How to Pass a Two-Step Prop Firm Challenge

Passing a prop firm challenge feels impossible until you understand the formula behind it. The Two Step Challenge is the gateway thousands of traders use to access large trading capital without risking their own funds.

In this article, you’ll learn the exact approach, mindset, and strategies top challenge-passers use to move through both phases with confidence, and how you can apply them instantly with firms like FundedNext.

TL;DR

• 2-Step Challenges prioritizes consistency, requiring a smaller profit target while following identical risk rules.
• Risk management, low-frequency setups, and strict discipline dramatically increase your chances of passing.
• Trading fewer pairs and following one clear strategy reduces emotional mistakes.
• FundedNext’s Stellar 2-Step and Stellar Lite Challenges offer flexible rules, fast processing, and industry-leading reward structures once you pass.

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How the Two-Step Prop Firm Challenge Works

A 2-Step Challenge is designed to evaluate whether a trader can:

1. Generate returns without excessive risk.
2. Maintain consistency over time.
3. Follow prop firm rules like daily loss limits and maximum loss limits.

Passing both steps earns you a Funded Account, where you receive a Performance Reward based on your returns.

Step-by-Step Guide: How to Pass a Two-Step Prop Firm Challenge

Below, you’ll find a detailed breakdown of the structure and recommended approach for each phase. This covers the mindset, execution framework, and tactical methods top-performing prop traders use to pass challenges repeatedly.

How to Pass the First Step

Step 1 usually has the highest profit target and is where most traders fail, not because of strategy, but because of impatience and over-risking.

Key Objectives of Step 1

1. Hit the profit target (e.g., 8–10%, depending on the firm).
2. Avoid violating risk rules like daily loss limits or maximum loss limit.
3. Demonstrate stable trading behavior without large swings.

Recommended Approach for Step 1

1. Trade Less, Win More

Overtrading is the number one cause of challenge failures. Limit your focus to:

• 1–3 pairs
• 1 high-probability setup per day
• Your best session (London or New York)

2. Use a Fixed, Low Risk Per Trade

A safe benchmark is:

• 0.5% per trade
• 1–1.5% total daily risk maximum

This allows room to recover from losing streaks without breaching the loss limit.

3. Follow a Single Strategy

Examples of simple Step 1 strategies:

• Breakout + retest
• Supply and demand
• Trend continuation using EMAs
• Market structure shift (“BOS + pullback/FVG”)

Always align your entry criteria, stop-loss, and exit plan with objective signals, not emotion.

4. Aim for Risk-to-Reward of 1:2 or higher

A few solid wins will push you closer to the challenge target faster than dozens of small scalps.

How to Pass the Second Step

Step 2 is typically easier because the profit target is lower, but traders still fail due to rushing.

Key Objectives of Step 2

• Prove consistency
• Hit a smaller profit target, often around 5%
• Maintain discipline and low drawdown

Recommended Approach for Step 2

1. Switch to a “Capital Preservation” Mindset

You’re no longer “chasing” a target. Your priority is to avoid big losses

2. Reduce Risk Even Further

Suggested:

• 0.25–0.5% per trade
• Stop trading for the day after one good win

3. Keep the Same Strategy From Step 1

Prop firms want to see continuity. Changing strategies increases mistakes.

4. Avoid Revenge Trading Entirely

Step 2 failures often come from emotional responses rather than poor analysis. If a trade fails, step away.

Prop Firm Challenge Tips That Improve Your Odds

Below are universal principles that apply to any modern prop trading firm.

1. Respect the Daily Loss Limit

This is the most commonly violated rule. Set a hard stop:

• If your daily drawdown reaches 40–50% of the firm’s limit, stop trading.

2. Use a Trading Journal

Record:

• Entry reason
• Timeframe
• Emotions
• Outcome

This builds awareness of patterns that either help or harm performance.

3. Avoid Trading During High-Impact News (Unless Allowed)

Many firms restrict trading news.

FundedNext’s Stellar models allow news trading, which gives traders more flexibility.

4. Stick to the Same Lot Size Range

Inconsistent lot sizing signals emotional volatility.

5. Trade During the Best Market Sessions

The highest-probability hours are:

• 8:00 AM to 5:00 PM GMT (London Session)
• 1:00 PM to 10:00 PM GMT (New York Session)

6. Choose a Prop Firm With Flexible Rules

Rules differ significantly between firms, so choosing the right evaluation model matters.

Trading Challenge Strategies That Work for Most Traders

These frameworks help simplify your challenge journey.

Strategy 1: Trend Continuation

• Identify the higher-timeframe trend
• Enter on pullbacks
• Use EMA or structure confirmation
• Target 1:2 or 1:3 RR trades

Strategy 2: Breaker Block or Retest Trading

• Price breaks key structure
• Wait for a correction
• Enter the retest zone
• Works best on the M5–M15 chart

Strategy 3: Supply & Demand Zones

• Draw major zones on H1–H4
• Wait for the price to return
• Confirm with smaller timeframe entries
• Use wide targets to accumulate RR

Why Many Traders Choose FundedNext for a Two-Step Challenge

FundedNext offers one of the industry’s most flexible and trader-friendly Two Step challenge models: Stellar 2-Step and Stellar Lite.

Key Benefits;

• No time limit to pass either Step
• News trading allowed
• Expert Advisors (EAs) allowed on MT4 and MT5
• Guaranteed 24-hour payout processing, or $1000 extra if delayed
• 15% profit share after passing the Challenge (except Stellar Lite)

FundedNext Account Scaling Example

Trade responsibly and you can get access to:

• $300,000+ funded capital equivalent
• Frequent payouts with a brand promise of receiving them in 24 hours or we pay $1,000 extra.
• Coordinate multi-asset execution on MT4, MT5, Match-Trader, and cTrader

Realistic Example: A Clean Path to Passing a Challenge

Let’s imagine a trader using the Stellar 2-Step model:

• Account Size: $100,000 demo challenge
• Step 1 Target: 8%
• Step 2 Target: 5%
• Daily Loss Limit: 5%
• Maximum Loss Limit: 10%

Passing Example

• Win 4 trades at 1:2 RR risking 0.5% → +4%
• Win 3 trades at 1:3 RR risking 0.5% → +4.5% → Step 1 Passed

Step 2 only needs 5%.

• Win 3 trades at 1:2 RR risking 0.5% → +3%
• One 1:3 RR trade → +1.5% → Step 2 Passed

Risking low per trade ensures losing streaks never threaten the account.

Final Thoughts

Passing a prop firm challenge, especially a structured Two Step Challenge, becomes much easier when you rely on solid risk management, disciplined execution, and a strategy you can repeat with confidence.

With firms like FundedNext offering flexible rules, clear evaluation conditions, and fast reward processing, traders have everything they need to succeed.

Frequently Asked Questions

What is a Two-Step Prop Firm Challenge?

A structured evaluation where traders complete two phases (profit target + consistency) before qualifying for a funded account with a prop firm like FundedNext.

What are the key components of the Two-Step Challenge?

They usually include:

• Profit target
• Maximum daily loss
• Maximum overall drawdown
• Minimum trading days (if applicable)
• Consistency requirements

How can I pass the First Step of the Two-Step Challenge?

Focus on risk management, avoid overtrading, and stick to one clear strategy. Risk 0.5% or less per trade and aim for high-quality setups.

How can I pass the Second Step of the Two-Step Challenge?

Trade even more conservatively, prioritize capital preservation, reduce risk, and take only the cleanest setups.

Can I trade any asset in a Two-Step Challenge?

Most prop firms allow major forex pairs, indices, gold, and sometimes crypto. FundedNext supports a wide range of markets depending on the platform (MT4/MT5/cTrader).

What happens after I pass the Two-Step Prop Firm Challenge?

You receive a funded account, become eligible for payouts, and can scale your account based on the firm’s scaling plan.