The Textbook of Prop Firms EP01 | Complete Understanding of Challenge Rules

Last Updated: March 17, 2026

“I want to try the challenge at a prop firm, but the rules are too complex and I don’t really understand…”

Are you struggling with this concern? The challenge (evaluation program) of prop firms is a system to prove your abilities as a trader and to obtain the right to manage the company’s funds. However, there are many unfamiliar terms and rules such as “2-step,” “1-step,” “8% profit target,” “-5% loss limit,” and many people don’t know where to start understanding them.

In this article, we will carefully explain the challenge rules of prop firms one by one, so that even those with no experience in FX can understand. We will focus on Fintokei (フィントケイ), the only officially registered overseas prop firm in Japan, and clearly show “what you need to clear in order to pass” along with specific numbers.

By the time you finish reading this article, the overall picture of the challenge should be neatly organized in your mind.

【Conclusion】The challenge is not a “test” but a “job interview” – First, have this mindset

Professor Kaitai! The prop firm’s challenge is like a “test” where you just have to get a passing score, right?

Shinshō-kun, that way of thinking could be a bit dangerous. The challenge is more like a “job interview” than a “test”. Prop firms are seeing whether it’s safe to entrust you with hundreds of millions to billions of yen.

Let me start with the conclusion. The key points to keep in mind about the challenge rules are the following 5 points.

The most important thing here is that the challenge is not just about whether you can generate profits, but whether you can manage risk. Even if you make a lot of profits, you will be disqualified the moment you violate the loss limit.

In other words, the challenge is a system to select people who can safely manage funds, not just those who can make a lot of money. Adopting this perspective can greatly change how you approach the challenge.

Now, let’s look at the specific rules one by one.

What is the prop firm’s challenge in the first place? – Understand the basic mechanism

What exactly is a prop firm? I heard that you can trade with the company’s money, not your own. Is that true?

That’s right! A prop firm (Proprietary Trading Firm) is a company that provides its own funds to traders to manage. The challenge is the evaluation process to determine if you are a suitable candidate to entrust their funds to.

The Business Model of Prop Firms

To understand the mechanism of prop firms, let’s first grasp the overall flow.

【Basic Flow of a Prop Firm】

1. Purchase a challenge plan (e.g., Fintokei’s Ruby Plan ¥69,800)
2. Challenge on a demo account (Step 1 → Step 2)
3. Pass both Step 1 and Step 2
4. A “pro account” is issued (able to trade with the company’s funds)
5. Receive 80% of the profits as compensation when profits are generated

The important point here is that the challenge is done on a demo account (virtual funds). In other words, even if you fail the challenge, you will not incur losses beyond the purchase price. The lack of risk to your own trading capital is the biggest advantage of prop firms.

Why do prop firms impose a challenge?

Let’s consider it from the prop firm’s perspective. The company is entrusting traders with hundreds of millions to billions of yen. If they gave funds to anyone, they would risk incurring huge losses.

That’s why they set up the “evaluation period” called the challenge to determine the trader’s abilities and risk management skills.

This “job interview” analogy makes it much easier to understand the meaning of each challenge rule. The profit target is “proof of your abilities”, the loss limit is “proof of your risk management”, and the minimum trading days is “proof that it’s not a one-off success”.

Types of Challenges: 2-Step and 1-Step

There are largely two types of challenges in prop firms.

① 2-Step (Standard)

• Evaluated in two stages: Step 1 and Step 2
• Step 1 has a higher profit target, Step 2 has a slightly lower one
• The most common challenge format
• Fintokei’s “Challenge Plan” falls into this category

② 1-Step (Fast-Track)

• Pass/fail is determined in a single assessment
• Profit target is usually slightly higher than 2-Step
• Advantage of a shorter evaluation period
• Fintokei’s “Swift Trader Pro Plan” falls into this category

In this article, we will mainly focus on explaining the 2-Step type. The details of the 1-Step type will be covered in the 4th article of the series, so please look forward to that.

Detailed Explanation of the 2-Step Challenge Rules

So the 2-step means there are two tests, right? That means I have to make 14% in total, 8% in Step 1 and 6% in Step 2, right?!

Calm down (laughs). Step 1 and Step 2 are challenges in separate periods. If you pass Step 1, your account will be reset and Step 2 will begin. Let’s take a closer look at what is being checked in each step.

From here, we will explain all the rules in detail using Fintokei’s 2-Step challenge plan as an example.

Step 1: Clear the 8% Profit Target

Step 1 is the first hurdle of the challenge. You are required to generate 8% profit on the initial balance.

【Example: Ruby Plan (Initial Capital 10 million yen)】

• Initial Balance: 10 million yen (Demo Account)
• Profit Target: 8% = 800,000 yen
• Target Balance: 10.8 million yen or more

In other words, the moment your account balance reaches 10.8 million yen or more, the profit target for Step 1 has been cleared. However, in addition to achieving the profit target, you must also meet all of the following conditions.

It’s easy to focus on the profit target, but the loss limit is actually much more important. You can achieve the profit target given enough time, but if you violate the loss limit even once, you will be immediately disqualified (end of the challenge).

Step 2: Clear the 6% Profit Target

If you pass Step 1, your account will be reset, and a new demo account will start Step 2.

【Example: Ruby Plan (Initial Capital 10 million yen)】

• Initial Balance: 10 million yen (Reset demo account)
• Profit Target: 6% = 600,000 yen
• Target Balance: 10.6 million yen or more

The profit target for Step 2 is set 2% lower at 6% than Step 1. This is based on the design concept of “proving your abilities in Step 1, then confirming the consistency in Step 2”.

The conditions to pass Step 2 are the same as Step 1, except that the profit target is 6%. The daily loss limit (-5%) and overall loss limit (-10%) also apply the same way.