If you’ve decided to take on the challenge of a prop firm evaluation then maybe you’ve seen traders on social media showing off their funded accounts or perhaps you just want a shot at trading with bigger capital. Either way, you’re here because you want to pass that first step. There’s no doubt prop firm challenges aren’t easy. The firms design them to filter out those traders who cannot protect their money. But it’s not impossible to pass this challenge. So let’s discuss the whole process as with the right approach, mindset, and strategy, you can pass the first step and get closer to securing that funded account.
Understand the Rules Inside Out
- Make sure you understand the prop firm’s rules before you even place a trade. While each firm has its own set of rules, the following are the main ones you’ll usually have to deal with:
- Profit Target: Usually, you have to reach a specific percentage (for example, 8–10%) within a given time frame.
- Daily Drawdown Limit: This is the maximum loss you can take in a single day; Overall Drawdown Limit: You’re out if your account balance falls below a certain level.
- Trading Days Requirement: Some firms require you to trade for a minimum number of days.
- Restricted Trading Strategies: Some firms prohibit high-frequency trading, copy trading, or other specific tactics.
Knowing the rules enables you to develop a plan that complies with them. Breaking a rule you didn’t completely understand and losing your opportunity to pass is the last thing you want to happen.
Trade Like You’re Already Funded
One of the biggest mistakes traders make is treating the evaluation like a gamble. They go all in, overleverage, and try to hit the profit target as quickly as possible. In this way, they will surely fail. Instead, approach the challenge as if you’re already a funded trader. Funded traders don’t take unnecessary risks. They focus on consistency, proper risk management, and controlled decision-making. If you want to pass then you should do the same.
Master Risk Management
Risk management isn’t just a term but it makes traders unique from other traders and gamblers. Here’s how to manage risk properly during the 2-step challenge:
- Maintain a Fixed Risk Per Trade: You stay in the game longer if you risk no more than 1% per trade.
- Do not engage in revenge trading: Instead, accept your loss and move on. Don’t try to immediately win it back.
- Control Your Leverage: Just because you have access to high leverage doesn’t mean you should use it excessively.
- Know When to Stop Trading for the Day: If you’re close to hitting your daily loss limit, step away. Live to trade another day.
Develop a Proven Trading Plan
You’re lost from the beginning if you’re doing it. A good trading strategy should consist of:
- Your Favorite Approach: Stay with what works for you, whether it’s indications, price activity, or smart money ideas.
- Rules for Entry and Exit: Define your trade entry and exit times. Emotional trading and guessing are eliminated.
- The ratio of Risk to Reward: For your trades to provide sustainable gains aim for a risk-to-reward ratio of at least 1:2.
- Trading Session: Choose a London, New York, or Asian session based on your trading approach.
Keep Emotions in Check
Emotional trading is one of the biggest killers of prop firm evaluations. If you find yourself hesitating, second-guessing, or chasing losses then take a break. Trading should be methodical, not emotional. Some ways to keep emotions in check include:
- Having a Trading Journal: list your trades to learn from mistakes and improve.
- Taking Breaks: If you’re feeling stressed then step away for a bit.
- Using Meditation or Exercise: These can help clear your mind and reduce impulsive decision-making.
Avoid Common Pitfalls
A lot of traders fail the first step for predictable reasons. Here’s what you should watch out for:
- Overtrading: Trading too much leads to mistakes and increased risk.
- Ignoring the Drawdown Rules: Even if you hit the profit target, breaching the drawdown limit will disqualify you.
- Not Adjusting to Market Conditions: The market isn’t always trending; sometimes it’s ranging. Adapt accordingly.
- Being Overconfident After a Winning Streak: Winning streaks can make you feel invincible, leading to reckless trades. Stay disciplined.
Use a Demo Account First
Before you drop money on an evaluation, test your strategy on a demo account. Simulate the exact conditions of the challenge including the risk parameters and see if you can consistently pass. If you struggle in a demo environment then you’ll likely struggle in the real challenge. Fine-tune your approach first.
