Evaluation Phases in Funding Firms

The evaluation phases are the heart of the funding firm model and the main hurdle every aspiring trader must overcome. They are designed not only to test your profitability but also your discipline and ability to manage risk under pressure.

The Purpose of the Phases: More Than Just a Test Funding firms use this structured process for a fundamental reason: to simulate the conditions and pressure of professional trading. They aim to filter out traders who got lucky from those who possess a sustainable strategy and robust psychology. Every rule, from the profit target to the drawdown limit, is there to see how you perform in an environment that mimics real capital management, identifying traders who are consistent, responsible, and capable of protecting the firm's capital in the long run.

The Evaluation Phases Phase 1: The Initial Evaluation The first phase involves a simulated trading environment where you must demonstrate your skills under specific conditions. Although this phase traditionally lasted 30 days, many leading firms today offer unlimited time , removing the pressure to rush your trades. The goal is to reach a profit target (usually 8-10%) without breaching key risk rules, such as maximum daily and total drawdown limits.

Strategic Tips for this Phase:

Break down the target: Don't think about the full 10%. Divide it into smaller, manageable goals, like 2.5% per week. This reduces psychological pressure and encourages consistency. Know your limits in detail: Before placing your first trade, fully understand how the firm calculates drawdown. Is it based on balance or equity? Do open floating losses count? Knowing this is crucial to avoid disqualification on a technicality. Phase 2: The Verification If you successfully complete the initial evaluation, you move on to the verification phase. Here, you are generally asked to reach a lower profit target (typically half of the previous one) while maintaining the same risk management rules.

The purpose of this phase is twofold:

To Confirm Your Consistency: The firm wants to ensure your performance wasn't a fluke or the product of a favorable market. They want to see if you can replicate your success, proving your strategy is robust and adaptable. To Combat Overconfidence: This is where many traders fail. After the euphoria of passing the first phase, some relax, abandon their plan, and make mistakes due to overconfidence. This phase tests your ability to maintain discipline even after a big win. Phase 3: The Funded Trader Once you pass both phases, you become a funded trader and are assigned an account with real capital. The focus shifts to consistent profitability and capital growth. This is where you start receiving a share of the profits you generate, which is usually very generous (between 70% and 90%).

Common Mistakes to Avoid During the Evaluation Passing the evaluations is as much a mental challenge as a technical one. Avoid these common pitfalls:

Ignoring the fine print: Not thoroughly reading and understanding all the rules, especially how loss limits are calculated. Revenge Trading: Impulsively and aggressively trying to win back a loss, which almost always leads to violating the daily drawdown. Switching strategies mid-way: Losing confidence in your system after a couple of losing trades and starting to improvise. Over-leveraging: Risking too large a percentage of the account on a single trade, especially at the beginning or when you're close to the target. Ready to take the next step? To stay up-to-date with the latest promotions, funding firm reviews, and industry news, explore all the content we have for you at TheGodFunded .