Profit Target
The number you must hit, and what happens after.
What it is
The profit target is the minimum percentage return you must achieve to pass a challenge phase or qualify for a payout. Typical values: 8-10% for phase 1, 5% for phase 2, and often 0% (no minimum) for ongoing funded payouts.
Challenge vs. funded targets
- Challenge phases: Must hit the target within the time limit (30-60 days typically). Fail = restart or lose the fee.
- Funded payouts: Some firms have no ongoing target, you get paid whatever profit you've made at the payout cycle. Others require a minimum (e.g. $100) before processing a withdrawal.
The real cost: total performance before first income
The number that actually matters for running prop trading as a business is not the profit target in isolation. It's the total performance you must generate, across all phases plus any payout gate, before a single dollar reaches you.
Add it all up: challenge phase 1 + challenge phase 2 + minimum payout threshold. A firm with a 10% phase 1, 6% phase 2, and a 3% minimum payout gate requires 19% total performance before your first withdrawal. That 19% is the manhour cost of entry. It's the work you do before the business generates income.
This has nothing to do with risk/reward ratios on individual trades. R-values matter at the trade level, but here the question is different: how long until this business pays you? A trader who earns 1% per week on average takes 19 weeks to reach that first payout. That's the real cost to evaluate, not whether 13% exceeds a 10k drawdown limit.
Example, assuming $100k account, 80% split, 1% per week:
| Instant Funded ($3,000 fee, 1.5% gate) | 2-Step Challenge ($500 fee, 10%+6%+3% gate) | |
|---|---|---|
| Work before first payout | 1.5% | 19% |
| Time at 1%/week | ~1.5 weeks | ~19 weeks |
| Entry fee | $3,000 | $500 |
| Net income over 6 months (after fee) | $16,200 | $4,300 |
| Monthly avg. (6 months) | ~$2,700/mo | ~$717/mo |
| Time to break even on entry cost | ~3 weeks | ~19 weeks |
| Months until income covers the $3,000 instant fee | ~1 month | ~5 months |
| Real cost of choosing this path | $3,000 fee, offset fast | $500 fee + $11,900 foregone = $12,400 |
The challenge trader does generate funded profits in the final weeks of that 6-month window, which is why the $4,300 figure is higher than just the first payout. The "cheap" $500 entry still costs $12,400 in real terms once you account for what the instant funded account nets over the same period. The entry fee is never the real number.