–9% | Take only qualifying setups; do not raise the lot to chase a checkpoint |
| Week 4 | Complete the 10% when a suitable opportunity appears | Within 2% of the target, consider cutting risk to 0.25–0.5% per trade |
The profit checkpoints are a scenario to track, not quotas to hit at any cost. A flat week still beats breaching the loss limit. If you reach the target but have not completed the four trading days the FTMO 2-Step rules require, check the condition on the dashboard and consider a very small risk for the remaining days — never trade purely to “tick off a day” while ignoring the rules.
Step 4: Pick Your Session And Check The News Calendar
Choose one session that fits the system you tested. Check the forex trading hours before settling on the London or New York session. Rotating sessions constantly makes the results impossible to compare.
Each morning, open the economic calendar and mark NFP, CPI and FOMC decisions. If you have no specific strategy for news volatility, staying out around the release is the cautious option. The 30-minute window is a rule we set in this plan; the firm’s own news-trading restriction, if any, has to be checked separately.
Step 5: Keep A Journal And Set A Pause Threshold
For each trade, save a chart screenshot with the setup, the stop, the lot, the dollars risked, the result and the reason you exited. At the end of the week, review the trades that fell outside the plan before you look at the total profit.
A sensible self-protection rule: when the account is 6% below initial capital, stop trading and reassess, even though the firm allows a 10% overall loss. It is a pause point that breaks the chain of loss-chasing decisions.
Phase 2 Strategy: A 5% Target, And The Same Discipline
Under FTMO 2-Step, phase 1 and phase 2 share the same 5% daily loss limit, 10% max loss and four-day minimum; the clearest difference is the target dropping from 10% to 5%. Because the target is lower, you can cut risk per trade from 0.5–1% to 0.25–0.5% while keeping the same setups, session and sizing process.
Cut The Risk, Keep The System
Phase 2 is not the moment to try a new strategy. If the system got you through phase 1 without touching your internal limits, carry on recording results in the same journal format. Note that a 5% target can still need a lot of trades when risk per trade is small; no calculation guarantees you finish by a given date.
After a good day, check the minimum trading days and the status of each condition on the dashboard. After a losing day, apply exactly the same personal stop as in the previous round. Whether you pass a prop firm challenge at this stage depends heavily on not loosening your own rules once you think the hard part is over.
A Reference Schedule For Phase 2
In weeks 1–2, trade qualifying setups and track a 2–3% gain if conditions allow. In weeks 3–4, continue toward the 5% target without raising the lot. Once the account meets the profit target and the minimum days, close your positions, check the dashboard and wait for the review process — do not open more trades just to make the result look better.
Before entering an evaluation at all, prepare with demo trading, backtesting and a journal. Those steps still matter in phase 2, where mistakes usually come from being impatient for the next account.
Rules And Technical Traps That Can Breach The Account
Phase 1 and phase 2 only count if you reach the target and comply with the terms. Before buying a challenge, make a note page with answers to the following:
- Daily loss and the reset time: does the firm measure balance or equity? What time zone does it reset in? Under FTMO 2-Step, equity includes open positions and the daily threshold resets at 00:00 CE(S)T.
- Consistency or Best Day rules: some programmes cap how much of your profit may come from one trading day. Do not assume a “40% rule” applies everywhere. FTMO, for instance, publishes a 50% Best Day Rule for its 1-Step programme — distinct from the 2-Step rules used in this article.
- Trading around news: establish whether the firm bans opening, closing, or both, and which news types and time windows apply. The5ers’ guidance describes a restriction roughly two minutes before and after high-impact news for its High-Stakes programme; do not generalise that to other packages.
- Holding overnight or over the weekend: check the rule separately for the evaluation stage and the post-evaluation account; a winning position can still breach the package you chose.
- EAs, copy trading and restricted strategies: read the policy for each tool and trading style. If you use a forex VPS to run an EA, the VPS only keeps the platform running; it does not change whether your contract permits the EA. Likewise, check the terms before using a scalping strategy, cross-account hedging, grid or martingale.
- Inactivity and identity verification: check the maximum number of days without a trade, the KYC documents, the countries served and the conditions for receiving a reward; save the firm’s official answer wherever something is unclear.
What To Do After You Pass, And How To Prepare Before You Start
Four Things To Do When The Next Account Is Granted
- Complete verification and read the agreement. Check the account name, your documents, the supported regions and the terms you have to sign.
- Re-read the rules that apply at the new stage. Do not assume the news, holding or automation rules match the challenge.
- Write down the payout conditions. Note when you may request one, how the reward is calculated, how it is paid, and the challenge refund conditions if any.
- Keep the risk level that got you through. An account labelled “funded” is not a reason to raise the lot or drop the daily stop.
FTMO describes its product as simulated trading with a reward mechanism. When comparing programmes, read how each firm defines the account and the payment, rather than assuming you directly hold the capital on display.
Test The Plan Before You Pay The Fee
Run the 30-day plan on demo or a small personal account for one to two months. Track three things: whether the system produces enough setups, how many times you hit your internal stop, and whether the result after fees reaches the profit you need. Only buy a challenge once the data shows you can respect the limits, including through a losing streak.
If you practise on a personal account, start from the criteria for a reputable forex broker. Then use the broker rebate comparison to weigh your trading costs. Cashback can offset part of the cost of practising; it does not offset the risk of oversizing or an unproven system.
Frequently Asked Questions About Passing A Prop Firm Challenge
One-Step Or Two-Step: Which Programme Should You Choose?
Compare the whole rule set before comparing how fast you can finish. A one-step programme skips the Verification round but may set different loss limits or profit allocation conditions. FTMO 1-Step, for example, publishes a 3% maximum daily loss while FTMO 2-Step publishes 5%. If you have never traded under firm limits, use a free trial or run demo accounts under both rule sets before paying.
Does Daily Drawdown Include Open Positions?
Yes, where the rule measures equity, as FTMO 2-Step does. The FTMO Trading Objectives page defines equity as balance plus the profit and loss of open positions, adjusted for swap and commission, so all three affect the threshold. On a $100,000 account with a balance of $102,000 at the daily reset, the 5% daily drawdown threshold is $97,000. If open positions drag equity below that, the account breaches even though you have closed nothing. Check your own firm’s calculation method and reset time.
How Do Phase 1 And Phase 2 Differ?
In the FTMO 2-Step example, phase 1 requires 10% profit on initial capital and phase 2 requires 5%. Both apply a 5% maximum daily loss, a 10% maximum loss and at least four trading days. Because the phase 2 target is lower, this plan suggests halving the risk per trade and keeping the system unchanged. Re-check these numbers if you pick a different firm or programme.
If I Fail, Do I Get A Free Retry?
That depends on the programme’s policy, why the account ended, and any promotion running when you bought. Do not build a free retry into your cost calculation unless the firm states it clearly in the terms. If you do fail, export the trade history and find the specific cause: a breached threshold, the wrong size, or a system without an edge. Fix it on demo before deciding to buy again.
How Long Does It Take To Pass A Prop Firm Challenge?
There is no number of days that applies to every trader. This plan allows about 30 days for phase 1 and another 2–4 weeks for phase 2, but that is a reference period for disciplined trading, not a forecast. FTMO 2-Step currently publishes no time limit and requires a minimum of four trading days in each stage. If there are no suitable setups, extending the plan makes more sense than raising the lot to keep to a schedule.
Conclusion
To pass a prop firm challenge, size lots from the loss you can accept, set a daily stop below the official limit, and use the 30-day schedule to hold discipline rather than force profit. In phase 2, cut risk and keep trading the system you tested. Before paying for a prop firm challenge, run the whole process on demo or a personal account. If you have not yet chosen where to apply this plan, read our review of seven prop firms for Vietnamese traders first.
This article is for information only and is not investment advice. Written by Backcom.io.
