Passing a prop firm challenge requires a solid trading strategy, disciplined risk management, and meeting profit targets while staying within drawdown limits. Yet, within the prop trading community I’m hearing some nightmare stories and some trying to claim it's all a scam.
At the same time, I haven’t come across a solid guide on any Reddit sub or even online that really digs into forex prop trading and gives a detailed overview for funded traders, so on this rainy day, I thought I’d summarise things for anyone interested.
Hopefully this will help some beginner traders get their head around things before they get started as more and more traders are realising that the perks of being a funded trader can outweigh traditional CFD trading.
Once you pass the initial challenge, the prop firm takes on the financial risk, making it a more attractive option for experienced traders. Profitable traders are rewarded with significant profit splits—up to 90%—while keeping their own capital safe. Here's a breakdown of everything you need to know to pass a prop firm challenge and become a funded trader.
Intro to Prop Firm Challenges
Prop trading, funded trader programs, or proprietary trading firms, are where traders use a firm's capital to trade financial markets. These firms offer what’s called funded accounts or prop challenges, where traders go through an evaluation process before they can access a real trading account funded by the prop firm. Some popular programs include elite trader programs, funded demo accounts, and more.
Challenges usually have two phases. In the first, traders need to hit profit targets while avoiding maximum drawdown. If successful, they move to a second phase with typically lower profit targets. These challenges are gaining popularity as they provide traders access to larger capital without risking their own money.
Compared to traditional CFD trading with online brokers, prop trading has more strict rules, especially regarding risk management and drawdowns. Prop firms generally operate outside of traditional financial regulation, unlike CFD brokers who must follow guidelines set by regulatory authorities. This is both a pro and a con; while traders get more flexibility, they must ensure they work with reputable firms.
Pros of Prop Trading:
- No personal capital at risk
- Potential access to significant capital
- Ability to earn large profit splits (up to 90%)
Cons of Prop Trading:
- Strict rules (max drawdown, risk limits)
- Fees to enter challenges
- Some firms have questionable reputations regarding payouts or transparency
Challenge Account Types
Prop trading firms vary widely in how their accounts and challenges are structured. Some offer instant-funded accounts, where you can bypass the evaluation phase by paying a larger fee upfront. This gives traders immediate access to a funded account without needing to prove their skills in advance. However, most firms follow the traditional two-phase evaluation process, where traders need to meet specific profit targets within a set number of days, typically between 6 and 18.
The fees for these prop trading challenges can range anywhere from around $50 to over $5000, depending on the firm and the account size. Some firms impose a minimum number of trading days (e.g., 5 days), while others set a maximum (e.g., 120 days). Profit splits also vary, with most firms offering anywhere from 75% to 90% of the profits, depending on how long you stay with them and your performance.
Other key factors, like the spreads, available markets (forex, indices, commodities, crypto), and trading platforms (MetaTrader 4, MetaTrader 5, MatchTrader, TradingView, or cTrader), also differ from firm to firm. For more detailed info, prop-firms.com has a solid comparison tool that breaks down the rules, fees, and restrictions of each firm, giving traders a clearer picture of what to expect—especially compared to some of the more confusing details on individual prop firms' websites.
If you want more info, I recommend having a look at Prop-Firms, their comparisons of the various prop firm accounts is done in a clear, comprehensive way compared to anything else online. Each firm’s rules, fees, and restrictions are broken down in detail, ensuring traders understand the fine print that might be confusing on some prop firms’ websites.
Payouts
Payout structures differ between prop firms. Some offer monthly payouts, while others provide weekly or bi-weekly withdrawals. The payout rate itself can range from 70% to 90%, with some firms increasing the payout split after the first successful month of trading.
However, not all firms are known for reliable payouts. Issues like delays, complicated withdrawal processes, and limits on the payout percentage have been reported with some less reputable firms. Companies like FTMO, IC Funded, and TopStep have established solid reputations for smooth payouts, while newer firms might need time to build a solid payout reputation
Risk Management
Risk management is crucial when attempting to pass a prop firm challenge, as firms impose strict daily loss limits and maximum drawdowns. For instance, many firms set a daily loss limit at 5% and an overall limit at 10%. Failure to stay within these limits results in failure of the challenge, so traders must adopt a solid risk management strategy.
Key elements of risk management in prop trading include setting stop-loss orders for every trade (which is mandatory for some account types and prop firms), keeping risk per trade low (usually around 1-2% of the account balance), and avoiding over-leveraging. Traders must also adjust their strategies according to the market conditions, especially when major news events are scheduled, as many prop firms restrict news trading.
Trading Strategies
There’s no one-size-fits-all when it comes to trading strategies in prop firm challenges. Everyone has their own style, and what works for one trader might not work for another. The key is to find a strategy that fits your strengths and the rules of the prop firm.
Here are a few popular strategies that traders use to tackle these challenges, each with its own pros and cons.
- Day Trading: Traders open and close positions within a single trading day. This approach requires quick decision-making but avoids overnight risks.
- Swing Trading: Trades are held for several days, allowing traders to capture larger price movements, but it can be more exposed to market volatility.
- Copy Trading: Some firms allow traders to copy the trades of successful traders, but many prop firms prohibit this practice.
- Automated Trading (EAs): Some traders use expert advisors (EAs) for automated trading, though some firms restrict or outright ban their use.
- News Trading: Trading during high-impact news events can be profitable but some prop firms have strict news trading rules and restrictions (i.e. timeframes you cant trade before or after significant news announcements), due to the unpredictable volatility involved.
Financial Markets for Prop Trading
Prop traders generally don’t have the same level of diversification as someone trading CFDs with their own capital or through forex funds. However, most prop firms offer a solid range of forex pairs, a handful of commodities, and sometimes some indices or cryptocurrencies too. While you won’t get every market under the sun, the selection is usually enough to work with, especially for traders who focus on specific asset classes.
Forex TradingForex is the most popular market among prop firms. It offers deep liquidity and operates 24/5, allowing traders to find opportunities at almost any time of day. Most prop firms focus heavily on forex trading due to its consistent volume.
CommoditiesGold, oil, and other commodities are frequently offered by prop firms. These assets can be more volatile than forex, providing both high risk and high reward.
IndicesMajor indices like the S&P 500, NASDAQ, and DAX are commonly available for trading. Indices can be more stable than individual stocks and offer good opportunities for technical traders.
CryptoCryptocurrencies like Bitcoin and Ethereum have grown in popularity for prop trading, though not all firms offer crypto trading due to its extreme volatility.
Tips to Pass Prop Firm Challenges
Here are 10 tips for traders aiming to pass prop firm challenges:
- Stick to Your Trading Plan: Define your strategy and have clear trading objectives before starting and don’t deviate.
- Manage Risk Carefully: Keep risk per trade low and always use stop-loss orders.
- Track Your Progress: Regularly monitor your drawdown and profit targets.
- Avoid Overtrading: Trade only when there is a clear opportunity—quality over quantity.
- Be Aware of News Events: Avoid trading during high-impact news unless your strategy specifically accounts for volatility, keep up to date with market trends.
- Use Proper Position Sizing: Ensure that your trade sizes align with your account size and risk tolerance.
- Follow the Firm’s Rules: Each prop firm has strict guidelines; know them and follow them to the letter.
- Practice on a Demo Account: Familiarise yourself with the prop firm’s platform and rules before entering a live challenge.
- Keep Emotions in Check: Stay disciplined, especially during losing streaks, look for mentorship where needed.
- Leverage Risk-Reward Ratios: Aim for trades with a risk-reward ratio of at least 1:2 to give yourself a better chance of success.
The Best Prop Firms
When it comes to finding the right prop firm, it’s all about transparency, fair rules, reliable payouts, and solid support. With all these new prop firms popping up left right and centre, it can feel a bit overwhelming to figure out which ones are actually worth your time.
So, to make things easier, here’s a quick rundown of some of the top prop firms that are known for treating their traders right.
- FTMO: Known for its high payouts and transparent rules, FTMO is one of the most trusted names in the industry.
- IC Funded: Backed by IC Markets, it offers low fees and flexible account sizes, with competitive spreads.
- Funded Trading Plus: A more relaxed approach to prop trading, with fewer restrictions and no time limits on challenges.
- FundedNext: A newer firm gaining popularity for its straightforward processes and good trading conditions.
- TopStep: Focuses on futures trading and is popular for its excellent educational resources.
- OANDA: A well-established name in the trading world, OANDA has recently launched its prop trading program with competitive terms.
So to sum up, prop firm challenges offer a unique opportunity for traders to access significant trading capital without risking their own funds. Success in these challenges requires discipline, a solid trading strategy, and a focus on risk management. By carefully choosing the right prop firm and sticking to key principles, traders can successfully pass challenges and earn funded accounts with significant payout potential.
I feel like I’ve covered most of the key concepts around prop trading and forex prop firms here, but let me know if you have any questions and I’ll do my best to answer them! I’ll also start posting any interesting resources and webinars I come across in this sub.
Otherwise, the next step would be looking at Prop Firm Reviews to find the best fit for your needs and trading style :)
How to Pass a Prop Firm Challenge
Passing a prop firm challenge requires a solid trading strategy, disciplined risk management, and meeting profit targets while staying within drawdown limits. Yet, within the prop trading community I’m hearing some nightmare stories and some trying to claim it's all a scam.
At the same time, I haven’t come across a solid guide on any Reddit sub or even online that really digs into forex prop trading and gives a detailed overview for funded traders, so on this rainy day, I thought I’d summarise things for anyone interested.
Hopefully this will help some beginner traders get their head around things before they get started as more and more traders are realising that the perks of being a funded trader can outweigh traditional CFD trading.
Once you pass the initial challenge, the prop firm takes on the financial risk, making it a more attractive option for experienced traders. Profitable traders are rewarded with significant profit splits—up to 90%—while keeping their own capital safe. Here's a breakdown of everything you need to know to pass a prop firm challenge and become a funded trader.
Intro to Prop Firm Challenges
Prop trading, funded trader programs, or proprietary trading firms, are where traders use a firm's capital to trade financial markets. These firms offer what’s called funded accounts or prop challenges, where traders go through an evaluation process before they can access a real trading account funded by the prop firm. Some popular programs include elite trader programs, funded demo accounts, and more.
Challenges usually have two phases. In the first, traders need to hit profit targets while avoiding maximum drawdown. If successful, they move to a second phase with typically lower profit targets. These challenges are gaining popularity as they provide traders access to larger capital without risking their own money.
Compared to traditional CFD trading with online brokers, prop trading has more strict rules, especially regarding risk management and drawdowns. Prop firms generally operate outside of traditional financial regulation, unlike CFD brokers who must follow guidelines set by regulatory authorities. This is both a pro and a con; while traders get more flexibility, they must ensure they work with reputable firms.
Pros of Prop Trading:
- No personal capital at risk
- Potential access to significant capital
- Ability to earn large profit splits (up to 90%)
Cons of Prop Trading:
- Strict rules (max drawdown, risk limits)
- Fees to enter challenges
- Some firms have questionable reputations regarding payouts or transparency
Challenge Account Types
Prop trading firms vary widely in how their accounts and challenges are structured. Some offer instant-funded accounts, where you can bypass the evaluation phase by paying a larger fee upfront. This gives traders immediate access to a funded account without needing to prove their skills in advance. However, most firms follow the traditional two-phase evaluation process, where traders need to meet specific profit targets within a set number of days, typically between 6 and 18.
The fees for these prop trading challenges can range anywhere from around $50 to over $5000, depending on the firm and the account size. Some firms impose a minimum number of trading days (e.g., 5 days), while others set a maximum (e.g., 120 days). Profit splits also vary, with most firms offering anywhere from 75% to 90% of the profits, depending on how long you stay with them and your performance.
Other key factors, like the spreads, available markets (forex, indices, commodities, crypto), and trading platforms (MetaTrader 4, MetaTrader 5, MatchTrader, TradingView, or cTrader), also differ from firm to firm. For more detailed info, prop-firms.com has a solid comparison tool that breaks down the rules, fees, and restrictions of each firm, giving traders a clearer picture of what to expect—especially compared to some of the more confusing details on individual prop firms' websites.
If you want more info, I recommend having a look at Prop-Firms, their comparisons of the various prop firm accounts is done in a clear, comprehensive way compared to anything else online. Each firm’s rules, fees, and restrictions are broken down in detail, ensuring traders understand the fine print that might be confusing on some prop firms’ websites.
Payouts
Payout structures differ between prop firms. Some offer monthly payouts, while others provide weekly or bi-weekly withdrawals. The payout rate itself can range from 70% to 90%, with some firms increasing the payout split after the first successful month of trading.
However, not all firms are known for reliable payouts. Issues like delays, complicated withdrawal processes, and limits on the payout percentage have been reported with some less reputable firms. Companies like FTMO, IC Funded, and TopStep have established solid reputations for smooth payouts, while newer firms might need time to build a solid payout reputation
Risk Management
Risk management is crucial when attempting to pass a prop firm challenge, as firms impose strict daily loss limits and maximum drawdowns. For instance, many firms set a daily loss limit at 5% and an overall limit at 10%. Failure to stay within these limits results in failure of the challenge, so traders must adopt a solid risk management strategy.
Key elements of risk management in prop trading include setting stop-loss orders for every trade (which is mandatory for some account types and prop firms), keeping risk per trade low (usually around 1-2% of the account balance), and avoiding over-leveraging. Traders must also adjust their strategies according to the market conditions, especially when major news events are scheduled, as many prop firms restrict news trading.
Trading Strategies
There’s no one-size-fits-all when it comes to trading strategies in prop firm challenges. Everyone has their own style, and what works for one trader might not work for another. The key is to find a strategy that fits your strengths and the rules of the prop firm.
Here are a few popular strategies that traders use to tackle these challenges, each with its own pros and cons.
- Day Trading: Traders open and close positions within a single trading day. This approach requires quick decision-making but avoids overnight risks.
- Swing Trading: Trades are held for several days, allowing traders to capture larger price movements, but it can be more exposed to market volatility.
- Copy Trading: Some firms allow traders to copy the trades of successful traders, but many prop firms prohibit this practice.
- Automated Trading (EAs): Some traders use expert advisors (EAs) for automated trading, though some firms restrict or outright ban their use.
- News Trading: Trading during high-impact news events can be profitable but some prop firms have strict news trading rules and restrictions (i.e. timeframes you cant trade before or after significant news announcements), due to the unpredictable volatility involved.
Financial Markets for Prop Trading
Prop traders generally don’t have the same level of diversification as someone trading CFDs with their own capital or through forex funds. However, most prop firms offer a solid range of forex pairs, a handful of commodities, and sometimes some indices or cryptocurrencies too. While you won’t get every market under the sun, the selection is usually enough to work with, especially for traders who focus on specific asset classes.
Forex TradingForex is the most popular market among prop firms. It offers deep liquidity and operates 24/5, allowing traders to find opportunities at almost any time of day. Most prop firms focus heavily on forex trading due to its consistent volume.
CommoditiesGold, oil, and other commodities are frequently offered by prop firms. These assets can be more volatile than forex, providing both high risk and high reward.
IndicesMajor indices like the S&P 500, NASDAQ, and DAX are commonly available for trading. Indices can be more stable than individual stocks and offer good opportunities for technical traders.
CryptoCryptocurrencies like Bitcoin and Ethereum have grown in popularity for prop trading, though not all firms offer crypto trading due to its extreme volatility.
Tips to Pass Prop Firm Challenges
Here are 10 tips for traders aiming to pass prop firm challenges:
- Stick to Your Trading Plan: Define your strategy and have clear trading objectives before starting and don’t deviate.
- Manage Risk Carefully: Keep risk per trade low and always use stop-loss orders.
- Track Your Progress: Regularly monitor your drawdown and profit targets.
- Avoid Overtrading: Trade only when there is a clear opportunity—quality over quantity.
- Be Aware of News Events: Avoid trading during high-impact news unless your strategy specifically accounts for volatility, keep up to date with market trends.
- Use Proper Position Sizing: Ensure that your trade sizes align with your account size and risk tolerance.
- Follow the Firm’s Rules: Each prop firm has strict guidelines; know them and follow them to the letter.
- Practice on a Demo Account: Familiarise yourself with the prop firm’s platform and rules before entering a live challenge.
- Keep Emotions in Check: Stay disciplined, especially during losing streaks, look for mentorship where needed.
- Leverage Risk-Reward Ratios: Aim for trades with a risk-reward ratio of at least 1:2 to give yourself a better chance of success.
The Best Prop Firms
When it comes to finding the right prop firm, it’s all about transparency, fair rules, reliable payouts, and solid support. With all these new prop firms popping up left right and centre, it can feel a bit overwhelming to figure out which ones are actually worth your time.
So, to make things easier, here’s a quick rundown of some of the top prop firms that are known for treating their traders right.
- FTMO: Known for its high payouts and transparent rules, FTMO is one of the most trusted names in the industry.
- IC Funded: Backed by IC Markets, it offers low fees and flexible account sizes, with competitive spreads.
- Funded Trading Plus: A more relaxed approach to prop trading, with fewer restrictions and no time limits on challenges.
- FundedNext: A newer firm gaining popularity for its straightforward processes and good trading conditions.
- TopStep: Focuses on futures trading and is popular for its excellent educational resources.
- OANDA: A well-established name in the trading world, OANDA has recently launched its prop trading program with competitive terms.
So to sum up, prop firm challenges offer a unique opportunity for traders to access significant trading capital without risking their own funds. Success in these challenges requires discipline, a solid trading strategy, and a focus on risk management. By carefully choosing the right prop firm and sticking to key principles, traders can successfully pass challenges and earn funded accounts with significant payout potential.
I feel like I’ve covered most of the key concepts around prop trading and forex prop firms here, but let me know if you have any questions and I’ll do my best to answer them! I’ll also start posting any interesting resources and webinars I come across in this sub.
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