Pass Your Funding Challenge With These 7 Tips
Passing a Prop firm funding challenge is not an easy task. I have attempted it before so I understand perfectly how it feels not to meet up with the trading goals and objectives of the Prop firm.
One of the reasons traders struggle to make good returns from the Forex market is due to small capital size. That is why a lot of traders would do anything to secure a funded account through a Prop firm.
Read more about how to choose the right prop firm
Securing a prop firm-funded account is possible. But the rate of failure in acquiring a funded account is high due to the fact that traders have been going about it the wrong way.
Before you take up another funding challenge, read through these 6 tips to help you pass your funding challenge
This should be at the forefront of your trading objective. Look at it this way, would you give your hard-earned money to just anyone to trade for you? Of course, not.
Most prop firms put the traders to a test by giving them demo accounts to handle at the initial stage. The challenge is to test your ability to manage large trading accounts.
To pass the challenge, it is advisable to stick with risking not more than 1% of your capital on a single trade.
Depending on the Prop firm, the maximum daily drawdown could be set at 5% and overall drawdown limit could be 12% of the trading capital. At 1% risk, you need to hit 5 losing trades in a day to hit the drawdown limit.
If you hit 5 losing trades in a row on a single trading day, it is most likely that you are overtrading or overthinking about the outcome of your trades. To know if you are a victim of overthinking, refer to this article here on why overthinking won’t solve your trading problem
Use A Tested And Trusted Trading Strategy
If you were a soldier, you would most likely not go into the battle field with weapons you have not tried and tested before. That would spell doom for you.
In the same way, you will most likely not pass the Prop firm challenge if you do not have a proven trading strategy.
Before you jump on a funding challenge, ensure that with your trading plan and strategy, you have a high chance of winning. If you are struggling with finding your edge in the market, click here to register for free training.
Focus On Risk To Reward
You need a risk to reward ratio of at least 1:2 to consistently make good returns in the Forex market. If your trading system gives a higher return of more than 1:2, the better for you.
Using a 1:2 risk to reward ratio for instance, with a 1% risk, you need 4 to 5 winning trades to hit the profit target of 8% or 10% depending on the requirement set by the Prop firm.
In the Forexlyfe Premium Channel, we share high probability trade opportunities that could yield returns 5 or 7 times the risk. This way, you are able to meet up with the profit target without necessarily overleveraging.
Avoid Trading Correlated Pairs
I have seen traders open positions on AUDUSD, GBPUSD, NZDUSD, EURUSD at the same time. This is a risky way to trade because these pairs move almost in the same direction. If not well managed and the open positions go against your trading analysis, it could increase your drawdown rate and could ultimately cause you to lose the challenge.
If the trades go in your anticipated direction, you will of course make a ton of profit. But this approach is a gambling method of trading and remember that the Prop firm is looking for real traders not gamblers.
Before Opening A Prop Firm Account, Ensure You Are A Profitable Trader
Your chances of passing a funded account maybe very slim if you have not successfully traded a live account on your own. You need to be profitable first on your personal live account before sourcing for funding.
You may get lucky to pass the challenge. Most traders gamble their way through overleveraging or probably use a bot.
But remember that you will be unable to sustain profitability on a funded live account, if you have not consistently made profit from your personal live account before.
It’s simple. While getting a funded account might seem like an easy way to make good profits, there is really no shortcut to success. You can not expect to reap where you have not sown.
If you have not been profitable on your personal live account, you will struggle with making gains on your funded account.
I understand that the time limit set by some Prop Firms could have a negative effect on your trading psychology. However, within a 30-day period, the market would most likely present good trading opportunities that could even yield over 10% return with minimal risk. Your job is to be patient and wait for the best trading setup.
If at the start of the challenge, you find yourself engaging in notorious acts like overleveraging just so that you can quickly pass the challenge, you are doing more harm than good to yourself. Be in charge of your emotions, don’t allow your emotions be in charge of you.
For a 2-phase challenge, some Prop firms could require that you hit a target of 5% within a 60 day period. That is very realistic and achievable.
Constantly remind yourself that there is no need to rush because you trust that your trading edge will present good opportunities for you to capitalize on during the evaluation period.
2 thoughts on “Pass Your Funding Challenge With These 7 Tips”
Forexlyfe keeps evolving every day on all dimensions also this academy always updates students with new concepts and ideas related to trading. This was a well detailed content on how to pass prop challenges. Thanks for the knowledge
I really appreciate you always breaking down all the steps especially the psychology aspect . This stood out for me here *if I can’t successfully trade my live account with $200 , I will definitely blown out the one account with $200000. It’ all about patience and discipline, which you always mentioned. At times, I’m like oh boy time is money : I tell myself I’m slow in digesting the Hybrid course but again it makes sense to understand fully and not rush so as to be able to dive in correctly. I will get this and it will all make sense at the long run. Thanks always Prof. You are too much.