Trading with a proprietary firm (prop firm) is a dream come true for many retail traders. You get access to large amounts of capital, and you keep a majority of the profits — often up to 90%. But before you get funded, there’s a major hurdle: the prop firm challenge.
Many traders fail at this stage. Why? Because they don’t prepare for the real test — not just their trading strategy, but their mindset, discipline, and ability to follow rules under pressure.
This guide is designed to help beginner and intermediate traders navigate and pass their first prop firm challenge — confidently and strategically.
What is a Prop Firm Challenge?
A prop firm challenge is an evaluation phase that prop trading firms use to determine if a trader is eligible to manage their capital. In exchange for a one-time fee, you must meet specific performance targets without violating risk rules.
Typical Requirements:
| Criteria | Range |
|---|---|
| Profit Target | 8%–10% (Phase 1), 5% (Phase 2) |
| Max Daily Loss | 4%–5% |
| Max Overall Loss | 8%–10% |
| Trading Period | 30 days (Phase 1), 60 days (Phase 2) |
| Minimum Trading Days | 5–10 |
| Refundable Fee | Yes, after passing |
Top Firms Offering Challenges:
- FTMO
- MyForexFunds (MFF)
- The5ers
- E8 Funding
- FundedNext
Each firm has different rules — always read the fine print before starting.
Step-by-Step Guide to Pass the Prop Firm Challenge
1. Choose the Right Prop Firm
Not all firms are beginner-friendly. Look for:
- Clear rules (e.g., no hidden restrictions on holding trades overnight)
- Refundable fees after passing
- Profit splits (70–90%)
- Customer support
📝 Start with firms like FTMO or MFF, known for transparency and solid reputations.
2. Develop a Simple, Consistent Strategy
The goal isn’t to be flashy — it’s to be consistent. Choose one high-probability setup and stick to it for the entire challenge.
Popular setups:
- London Breakout Strategy
- Support & Resistance with Confluence
- Trendline Retest Entries
- Break and Retest on the 1H/4H Timeframes
👉 Avoid trading random pairs. Stick to 1–2 instruments you understand well.
3. Use a Risk Management Plan (or You Will Fail)
This is the most common reason traders fail the challenge.
Use this formula:
- Risk per trade: 0.5% – 1%
- Max trades per day: 2–3
- Max daily loss cap: 2%
💡 Never trade just to meet the minimum trading days. Plan your trades ahead of time.
4. Stick to a Trading ScheduleProp firms evaluate your ability to follow a trading routine, not just your results.
Ideal Trading Windows:
- London session: 8 AM – 12 PM GMT
- New York open: 1 PM – 3 PM GMT
Avoid:
- News events (unless you’re a news trader)
- Low-volume periods (e.g., during Asian session unless trading JPY pairs)
5. Journal Every Trade (Seriously)Use tools like Notion, Edgewonk, or Excel to record:
Entry & exit
- Reason for entry
- Emotions
- Mistakes made
- Screenshot of the chart
Over time, this becomes your edge.
⚠️ Common Mistakes That Cause Challenge Failure
❌ 1. Overleveraging
Even if your challenge account offers 100:1 leverage, don’t use it all. Overleveraging creates large drawdowns — especially during volatile news spikes.
❌ 2. Revenge Trading
Lost a trade? Don’t jump back in. Walk away. The market will be there tomorrow.
❌ 3. Trading Without a Plan
Many fail because they switch strategies mid-way. This causes inconsistency — which gets flagged during review.
❌ 4. Ignoring Firm Rules
For example:
- FTMO doesn’t allow weekend holding
- Some firms disallow certain EAs
- News trading may be restricted
Read and understand all rules before placing your first trade.
Prop Firm Mindset Tips
Mindset is 80% of the game.
Stay Calm Under Pressure
Challenge trading is a simulation of real-world stress. Practice detachment from outcomes.
Think Like a Fund Manager
- You’re not trading to double the account
- You’re showing you can manage risk and stay consistent
🧾 Focus on Execution, Not Results
Let the setup play out. Good trades can still lose — what matters is following your plan.