If you’ve ever dreamt of trading professionally without risking your own capital, joining a prop firm is one of the best ways to turn that dream into a reality. But there's a catch: before you can trade with their money, you have to pass a challenge.
It’s not a walk in the park. But with the right approach, a clear strategy, and mental discipline, you can crack the code and get funded. This isn’t just about making money—it’s about proving you have the skills, discipline, and patience to trade professionally.
In this article, we’ll dive deep into the exact steps you need to take to pass a prop firm challenge, avoid common pitfalls, and set yourself up for long-term success.
What Is a Prop Firm Challenge?
A prop firm challenge is essentially a test that assesses your ability to manage capital and trade profitably under pressure. Prop firms like Apex Trader Funding, MyFundedFutures, and Trade Day offer traders the opportunity to trade with their capital—but only after you prove yourself through a series of objectives.
The challenge typically includes:
Profit Target: For example, achieving a 10% profit in 30 days.
Max Drawdown: You can’t lose more than 5% (or less) of the initial capital during the challenge.
Daily Loss Limit: Often set at 1-2% per day to ensure you're not risking too much in one trade.
But passing this challenge is not just about being a good trader. It’s about mastering risk management, staying disciplined, and following the rules to the letter.
Step 1: Master the Prop Firm’s Rules and Requirements
Before you even think about opening a position, know the rules inside and out. The key difference between those who pass and fail is how well they follow the firm’s guidelines.
Key Things to Know:
Profit Target & Timeframe: You’ll usually have a set timeframe to hit a profit target—let’s say 10% over 30 days. Make sure you break this down: don’t try to hit the target all at once, and don’t rush it. You can take small, steady wins.
Example: If you're aiming for a 10% profit in 30 days, target a 0.33% return per day. This helps you avoid going for big wins that could blow up your account.
Max Drawdown: This is one of the most crucial rules. Exceeding the max drawdown (usually 5% of the starting capital) means you’ll fail the challenge. Never risk more than 1-2% on a single trade.
Example: On a $50,000 account, you can't lose more than $2,500. If you’re risking 1% per trade, that’s $500. This means you can take 5 losing trades in a row before you hit the max drawdown limit.
Daily Loss Limit: Most firms impose a daily loss limit of 1-2%. This means if you lose 1% in a day, you need to stop trading immediately. This forces you to maintain strict discipline.
Pro Tip: Set an alert or reminder on your phone so that you’re aware when you’re close to the daily loss limit.
Step 2: Develop a Specific, Repeatable Strategy
In the prop firm challenge, consistency is king. You’re not looking for home runs—you’re looking for steady, repeatable profits.
How to Build a Trading Strategy That Works for the Challenge:
Focus on 1-2 Trading Setups: Choose simple setups that you can repeat over and over. This could be a basic trend-following strategy, breakouts, or a scalping method. Don’t complicate things.
Example: A moving average crossover strategy (where a shorter-term moving average crosses above a longer-term moving average) can work well for swing trading. It's simple and gives you clear entry and exit signals.
Don’t Overtrade: Prop firms want to see that you can manage risk. Overtrading—making too many trades, especially when the market doesn’t fit your setup—can be disastrous. If you’re not sure whether a setup is good, skip it.
Pro Tip: Set a limit for the number of trades per day, such as 3-5 trades. This helps keep you focused and reduces the chance of unnecessary losses.
Trade with the Trend: The safest way to trade is by aligning with the market's overall trend. Don’t fight it. For example, if the market is bullish, focus on buy setups, not shorts.
Example: In an uptrend, look for pullbacks to enter long positions rather than trying to sell short.
Step 3: Simulate the Challenge with a Demo Account
Before jumping into a real prop firm challenge, practice under realistic conditions. Use a demo account that mirrors the rules of the prop firm you want to join.
What to Do in the Demo:
Replicate the Exact Rules: Set up your demo account with the same profit target, drawdown limits, and daily loss limits.
Track Your Performance: Treat this as a dry run. Track your win rate, average risk-to-reward ratio, and how often you hit the max drawdown or daily loss limit.
Test Your Risk Management: Set strict rules about how much you’re willing to risk per trade and practice sticking to them—this is crucial for success in the challenge.
Step 4: Cultivate Mental Discipline and Avoid Emotional Decisions
One of the biggest pitfalls traders face in prop firm challenges is emotional trading—making decisions based on fear, greed, or impatience. The key to success is learning how to control your emotions and stay mentally disciplined.
How to Stay Mentally Strong:
Use a Trading Journal: Keep track of every trade—why you took it, the outcome, and how you felt. This will help you identify patterns and improve.
Pro Tip: Write down your emotional state during trades (e.g., were you feeling nervous, overconfident, or frustrated?) so you can recognize emotional bias and correct it.
Set Realistic Expectations: Don’t expect to double your account overnight. In fact, small, consistent wins are often the key to passing the challenge. If you’re up 5-6% after two weeks, that’s great progress.
Pro Tip: Focus on hitting small daily targets rather than trying to reach your overall profit target too quickly. This prevents you from taking unnecessary risks.
Follow a Routine: Start and end your trading day at the same time. Have a set routine that includes pre-trade analysis, a break after each trade, and post-trade review. This structure helps keep your mind clear and reduces emotional decisions.
Step 5: Stick to the Challenge Rules—No Exceptions
The most important factor in passing the challenge is following the rules without exceptions. Prop firms are strict about the max drawdown, daily loss limits, and other parameters for a reason—they want to see that you can trade responsibly and consistently.
If you hit your daily loss limit, don’t try to make it back with high-risk trades.
If you’re near your profit target, don’t risk it all by making a “big bet” on one trade. Consistency is better than a big win.
Final Thoughts: Your Path to Becoming a Funded Trader
Passing a prop firm challenge is more than just a test of your trading knowledge. It’s about demonstrating that you can follow rules, manage risk, and stay disciplined.
Here’s a quick recap of how to succeed:
Understand the firm’s rules and trade with them in mind.
Develop a repeatable, low-risk strategy with clear entry and exit points.
Practice rigorously on a demo account.
Manage your emotions and stick to your plan—no exceptions.
Stay patient and consistent; remember, the goal is steady profits, not home runs.
You don’t need to be a trading genius to pass a prop firm challenge, but you do need to be consistent, disciplined, and able to follow the rules. If you can do that, you’ll be well on your way to becoming a funded trader and turning your trading passion into a career.
Recommended Prop Firms: