Prop firms provide traders with a new way to start their trading journey. These firms provide traders with the amount of capital they need to start. These firms first require traders to complete an evaluation process. Prop firms provide funding to those traders who successfully complete and achieve evaluation criteria. If we talk about the evaluation then each firm has a different evaluation process. Some firms have one-step evaluation and others prefer two-step evaluation. But which one is better and easier for traders to qualify? Let’s get the answer to this question and discuss the whole process of both evaluations.
What are One-Step Challenge prop firms?
One-step challenge prop firms provide traders with a very clear way for trading. This evaluation consists of only one step in which traders have to achieve a specific profit target within a specific time limit. In this single step, traders have to maintain all the rules with specific risk parameters like their drawdown limit or loss limit. When traders choose a one-step evaluation prop firm they get different advantages with some drawbacks.
Advantages of One-Step Evaluation
Quick access to funding: When traders choose one-step evaluation prop firms they complete this single step in a short period and after completing this challenge they get quick access to funding without any delay.
Simplicity: Due to a single step this evaluation process is very simple and traders can easily understand the criteria and time limits with other risk parameters that are very clear. Traders do not need to be confused when they choose one-step challenge prop firms.
Lower mental stress: Having a single step means you can focus only on a single step as compared to a two-step evaluation process in which traders can maintain their focus and as a result they fail to succeed. But when traders have a single step their focus helps them to get success.
Short duration: As traders have to complete a single step then they can achieve this target in a short period of time as compared to a multi-evaluation process that takes more time even months to complete the evaluation and verification process.
Disadvantages of one-step evaluation
Higher risk: When traders choose one-step prop firms then these firms have more chances of risk. That’s why these firms implement strict risk management rules that are sometimes difficult for traders to achieve their profit targets under these strict risk rules. Traders need to be limited to specific trading styles and strategies when they work with strict rules.
Difficult profit targets: Some firms specify higher profit targets that are difficult for traders to achieve in a single step within a short period. The common range of one-step evaluation prop firm profit target is 8-10%.
What are Two-Step Evaluation prop firms?
As its name shows the two-step evaluation prop firms require traders to complete the two phases of evaluation to get access to their Cheap funded account. Most of the time traders achieve profit targets in phase 1 within given time limits and phase two provides some flexibility and traders achieve lower profit targets under the same risk management rules. The traders mostly achieve 10% in step 1 and 5-6% in step 2.
Advantages of Two-step Evaluation
Detailed validations: Two-step challenge prop firms ensure traders have maintained their performance over a longer period. It helps them to boost their confidence when they get funded. When they provide consistent performance in this large period then firms also have more confidence in them.
Reduce profit targets in Phase 2: When traders complete Phase 1 and achieve a larger profit target then they are given fewer profit targets during Phase 2. This lower target reduces the overall pressure and headache of traders and makes it easy to achieve this target.
Proven track record: When traders consistently perform during these two phases then success in these phases shows the trader’s adaptability which can be beneficial to manage larger capital with real funds.
Disadvantages of Two-Step Evaluation
Longer time: The evaluation time period is much longer as traders have to pass two different phases with different profit targets. This lengthy process can be frustrating for some traders as they have to wait longer to get access to funding accounts.
Pressure to stay consistent: Traders not only prove their skills in a single step instead they also have to manage their performance consistently through the two phases. This can be a very difficult task and if traders fail to complete phase two then they have to start from phase 1 again. All these steps and losses can be mentally taxing.
Delays in funding: A two-step evaluation has an extended period which means traders have to wait longer even weeks or months to access real capital.
Final thoughts
You see all the factors of one-step and two-step evaluation processes and if you think about which one is better then it depends on your preferences and trading expertise. Experienced traders mostly prefer one-step evaluations and if they want more time and flexible risk management then they can prefer two-step evaluations.
