Differences between trading in a challenge account and a funded account

In prop trading, traders who qualify through assessments conducted by these firms then advance to a funded account. If you are new or just started prop trading, you may read the introduction here: “An introduction to the essentials of proprietary trading”.

While both the Challenge and the Funded stage entail trading, not with your own capital, the goals, approach, and guidelines are somewhat different between the two. Successful traders in prop trading and those hoping to advance their professions need to be aware of and understand these distinctions.

From trading mentality and risk rules to performance objectives, we will discuss the main differences between trading a funded account and a challenge account.

The main objective of a Challenge account is passing an evaluation step. Traders must maintain stringent risk limits while meeting particular profit targets within a time period. This environment tests the trader’s consistency, discipline, and strategy.

A funded account is the real deal, though. Once a trader passes the challenge and verification, they can make actual earnings through a profit split. In this stage, the objective is to trade profitably using sound risk management to grow the account. Prop traders will, in return, receive a profit share or a fee for the trading signals generated based on the prop firm that they trade with.

In a challenge account, traders often feel pressure to pass the challenge quickly. This can lead to overtrading, higher risk-taking, and emotionally driven decisions.

Once funded, the trader's focus should shift from "proving your strategy works" to "sustaining your proven strategy for long-term performance." This involves smarter risk management, consistent execution, and avoiding unnecessary drawdowns to retain the funded status.

One pro tip here is that those funded traders who treat their account like a business, focusing on capital preservation, will tend to last longer and earn more.

Challenge accounts generally have very strict and clear-cut rules. The rules during these phases are designed to foster stable profits while managing risks. By avoiding unnecessary risks, you, as a prop trader, can maintain steady growth, leading to a more stable trading journey.

Daily loss limits: This is the maximum daily loss your challenge account can lose on any given day. This level will remain fixed and not change intraday. If you exceed this limit, you will lose your challenge account.

Overall drawdown limit or maximum drawdown: This is the limit on the maximum loss you can sustain in the lifetime value of your challenge account in each phase. Breaking this rule will also result in the loss of your challenge account.

Profit targets: The profit targets are like the “passing marks” of the challenge. You will pass the challenge phase as soon as the respective profit target is reached, provided you have not violated any other conditions.

Maximum daily profit: This is also known as the consistency rule in OANDA Prop Trader. Upon reaching this limit, all open trade positions will be closed and trading will be disabled until the following day. Our consistency rule is in place to identify profitable traders who can deliver consistent and steady results with proper risk and money management controls at the challenge stage. This rule is only applicable during the challenge stage.

You will reach the Funded stage once you pass the evaluation or challenge phase. At the Funded stage, some prop firms may slightly adjust the rules. Different prop trading firms will differ in their rules.

Suppose you trade with OANDA Prop Trader once you pass both phases of our challenge. In that case, you’ll have to complete the necessary verification where your identity is confirmed before being given access to an OANDA Prop Trader Account.

Maximum drawdown thresholds: For OANDA Prop Trader, the same drawdown limits apply both during the challenge phase and after passing the challenge.

Profit targets: For OANDA Prop Trader, we do not have profit targets once traders pass their challenge phases. Nonetheless, traders should treat their trading as their business and seek to make consistent profits when taking trades on the account.

Maximum daily profit: Similar to profit targets, traders with an OANDA Prop Trader Account who have passed the challenge phase do not have a maximum daily profit restriction.

You must be familiar with the rules applicable to you at each stage. You may find the details of our rules and challenge conditions here. Besides the challenge rules and conditions, it is equally important to read the account agreement thoroughly, as each prop firm may apply different rules post-challenge.

In a challenge, you are prop trading for the chance to be funded, not for profit. Any gains made in the challenge stay with the prop firm. However, you begin earning a profit split once you pass the challenge and become a funded trader. The profit split varies between firms, typically between 70 – 90%.

This is when prop trading starts to become lucrative. You’ll be pleased to know that OANDA Prop Trader offers a profit split of 80%.

You may think that passing the challenge is the most stressful and hardest part of prop trading. Nonetheless, many traders face even higher emotional pressure after they pass the challenge. Because now, there’s real money at stake, mistakes feel heavier.

One bad trade can mean forfeiting a month's profit share or worse, losing the entire account. However, with the proper prop trading plan and risk management habits, prop trading doesn’t have to feel like walking on a tight rope.

Developing a winning mindset as a trader, emotional control, and journaling practices are all essential at this stage.

Trading a challenge account is like trying to pass an exam. It tests your strategy, discipline, and execution under pressure. If you want more tips and strategies to pass the challenge, check out our previous article “How to create a solid trading plan to pass your Challenge”.

Trading after passing the challenge, however, is a professional commitment. You now need to perform reliably, and you’ll be rewarded for consistent performance. Along with the opportunity to earn a profit share, prop traders typically have access to the firm’s technologies and market data, which can help them navigate the trading challenges.

Whether you’re in the challenge stage or you’ve passed it, as long as you want to remain trading, you’ll need skill and discipline.

If you’re new to prop trading, our blog is a treasure trove of resources for prop traders, from technical analysis, market analysis, to prop trading “how to” articles. Over time, if you control your risks, apply a smart trading plan, and keep learning from past mistakes, you’re on track to become a smarter trader.

OANDA Prop Trader is an excellent choice if you are looking for a prop trading firm providing fair policies, clear incentives, and first-rate tools for traders. We offer industry-beating core pricing with spreads starting from 0.0 pips in FX and low commission. With profit targets of 5% at both phases of the evaluation, our Challenge is simply the best 2-step evaluation in the industry.

OANDA's prop trading program allows you to trade with virtual funds when qualifying through a Challenge. There are various levels to choose from, providing you with up to $500,000 in virtual funds to trade with. Once you finish the two-phase Challenge, we’ll set you up with an OANDA Prop Trader Account, and you may potentially earn 80% of any profits you make.

So what are you waiting for?

Create an account today with OANDA Prop Trader!