Prop Firm Evaluation Phases Explained: Phase 1, Phase 2, and Funded

Most prop firm evaluations consist of two phases followed by a funded account. Each phase has different requirements and calls for a slightly different approach. Understanding the purpose and optimal strategy for each phase significantly improves your chances of passing.

Why Two Phases?

The two-phase structure exists to filter out lucky traders from consistently skilled ones. A trader who gets lucky on a few trades might pass Phase 1 but struggle to repeat the performance in Phase 2. A genuinely skilled trader should be able to pass both phases consistently.

From the prop firm's perspective, the two-phase structure also provides two opportunities to observe a trader's risk management and consistency before committing capital.

Phase 1: The Challenge

Phase 1 is the primary evaluation. It has the highest profit target and is where most traders fail.

Alpha Funded Phase 1 Parameters:

  • Profit Target: 8% of account balance
  • Daily Drawdown Limit: 5%
  • Maximum Drawdown Limit: 10%
  • Minimum Trading Days: None
  • Maximum Trading Days: Unlimited

The Phase 1 Strategy:

Phase 1 requires the highest profit target (8%), which means you need to generate the most profit while staying within drawdown limits. The optimal approach:

  • Risk 0.5–0.75% per trade
  • Target a 1:2 or better risk-reward ratio
  • Trade only your highest-conviction setups
  • Expect Phase 1 to take 20–40 trading days at conservative sizing

The absence of a time limit at Alpha Funded is a significant advantage. You can take as long as needed to reach the 8% target without pressure to rush.

Phase 2: The Verification

Phase 2 has a lower profit target (5%) and serves to verify that Phase 1 performance was consistent rather than lucky.

Alpha Funded Phase 2 Parameters:

  • Profit Target: 5% of account balance
  • Daily Drawdown Limit: 5%
  • Maximum Drawdown Limit: 10%
  • Minimum Trading Days: None
  • Maximum Trading Days: Unlimited

The Phase 2 Strategy:

Phase 2 should be approached more conservatively than Phase 1. The lower profit target (5%) means you need less profit, and the primary risk is a drawdown violation that ends the evaluation when you're close to completion.

  • Reduce risk per trade to 0.5% maximum
  • Focus on protecting the account rather than maximizing profit
  • The 5% target should be achievable in 15–25 trading days at conservative sizing

The Funded Account: What Changes After Passing

After passing both phases, you receive a funded account with real capital. The rules are identical to the evaluation phases, but the psychological environment changes significantly.

What's the Same:

  • 5% daily drawdown limit
  • 10% maximum drawdown limit
  • Same trading rules (news trading allowed, weekend holding allowed)

What's Different:

  • Real capital — profits and losses are real
  • Payout schedule — you can request withdrawals bi-weekly
  • Scaling plan — consistent performance triggers account size increases
  • Long-term relationship — you're now a funded trader, not an evaluation candidate

The Funded Trader Mindset Shift

Many traders pass the evaluation but struggle in the funded account because they don't make the necessary mindset shift. The evaluation is a sprint; the funded account is a marathon.

In the funded account, consistency over months and years is more valuable than maximizing any single month's profit. A funded trader who generates 3–5% consistently every month for 12 months is more successful than one who generates 15% in one month and loses 8% the next.

Alpha Funded's scaling plan rewards this consistency — traders who demonstrate 10% profit over 3 consecutive months receive account size increases, creating a compounding growth trajectory.

Start your evaluation journey with Alpha Funded →