Profit target
Also known as: prop firm profit target, challenge profit target
Profit target: A profit target is the gain, usually a percentage of the initial account size, that a trader must reach to pass a stage of a prop firm challenge.
How is a profit target measured?
The target is usually a percentage of the initial account size, and many firms count it only once the balance reaches the target with all positions closed. In a two-step challenge each stage has its own profit target, the second usually lower than the first; funded accounts typically have no target: prop firm challenge.
Profit target and drawdown limits
Reaching the target does not pass a stage if a drawdown limit was breached on the way; both conditions have to be met, often together with minimum trading days and a consistency rule.
Worked example
Illustrative only: on a $100,000 two-step challenge with a 10% target in stage 1 and 5% in stage 2, the trader needs a closed balance of $110,000 to pass stage 1 and, starting again at $100,000, $105,000 to pass stage 2.
Sources
- Trading Objectives, FTMO
Learn more
- Prop Firm Challenge Explained: One-Step, Two-Step and Instant Funding
How a prop firm challenge works: one-step vs two-step evaluations, instant funding, profit targets, drawdown limits, trading days, fees and refunds.
- What Is a Prop Firm? How Prop Trading Firms Work
What a prop firm is and how prop trading firms work: challenge fees, prop firm evaluations, funded and simulated accounts, profit splits, rules and risks.
Related terms
- Consistency rule
A consistency rule is a prop firm condition that limits how much of a trader's total profit may come from a single day or trade, so that results are not driven by one outsized gain.
- Daily drawdown
Daily drawdown, also called the daily loss limit, is the most an account may lose within one trading day under a prop firm's rules; the limit is recalculated at a reset time set by the firm.
- Funded account
A funded account is the prop firm account a trader receives after passing a challenge, or directly through instant funding, on which profits are shared under the firm's profit split.