Prop firms give traders an innovative solution to reduce their trading barriers. The common barrier in trading that first traders have is an insufficient amount of capital. Beginners mostly do not have enough money they invest to save larger positions in trading. That’s why they can start with prop trading which provides them capital as well as resources to start and execute successful trades. To get access to this capital traders first need to pass the
challenge of the prop firms in which they are given specific criteria. Few of the traders can pass this evaluation due to its tough criteria. But how can traders pass this challenge? Let’s discuss in detail the factors that traders need to pass the forex prop firm challenge.
What is an Evaluation Process?
Prop firms cannot take risks by giving their capital to each trader. These firms have specific criteria that traders must meet to get funded. They first check the skills of the traders through an evaluation process. This evaluation process is different in each firm with different criteria. Some firms have a single evaluation process and others provide a multi-evaluation process. Both of these evaluation processes are different. In the multi-evaluation process, traders have to meet the evaluation criteria through different phases but if they choose one-step challenge prop firms then they achieve profit targets in a single step.
Most traders are given specific profit targets that consist of a specific percentage of total capital with risk management rules. Traders can access different account sizes depending on their trading skills. The purpose of this evaluation process is to check the risk management strategies of traders, how they adapt their strategies according to the current market situations, and how the trader will follow the firm’s trading rules.
When traders follow these evaluation criteria they will definitely get access to the funded trading account.
Important Factors to Consider to Pass Prop Firm Challenge
There are some factors that you need to consider when you choose a prop firm and that are important to pass a challenge.
Firm-Specific Rules
Each firm has different evaluation-specific rules. You need to see those factors like the firm’s drawdown limit. How much capital do they allow you to lose at the completion of the evaluation? Traders are given a specific profit target that they must achieve within a given time limit. If firms want you to earn 10% of the profit of capital $100000 then you must grow this account up to $110000. Consider their profit percentage when choosing a firm. See their trading restriction which means what and when you can trade as some firms provide access to limited trading instruments or allow trading in specific market hours. The time limit of each evaluation is also different. Most of the firms give a period of 30 days to complete this profit target by staying within the drawdown limit. When you choose a firm consider all these factors and choose one that aligns with your trading goals.
Technical Skills Required
Technical skills are compulsory to pass the challenge. Forex traders must have technical skills to analyze the market’s latest trends and trade in different instruments. If you don’t have these skills then you first need to improve your technical skills through different educational resources and by practicing on demo accounts. Demo accounts provide you with the facility to check and improve your trading skills.
Risk Management as a Skill
The main focus of prop firms is to have proper risk management. For efficient risk management, traders must have those risk control measurements. Traders first need to have a risk management plan if they want to pass the evaluation process. This plan covers different aspects like how much money you can give to each trade. According to your account, you decide how much risk you can take and what is the current situation of the market in which you want to invest. Do not take larger risks by investing large amounts only in a single trade. Set your position size and stop loss for effective risk management.
Initial Investments
Some firms also charge an initial fee so when you choose a firm first see this evaluation fee and whether you can afford this or not. Understand this investment and other terms fully so you do not face hidden costs. Some firms also refund this cost when traders successfully complete this evaluation process so choose the firm that provides these options to save your money.
Performance Requirements
Prop firms prefer those traders who consistently perform. When traders provide consistent profits they can increase their account balance and hold larger positions. These positions provide them more chances to execute profitable trades and earn more profit.
