Most beginner traders think they can make it big time with their $100-dollar accounts. They soon realise, either too quickly or too late, that the financial market is not a get-rich-quick scheme. In fact, there are several components needed to be a successful trader.
Among other things, you need a backtested strategy, proper risk management rules, discipline, and a reasonable starting capital.
The first three could be free to implement, but if you don’t have access to capital, instead of blowing multiple 100-dollar accounts, the quickest way is to invest in prop firm challenges.
But buying a prop firm challenge and passing it to become a fully funded trader are different things.
Here are some tips that can help you pass a prop firm challenge.
1. Make Sure Your Strategy Has an Edge
If you are going into prop firm challenges with an out-of-the-box trading strategy you heard from your favourite influencer or “self-declared” YouTube guru, you are guaranteed to fail 80% of the time.
You need a strategy with an edge (odds tilted in your favour) that fits your trading style (scalping, day trading, or swinging) and personality.
The good news is your strategy does have to be right every time. Successful traders like George Soros have proved that you can make money if you win 50-60% of the time.
All you need to do is backtest your strategy to ensure it works as you intended before buying a prop challenge.
You can use back-testing software like TradingView and Forex Tester, which allow you to use past data for testing.
2. Learn to Control Your Emotions
It’s one thing to have a working trading strategy. But improving your trading psychology to align with your trading plan is one tough nut to crack.
You see, most traders' problem is not their strategy. No. They already have a winning strategy. Their issue is keeping their cool when things are not going their way.
A mix of emotions from one losing trade can make a trader make rush decisions that don’t follow their plan, for example, revenge trading in an attempt to rescope the losses.
Don’t be like that if you want to win that trading challenge!
If you have trouble focusing after a loss, take a walk and get some new perspective when clear-headed. It might sound trivial, but this genuinely helps.
3. Have Risk Management Measures
A trading strategy without defining risk management rules is a losing strategy.
As mentioned, your strategy doesn’t have to win over 80% of the time, as some traders may suggest. You can become profitable with a 50-50% win rate. What makes this possible is the risk management rules you outline in your strategy.
Let’s prove this hypothesis with a 50% win rate strategy.
Imagine you take ten trades. Out of the 10, you lose 5 and 5 wins. Assuming you risk 1% of your capital (like recommended) on each trade and make 3% or more return, that’s a 10% average return on all your trades.
However, if you close your trades for 1% or less return out of fear, your winning strategy automatically becomes a losing one, and it’s highly unlikely you’ll pass the challenge.
4. Stick to What Works
Learning, growing, and adjusting are all part of being a trader. But with social media all over, it’s highly likely that you’ll come across a guy who will make you feel like you aren’t doing enough.
Don’t get us wrong, it’s okay to have a mentor. But for profitability sake and consistency, follow the ones who can improve your trading psychology without encouraging toxic or risky trading behaviours.
Don’t allow yourself to be swayed by the so-called “quick winning hacks” from the internet that you haven’t backtested.
Plus, if what you know already works, why reinvent the wheel?
The best thing you can do is to stick to what you know and focus on improving your strengths.
5. Avoid Trading During Red News Events
The red news events like CPI (Consumer Price Index), Nonfarm Payrolls (NFP), and Central Bank rates announcements are like time bombs waiting to happen.
They can shake up the market, causing high volatility and rapid price changes. Even when they release positive data, you can never quite know which direction the data will push the market (up or down).
Therefore, if you want to pass a prop firm challenge, a stable market is the surefire way to ensure consistent trades.
And although most prop firms prohibits placing or closing trades a few minutes before and after big news, holding a position that you opened before through the big news can still be risky.
So, use your favourite economic calendar to check upcoming news before starting your trading day.
The Bottom Line
Passing a prop firm challenge is no small feat, but with the right mindset, strategy, and risk management, you can greatly improve your chances of success.
The "go big or go home" mentality is tempting, but it's not the path to consistency. Yes, taking big risks can occasionally leap big rewards, but it's often not the most reliable strategy.
Therefore, be cautious, stick to your well-tested plan, and avoid unnecessary risks, especially red news market events.
If you feel ready to take the next step in your trading journey, try Optimal Traders. We have flexible challenges, the support and the resources to turn your trading skills into a profitable career, and we are dedicated to helping traders succeed.
Prop Firm Accounts FAQs
What is a prop firm challenge?
A prop firm challenge is a test or evaluation traders must pass to demonstrate their skills. If successful, the trader is given access to the firm's capital to trade with, keeping a portion of the profits.
How much capital can I get after passing a prop firm challenge?
The amount of capital you get varies depending on the prop firm and the challenge you complete. At Optimal Traders, our accounts range from $5,000 up to $400,000 - or a massive $6.5m with the Optimal Trader Program.
Do I need a perfect win rate to pass a prop firm challenge?
No, you don’t need a perfect win rate. You can succeed with a win rate as low as 50-60%, as long as you have proper risk management and maintain a positive profit factor.
Are prop firm challenges worth it for beginner traders?
Yes, prop firm accounts can be worth it for beginners if they have a well-tested strategy and understand risk management. It provides access to larger capital than they might have on their own.
