> For the complete documentation index, see [llms.txt](https://carrotfunding.gitbook.io/carrotfunding.io-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://carrotfunding.gitbook.io/carrotfunding.io-docs/get-funded/how-it-works.md).

# How It Works

Before starting your challenge, it’s important to understand the evaluation flow and what’s expected of you as a trader. At carrotfunding, every trader begins with a structured, rule-based challenge designed to assess real trading skill under transparent conditions, no hidden metrics, no guesswork.

The objective is simple: demonstrate consistency, disciplined risk management, and profitability. The challenge exists to turn your trading plan into a repeatable system that can be responsibly scaled. By proving you can trade with control and structure, you position yourself to monetize your strategy while helping maintain a sustainable, risk-aware ecosystem that benefits both traders and the protocol.

<figure><img src="/files/buAWOiypsjQct3fCBTZL" alt=""><figcaption><p>How it works</p></figcaption></figure>

### 1. Configure Your Challenge

After signing up, you can immediately configure a challenge that fits your trading style.

Each access NFT grants you an access to a challenge with clearly defined objectives and risk parameters designed around professional risk management principles.

### 2. Hit Trading Objectives

Once your evaluation begins, you'll trade using our proprietary trading terminal in a simulated trading environment reflecting live trading conditions of the trading venue of choice. In both the [Evaluation ](broken://pages/BP6sF6biE6eFAfmMR4ms#phase-1-evaluation-account)and [Verification ](broken://pages/BP6sF6biE6eFAfmMR4ms#phase-2-verification-account)phase, your goal is to hit the profit target while staying within the drawdown limits and following all risk rules.

Here is where you prove consistency, discipline, and risk control.

### 3. Trade Backed by Real Capital

Once you complete your challenge successfully, you’ll be upgraded to a [**Carrot Funded Trader Account**](broken://pages/BP6sF6biE6eFAfmMR4ms#phase-2-funded-trader-account). At this stage, the profit target is removed, and your trading continues under the same real-market conditions, but with **payout eligibility**.

Your trading activity is now backed by capital from our vault, which transparently supports execution and hedging. Depending on your performance, your trades may be mirrored into real on-chain market positions for risk-managed exposure, all visible and verifiable on-chain. You can check out more details and how it works under the transparency tab [here](/carrotfunding.io-docs/introduction/transparency-and-on-chain-proofs.md).

### 4. Receive Payouts On-Chain

Profits earned in your [**Carrot Funded Trader Account** ](broken://pages/BP6sF6biE6eFAfmMR4ms#phase-2-funded-trader-account)become eligible for payout. **All payouts are initiated and recorded on-chain**, and unlike traditional prop firms, you can always verify our capital adequacy and **track all fund movements**, including our vault balance, yourself.