How to pass a Prop Firm challenge
In this comprehensive guide, we’ll walk you through how to pass a prop firm challenge with proven strategies, risk management tips, mindset shifts, and a step-by-step plan to dramatically increase your chances of success.
If you’ve been exploring ways to grow your capital as a trader, chances are you’ve come across proprietary trading firms, or prop trading firms. These firms allow you to trade with their capital and keep a portion of the profits. But before you can get funded, there’s a key hurdle you must overcome which is passing a prop firm challenge.
Whether you’re aiming to pass a challenge with FTMO, The5%ers, FundedNext, or any other prop firm check prop firms review here, this article will show you exactly what to do and what to avoid.
How to pass a prop firm challenge
Table of Contents
- What is a Prop Firm Challenge?
- Why Do Traders Fail Prop Firm Challenges?
- Rules and Requirements: What to Expect
- Step-by-Step Guide: How to Pass a Prop Firm Challenge
- Top Tips from Funded Traders
- Best Trading Strategies to Use
- Common Mistakes to Avoid
- Final Thoughts
1. What is a prop firm Challenge?
A prop firm challenge is a performance evaluation set by a proprietary trading firm to assess your trading skills, discipline, and consistency before giving you access to a funded account.
Key Objectives of the Challenge:
- Demonstrate consistent profitability
- Show proper risk management
- Stick to daily and overall drawdown limits
- Hit a profit target within a given period
How to pass a Challenge Examples:
A challenge consist of many rules that traders need to meet in order to pass the challenge. The standard challenge comes with 2 steps. First you need to achieve a profit target and then you need to complete another target before the company give you the funds.
- FTMO Challenge: Achieve 10% profit target in phase 1 and 5% in phase within unlimited time with 10% max drawdown and 5% daily loss limit.
- FundedNext 2-step Challenge: Similar structure with slight variations. Achieve only 8% in phase 1 and 5% in phase 2, with a limit of 10% max drawdown and 5% daily loss limit.
Passing the challenge proves to the firm that you’re capable of managing risk and making consistent gains. Also, it allows you to have a live funded account to trade with.
2. Why Do Traders Fail Prop Firm Challenges?
More than 90% of traders fail their first prop firm challenge. The reasons are usually not because they’re bad traders, but due to:
- Overleveraging to hit the target fast
- Revenge trading after a loss
- Lack of a trading plan
- Not adapting to the rules
- Poor risk-to-reward ratios
- Emotional decisions under pressure
Understanding these pitfalls is the first step to avoiding them and learning how to pass a prop firm challenge efficiently.
3. Rules and Requirements: What to Expect
While each prop firm has its own terms and rules, most challenges share the same core metrics:
Typical Requirements for passing your challenge
- Profit Target on phase 1:10% or 8% depending on the prop firm.
- Profit Target on phase 2: 5%
- Max Overall Drawdown: 8%–10%
- Minimum Trading Days: 3 – 10 days
- Time Limit: Unlimited time, it used to be 30 days
- Leverage: Usually 1:100 or 1:50
- Lot Size Limits: Sometimes firms apply them to prevent overtrading
You must hit your profit target within the time limit, while staying within drawdown limits and following all rules — otherwise, you fail the challenge.
4. Step-by-Step Guide: How to pass a prop firm challenge
Here’s a step-by-step plan to help you pass your prop firm challenge on the first try.
Step 1: Choose the Right Prop Firm
Start by selecting a prop firm that aligns with your trading style and offers:
- Transparent rules
- Fair profit targets
- Realistic drawdown limits
- Supportive community
Popular options include FTMO, The 5%ers, FundedNext, and Alpha Capital.
Step 2: Know the Rules Inside Out
Before placing a single trade, make sure you:
- Read all rules and terms
- Understand what counts as a violation
- Know how daily loss and overall drawdown are calculated
A single misstep (like overtrading on a Friday or trading during restricted news events) can cost you the challenge.
Step 3: Set a Realistic Trading Plan when doing the challenge
Define your approach before you begin. Your plan should include:
- Preferred trading hours (e.g., London or New York session)
- Pairs you’ll trade (stick to 1–3 max if you are a day trader)
- Entry and exit rules
- Risk per trade (ideally 0.5%–1%)
- Daily max loss (to avoid hitting firm’s limit)
Stick to your plan religiously. Consistency is what prop firms want to see. Remember that is all about risk, If you have a max drawdown of 10% and if you are risking 1% per trade you are allow to loose 10 times in a row before you lose the challenge.
Step 4: Use Proper Risk Management
This is the most important factor in passing your challenge. Apply the 1% risk rule or less — even if it takes longer to hit your profit target.
Example:
- Account Size: $100,000
- Max Risk per Trade: 1% ($1,000)
- R:R Ratio: 1:2
- You only need 4–5 good trades to pass the challenge.
Step 5: Avoid Overtrading
Trading too often leads to errors, emotional decisions, and drawdown. Set a maximum number of trades per day (e.g., 1–3) and take breaks between trades to stay sharp. Never place a trade after a losing trade to try to recover the loses.
Step 6: Journal Every Trade
Track every entry, exit, reason for taking the trade, and outcome. This will help you:
- Improve faster
- Stay accountable
- Identify patterns of success and failure
Free tools like Notion, Excel, or dedicated trading journals work fine. Here at Prop Firms Compare we give you a perfect template to start tracking your trades. Download it for free!
Step 7: Focus on Consistency, Not Speed
Many traders rush to hit the 10% target in the first week and blow the account. Remember, you have unlimited time!. Aim for 0.5%–2% per day, and you’ll hit the target with less stress. Remember that a losing streak can happen at any time, that is why is important to keep your risk consistent and never go for big wins.
5. Top Tips from Funded Traders
Here are some real-world tips from traders who’ve passed multiple challenges:
- Trade only your edge — don’t chase setups that don’t align with your plan.
- Trade during your most profitable hours — avoid trading just to fill time.
- Use alerts or automation to reduce screen time and improve discipline.
- Avoid trading after a loss — take a break and review your plan.
- Treat the challenge like a live funded account — not a demo to “go big or go home.”
6. Best Trading Strategies to Use to pass
While many strategies can work, the best ones for passing prop firm challenges are high-probability, low-risk, and rule-based.
1. Breakout Strategy
- Works well during major sessions
- Wait for a consolidation range
- Enter on breakout with tight SL
2. Trend Continuation
- Identify trend direction using EMAs or market structure
- Wait for pullbacks to key levels
- Use price action for confirmation
3. London Breakout (for Forex traders)
- Trade GBP/USD or EUR/USD during London open
- Enter after price breaks out of pre-London range
- Use small lot sizes to control risk
4. News Fade Strategy
- Avoid initial volatility
- Enter after the spike fades and direction is confirmed
- Best used with tight risk controls
Pro Tip: Backtest your chosen strategy before starting the challenge to ensure you have confidence in it.
7. Common Mistakes to Avoid
Even experienced traders fall into these traps:
- Trading too aggressively: Increases risk of hitting drawdown limits
- Ignoring news releases: High-impact events can cause unexpected moves
- Overtrading after losses: Leads to emotional revenge trading
- Switching strategies mid-challenge: Shows inconsistency and uncertainty
- Trading too many pairs: Harder to manage and analyze
Passing your challenge is not about being perfect — it’s about being consistent and disciplined.
8. Final Thoughts: How to pass a prop firm challenge successfully
Passing a prop firm challenge is a realistic and achievable goal, but it requires a professional mindset, clear risk rules, and strict discipline.
Let’s recap the keys to success:
- Choose a prop firm that fits your trading style
- Know the rules and never violate them
- Use solid risk management — risk 1% or less per trade
- Focus on high-probability setups that match your plan
- Limit trading to specific sessions and avoid overtrading
- Be patient — slow and steady wins the race
- Journal your trades and review them weekly
- Stay calm, confident, and emotionally detached
Once you pass, you’ll gain access to capital that can change your financial future. But more importantly, you’ll develop the skills that make you a consistently profitable trader — which is the real prize.
Bonus: Tools to Help You Pass a Prop Firm Challenge
Here are some recommended tools to help you stay on track:
- TradingView – Get our discount for premium subscription here
- MyFxBook or FxBlue – Trade tracking and analytics
- ForexFactory – Check news before entering trades
- Excel – For custom trading journals. Download a free template here