Why Traders Fail PROP FIRM Challenges?
As forex prop firms have grown in popularity, thousands of traders from all over the world have attempted to get funded and obtain large trading accounts. Although thousands of traders begin, you will not see thousands of funded accounts distributed. This is simply due to a large number of forex traders failing their prop firm challenges.
Only 4% of forex traders are estimated to pass forex prop firm challenges, with only 1% of traders keeping their funded accounts for the long term by not breaking any rules.
This number may surprise you, but it was purposefully constructed in this manner. Let us find out more…
How Many Forex Traders Get Prop Firm Funded Accounts?
It’s difficult to say how many traders succeed prop firm challenges across the industry, but we have a good idea! We estimate that approximately 4% of forex traders have funded accounts. Only 1% of the 4% who started the challenge will be trading on the funded capital for the long term.
Most traders are taken aback by this, as prop firms are frequently thought of as a way to skip the years of learning how to trade properly and simply get started on a massive amount of assets under management.
In contrast, regardless of the trading challenge or opportunity, approximately 75% of traders fail in the forex markets.
Thus proving that obtaining a funded trading account is actually more difficult than simply being profitable with your own money. However, this is by design, as many prop firms do not have the trader’s best interests at heart.
Why the failure rate in prop firm challenges are high?
In essence, forex prop firm challenges are difficult to pass because the majority of companies offering funded accounts only receive payment through subscription fees and have their traders sitting on demo accounts.
If you are willing to put in the effort, you can become a successful trader. However, many people believe trading is their passion, then sit at a trading desk, see the work required to succeed, and are unwilling to do the work.
The market demands that you become a top performer. Most people can “punch the clock” at work, do mediocre work, and be appreciated by their bosses. You might even get a promotion. If you try this as a trader, the market will devour you like a shark devours squid.
The best trader on our desk works like a steam pipe fitter every day.
Reasons why traders fail in PROP FIRM challenges
1. Vague rules:
We went through most of these prop firm’s rules, and thought we understood everything until we dug deeper.
For example, if you had a -2.8% drawdown compared to their -5% drawdown rule, you would be in violation of your account. Because the verification phase’s drawdown was relative rather than absolute.
That is, if you make profits in the second phase and then lose them, it will be counted against you even if the initial capital provided to you is still intact. This rule was never explained on their websites; instead, the prop firm focused on the -5% drawdown.
Regardless of how good you are as a trader, hidden rules like this can sabotage your efforts to get a prop firm account, so do your homework and speak with customer service before taking any challenges.
2. Time Limit:
More than 80% of the top real estate firms demand a certain return on investment within 30 days. Is it possible to achieve this 100% of the time?
To be honest, most professional traders will never be able to achieve a specific ROI every month. This has nothing to do with your skill level, but rather with what the market has to offer.
If the market favors you and most of your setups play out as expected, you could hit your prop firm target in a matter of days or less than two weeks. But if the market does not favor you and the few that come your way are fakes, you will fail.
A few prop firms recognize this fact. So, they encourage traders by giving them up to a year to complete their verification phase (just one phase). Some popular prop firms have recently adopted this idea and implemented it in the form of extending a challenge or verification phase if a trader is profitable but struggling to meet their target.
This makes it critical for any trader who wants to get a prop firm account with minimal trials to look for firms with a time-friendly rule.
3. Biting off more than you can chew:
Many traders would love to start with a large prop firm account. It’s justified, right?
After passing the challenges and becoming a prop firm trader, a 5% profit on a $200,000.00 account equals $10,000.00. If you earn 80% of that after profit splitting, you will have made $8,000.00 after a successful month of trading. Consider your bargaining power if you have $8,000.00 in your wallet.
Most traders are duped by this way of thinking. The trap of spending their last penny to get a huge prop firm account and putting themselves under psychological pressure not to fail their challenge because they literally broke their piggy bank to invest in a prop firm account.
The market pressure begins to influence their decision-making, and the time constraint rule adds to the stress. Most traders lose such accounts before they reach the first payout phase, leaving them financially stranded because they do not have enough money to take on another challenge.
So, what could we do?
We know that every month will not be profitable in the market. So, we must divide the money we intend to invest in obtaining a prop firm account into three parts.
This ensures that we can complete the challenge three times before our savings run out. This increases your chances of passing the prop firm challenge significantly.
Another advantage of using this method is that once you have a small account with any prop firm, you can decide to use the profits from that account to buy a larger account. By doing so, you are not investing your capital to obtain a larger prop firm account, but rather the profits generated by your prop firm account.
How long will take to become consistently profitable?
It is dependent on the individual.
However, if you are not willing to work and struggle (you don’t learn unless you struggle) for 6-8 months honing your craft before you can sustain profitability, trading is not for you.
Too many people enter this field without a realistic timetable for becoming profitable. To become great at anything requires deliberate practice.
How to pass your prop firm challenges?
1. Accepting the real truth:
This enables you to lose multiple positions in a row without being disqualified.
Static risks such as x% per trade are impractical because they do not account for previously sustained losses or profits.
2. Always risk a portion of your limit:
Rapid profits are followed by rapid losses, resulting in high account volatility, making you a liability rather than an asset. Prop firms track your drawdown rather than your profits!
If you lose 5% every day and make 5% profit at the end of the month, you are a terrible trader!
Because you are constantly introducing significant risks to the company, and the reward is small in comparison to the drawdown. Rule of thumb: the less risk you take, the more capital you will receive!
3. Use tools:
Use Telegram Signal Copier, Prop Guard EA and good signal services along with your risk management to be safe and profitable.
Telegram Signal Copier will help you automatically copy good signal service’s signals into your trading account. The prop guard EA will help you manage your drawdown limits by alerting you and closing trades in your set limit.
In Conclusion – Is It Possible To Pass Prop Firm Challenges?
In summary, it’s possible to pass prop firm challenges and start trading on funded accounts, but this depends on the conditions you’re given, as a trader. Historically, retail prop firm challenges have been designed to set traders up to fail. They’re given harsh targets, limited time, no support, and huge leverage – a perfect storm! It’s not surprising that 96% of traders fail their challenges!
However, if you have overcome all the internal obstacles which is hindering your trading journey, as well as, you are backed up by good signal service + telegram signal copier– You will be able to win prop firm challenges too!