How to pass prop firm challenges: A comprehensive guide to passing prop firm challenge

Jason Olive
9 min readMay 23, 2023

I. Introduction

In the world of trading, proprietary (or “prop”) trading firms offer a lucrative opportunity to talented traders. By providing traders with the firm’s capital to trade, prop firms offer a platform to earn significant profits without the personal financial risk often associated with independent trading. However, the journey to becoming a successful prop trader isn’t without its challenges. For one, to trade with the firm’s capital, you must first pass a rigorous trading challenge that tests your skills and discipline.

This is the agency I used to use to pass my prop firm challenge if you don’t want to read the full guide.

Passing these challenges can be daunting, even for experienced traders. That’s where firms like 100KPass come into play. They specialize in helping traders pass their prop trading challenges, even taking on the challenge on their behalf. When I started my journey in prop trading, I partnered with 100KPass, and their expert team ensured a successful passage through the trading challenge. This experience not only got me my first funded account but also equipped me with invaluable insights and lessons that have since helped me acquire additional funded accounts independently.

This article is an in-depth guide based on my experiences and learnings from working with these prop firm challenge exam services and subsequently navigating the world of prop trading on my own. We’ll cover everything from understanding prop trading firms, the necessary skills for success, preparation for the challenge, dealing with losses or drawdowns, and much more. Whether you’re an experienced trader looking to break into prop trading or a novice trying to understand the landscape, this guide will provide valuable insights to help you pass prop firm challenges.

Fasten your seatbelt and get ready to delve into the world of prop trading.

II. Understanding Proprietary (Prop) Trading Firms

Proprietary trading firms, or ‘prop firms,’ are specialized finance companies that allocate their own capital to traders to trade financial markets. These firms derive their earnings primarily from the profits made by their traders. Many people ask, “Why do prop traders make so much money?” The answer lies in the structure of these firms. Traders at prop firms can leverage the firm’s capital, which can magnify their earnings, provided they can successfully navigate the markets.

III. Choosing the Right Proprietary Trading Firm

Selecting the right prop firm is crucial for passing prop firm challenges. The selection criteria should include firm reputation, capital allocation, risk management policies, training programs, and the technological tools on offer.

A common question that arises is, “Do prop firms use demo accounts?” The answer is yes, most prop firms use demo accounts or simulated trading environments, especially during their evaluation phases. These accounts provide a risk-free environment where the firm can assess a trader’s skill level, and the trader can practice their strategies.

IV. Understanding Prop Trading Firm Challenges

Prop firm challenges, like the FTMO challenge, are evaluation phases during which a trader must prove their trading skills to gain the backing of the firm. These challenges often involve meeting certain profit targets while staying within specified risk parameters.

“Is it hard to pass prop firm challenges?” This is a frequently asked question. While the difficulty varies depending on the individual’s skills and experience, it’s worth noting that these challenges are designed to test your trading skills thoroughly. However, with the right preparation, strategies, and mindset, you can increase your chances of passing the prop firm challenge.

An often wondered question is, “What percentage of people pass prop firm challenges?” While this can vary across firms and depends on the skills and preparation of the traders, generally, the pass rate can be quite low. The rigorous nature of these challenges means only those with effective trading strategies and excellent risk management skills typically succeed.

V. How to Pass Prop Trading Firm Challenges

In your journey to pass prop firm challenges like the FTMO challenge, it’s essential to understand and acquire several key skills and follow specific steps in preparation, during, and after the challenge.

Necessary Skills for Success

  1. Technical Analysis Skills: To pass prop firm challenges, a comprehensive understanding of technical analysis is crucial. This involves analyzing price charts, identifying patterns, and utilizing technical indicators to predict future price movements. Developing this skillset allows you to make informed decisions, identifying optimal entry and exit points for your trades.
  2. Risk Management Skills: Successful prop trading hinges on effective risk management. Understanding concepts like position sizing, stop-loss orders, and risk-reward ratios, and applying them effectively, can protect you from severe losses and increase your chances of passing the challenge.
  3. Emotional Control and Discipline: Trading can be a psychological rollercoaster. Your ability to maintain discipline, manage your emotions, and stick to your trading plan, especially during turbulent market conditions, is a significant determinant of your success in prop trading.
  4. Understanding of Financial Markets and Instruments: A broad understanding of financial markets, the different asset classes, and the various financial instruments you’ll be trading is fundamental. This knowledge provides context for your trading decisions and allows you to navigate market dynamics more effectively.

Preparing for the Challenge

Before you begin your FTMO challenge or any other, thorough preparation is essential. This includes understanding the challenge rules, setting up your trading environment, and developing a robust trading plan. Use training resources and recommendations available online and from your chosen prop firm to enhance your knowledge and skills.

A trading plan outlines your strategy, including the conditions for entering and exiting trades, risk management rules, and your daily or weekly trading goals. It provides a roadmap to follow, helping you stay disciplined and focused during the challenge.

During the Challenge

Throughout the challenge, consistency and adherence to your trading plan are vital. Remember, the goal is not just to make profitable trades but also to demonstrate good risk management. Your strategies should involve controlling losses or drawdowns, which are inevitable in trading. The ability to manage and recover from drawdowns can be a deciding factor in whether you pass your FTMO challenge.

Post-Challenge Reflection

After the challenge, take the time to review your performance. Identify what went well and what didn’t, and more importantly, understand why. This process allows you to learn from your mistakes and your successes. Use these insights to iterate and improve your trading plan, enhancing your strategies and risk management tactics.

By developing these skills and following these steps, you’ll be well-positioned to pass prop firm challenges, setting the stage for a successful career in prop trading.

VI. Understanding Drawdowns

When you embark on the journey to pass prop firm challenges, the financial market’s unpredictable nature necessitates an understanding of drawdowns. A drawdown, in its simplest terms, is a decrease in your trading capital after a series of losing trades. This reduction is typically calculated as the difference from a peak in account value to a subsequent trough.

But why are drawdowns important? And why should you, as an aspiring prop trader, pay significant attention to them? Understanding drawdowns is vital because it gives a realistic picture of potential losses. It underscores the inherent risks in trading and helps you comprehend the volatility of your trading strategy over time.

Knowing your drawdown, or the extent of potential loss in a worst-case scenario, can help you assess whether your risk tolerance aligns with the trading strategy’s risk-reward profile. Furthermore, it helps you create a more effective risk management strategy, allowing you to place appropriate stop-loss orders and adequately size your trading positions.

A noteworthy point in the context of drawdowns is the mathematical reality that recovering from a significant drawdown requires a disproportionately larger return. For example, if your account experiences a 50% drawdown, it requires a 100% gain to return to the original account balance. Thus, managing drawdowns is not just about limiting losses but also about making your road to recovery more manageable.

In the trading world, drawdowns are inevitable. No matter how effective your strategy is, losing trades are part of the game. The question is not ‘if’ but ‘when’ and ‘how much’. The real art of trading lies in managing these drawdowns, keeping them within acceptable limits, and knowing how to recover from them effectively. Successful traders are those who understand that drawdowns are part of the process, who do not get discouraged by them but instead learn from them to improve their strategies and risk management tactics.

Moreover, prop firms pay close attention to how traders manage drawdowns during their challenges. Demonstrating that you can control drawdowns and recover from them effectively is crucial to pass your FTMO challenge or any other prop trading firm challenge.

In conclusion, understanding drawdowns involves recognizing their inevitability, appreciating their impact on account recovery, and learning how to manage and mitigate them. This knowledge is essential for anyone aspiring to succeed in the world of prop trading.

VII. Risk Management

Risk management goes hand-in-hand with understanding drawdowns. Successful risk management aims to limit potential losses while maximizing potential gains. In the context of prop trading firms, risk management involves several aspects:

  1. Position Sizing: Never risk more than a small percentage of your trading capital on a single trade. This approach ensures that even a series of losses won’t significantly draw down your account.
  2. Setting Stop-Loss Orders: These orders help limit your loss on a trade if the market moves against you. A properly placed stop-loss order can help control the maximum drawdown.
  3. Risk-Reward Ratio: Always assess potential profits against potential losses. Traders often aim for trades where the potential reward is at least twice the risk.
  4. Diversification: Don’t put all your eggs in one basket. Spreading your trades across different assets can help manage risk.
  5. Emotional Control: Don’t let fear or greed dictate your trading decisions. Stick to your trading plan and risk management rules, regardless of market conditions.

VIII. Continuous Learning and Improvement

Even after you pass your FTMO challenge, the journey doesn’t end. Trading is a field where continuous learning and improvement are crucial. Keeping up with market news, analyzing your trades, learning from your mistakes, and adapting your strategies accordingly can help you stay successful in the long run. There are many resources available, such as books, online courses, forums, and communities, which can provide valuable insights and lessons to keep you improving as a trader.

To answer the question, “What if a prop trader loses money?”, losses are part of the trading business. It’s the management of these losses through proper risk management and learning from mistakes that make a successful prop trader. In prop firms, if a trader loses beyond the specified risk limits, they may lose their trading privileges. This underlines the importance of risk management and continuous learning.

Finally, “Is working with a prop firm worth it?” This depends on individual circumstances. For many, the capital backing, reduced personal financial risk, access to advanced trading tools, and learning opportunities make trading with a prop firm an attractive choice. However, the challenges are demanding, and the expectations are high. Therefore, continuous learning, proper risk management, and emotional discipline are essential.

IX. Concluding Thoughts: Navigating the Path to Prop Trading Success

Through this guide, we’ve explored the comprehensive journey to pass prop firm challenges, equipping you with the knowledge and tools needed to step into this thrilling, rewarding, yet demanding arena. By now, you should understand why traders at prop firms can generate substantial earnings, and what happens if they lose money. You’ve gained insights into the kind of preparations necessary to meet these challenges head-on, the importance of emotional discipline, risk management, and continuous learning in your quest to succeed.

However, it’s crucial to remember that while the potential rewards are high, so too are the risks. And although you might be equipped with all the necessary skills and knowledge, it’s possible to make mistakes due to human error or unprecedented market volatility. The world of prop trading is not for the faint-hearted, and it’s okay if you’d rather not take on these challenges alone.

If you’d rather avoid risking such mistakes, and prefer to have a professional hand guiding you, consider partnering with a service like 100KPass. Known for their expertise and proficiency, 100KPass offers a unique service — they specialize in helping traders pass their prop firm challenges. With an experienced team of professionals, 100KPass can navigate the challenge on your behalf, employing effective strategies and extensive market knowledge to ensure you successfully pass your FTMO challenge or any other prop firm evaluation. They provide a great option for traders who want to participate in prop trading but prefer to avoid the stress and risks involved in passing these challenges themselves.

Finally, whether you choose to take the challenge head-on or seek the professional assistance of 100KPass, remember that the journey of trading is one of continuous learning and adaptation. Market dynamics change, new strategies emerge, and the only constant is change. So, stay informed, stay disciplined, and remember: every challenge is a stepping stone towards growth.

Good luck with your journey to pass the prop firm challenges. Here’s to your success in the exciting world of prop trading!