# What is Evaluation?

> An evaluation is the paid, rule-bound test a prop firm sells, in which a trader must hit a profit target in a simulated account without breaking any risk rule.

- Source: https://pipvalley.com/glossary/evaluation
- Publisher: PipValley - web design studio for prop trading firms
- Updated: 2026-10-03

In a prop firm, the evaluation is the core product. The trader pays a fee, receives a simulated trading account of a stated size, and has to reach a profit target while staying inside a daily loss limit, a maximum loss limit and any other rules the firm publishes. Pass, and the trader moves to a simulated funded stage; break a rule, and the account is closed.

Evaluations come in several shapes: one-step, two-step and three-step programs, programs with or without time limits, and futures-style programs with end-of-day or intraday trailing drawdowns. The structure decides how the firm earns money and how much payout liability it takes on, so it is a business design decision before it is a marketing one.

Most retail prop firms run the evaluation and the funded stage in a simulated trading environment. Firms that state they place some or all trades on live markets should say so plainly and explain how; everyone else should describe the account as simulated everywhere it appears.

## Why it matters

The evaluation is what you sell, so its rules are your pricing, your risk model and your support load at once. Rules that are vague on the website turn into disputes, chargebacks and bad reviews later. A founder who can explain the evaluation in one screen, with every number visible, has already removed most of the reasons a trader hesitates at checkout.

## Example

A 2-step evaluation on a $100,000 simulated account might ask for an 8% profit target in phase 1 and 5% in phase 2, with a 5% daily loss limit and a 10% maximum loss limit. These are illustrative figures; every firm sets its own.