How to Pass a Prop Firm Challenge
#492: How to Pass a Prop Firm Challenge
In this video:
00:30 – Everyone wants to trade through a prop firm
01:15 – They don’t just hand out money
02:31 – You must preserve capital
03:50 – Don’t use a prop firm who insists on a time limit
04:58 – Trade a variety of markets and time frame charts
05:38 – Do not rush your trading
06:04 – Use a strategy with high reward:risk trades
07:02 – Use Blueberry Markets if you want a good broker
07:39 – Like & Subscribe and leave a comment
08:16 – Ensure you are profitable first before opening a prop firm account
In this week’s video and podcast, I’m going to give you some important tips of how you can pass a firm challenge and therefore make substantial gains for yourself from the Forex market. Let’s talk about that and more right now.
Hey, traders, Andrew Mitchem here, the owner of the Forex Trading Coach with video and podcast number 492.
Everyone wants to trade through a prop firm
So everybody’s talking prop firms right now, aren’t they? You know, it’s the big thing. It’s a way that you as a trader do not need to put large amounts of cash or capital into your own trading accounts, whether you’ve got lots of money or whether you got no money. It does not matter these days because prop firms are there to help us to gain really good incomes through trading the markets, the forex market and other markets.
So what is a prop firm if you’ve not heard of a prop firm, it’s basically a firm out there online are lots of them. As always, there are a few good ones and there’s probably lots of not so good ones. So be selective. But basically it’s a firm that will allow you to trade on their capital for a profit share.
They don’t just hand out money
Now, of course, they’re not just going to go randomly giving out hundreds of thousands of dollars to people. They have no proof of bad. So there’s a charge to do it naturally. And also for most of them, there is a challenge to get through first on a demo account for maybe one or two challenges, depending on the level that you enter the challenge.
And before you can go into real money. However, we have some traders here at the Forex Trading Coach, some of our clients who are on substantial figures of $750,000 USD and more, and they are making incredibly good income through trading the prop firms and bypassing the different challenges. So think of it, if it was your capital, what’s the most important thing you’d like to know?
Well, of course you want to know. Can that trade are actual Trade. But also, are they a good trader and can they preserve my capital? That’s really what it’s about. It’s all well and good saying. “I’ve got a system with a 90% win rate or I’ve made 50% on my account last week”. But probably if you’re doing that, you’re gambling, you don’t know what you’re doing and you will almost certainly fail the prop firm challenges. So in order to pass a prop firm successfully, you need to do a number of things and I’m going to outline those for you.
You must preserve capital
First of all, as mentioned, preserve capital. So how do you do that? Well, you have to have low and controlled risk. You’d have heard me talk for years and years, about 14 years now, about I trade personally with no more than half of 1% risk per trade. That’s my personal level. Now, on a prop firm, you might want to go lower than that. You might want to trade, say, 0.25, a quarter of 1% risk per trade because the aim of a prop firm is not to lose their capital. Most of them have a challenge of, let’s say, making a 10% gain, and that’s all well and good.
But they have a drawdown maximum, most of them around 5%. So again, preserving capital is key. So if you think of it in simple terms, let’s say you are at five sorry, half of 1% risk with a 5% maximum drawdown, you can have ten trades, all losing in a row before you get to your 5%. Now, obviously, if you go down to 0.25, you’ve got more, more and more trades that you could have in a row losing before you get to that level. And if you strategy is any good, you of course, are going to have some good profitable trades in there as well. So really low risk quarter of 1% to half of 1%, Max, is where I’d suggest you look at your risk level.
Don’t use a prop firm who insists on a time limit
And so to get to 10% gain a lot of the prop firms and be careful with this because a lot of prop firms put a time limit on you getting to those gains.
I personally do not like that. I personally would select a prop firm who does not have a time limit on getting to that 10% gain. What you don’t want to do is get into the gambling mentality or let’s say you’re up five or 6% and you’ve got two or three days left and then you start doing silly things.
You may fluke it. You may get to that 10% by taking a stupidly abnormal high risk and just pulling it off. And you get there the trouble is you get onto a bigger account or you stop paying for more prop firms and you get into that same mentality and you’ll end up coming unstuck. So I would much prefer to look for prop firms who do not have a time limit on getting to the game. That’s really important. The other thing is also when I say risk quarter to half percent per trade. Don’t be like the majority of traders out there. We just put the same lot size on every single trade regardless. Don’t do that.
Trade a variety of markets and time frame charts
Have known controlled risk and know your size that you need to trade different markets because depending on the market conditions like you might find that the metal has been going really good.
Like yesterday we took a sell trade on gold and silver worked beautifully. You know, sometimes the metals are showing good set up, sometimes they’re not. Sometimes the forex pairs are, sometimes they’re not. Look at a variety of forex pairs as well and also look at a variety of timeframe charts. Give yourself the best opportunity because you don’t know next week what the market is going to show and give us.
You just don’t know. You might find that the day the charts went really well or you might find that the chances are not so good and the six hour chart are showing what’s a good set up. So give yourself the best all round chance here of success.
Do not rush your trading
And also don’t rush it, Do not rush it. Do not be forced into having to make X percent in X amount of time. Do not rush it because that’s not what professional traders do. You wait, you look for the high quality set ups and you take them when they show. If a lot show at the same time, take them and you know, if all of a sudden you’re getting like a day or two with not many trades, that’s fine. Also, trade what the market is giving you at the time.
Use a strategy with high reward:risk trades
I’m also you need to ensure that you have a strategy that has high reward to risk trades. That’s exactly what we have here at the Forex Trading Coach with most of our trades making a 2 to 1, 3 to 1, 4 to 1, sometimes a 5 to 1 reward to risk. Put that in simple terms. If you’re risking half of 1% on a trade and getting a 2 to 1 means you’re making a 1% gain if you’re at half of 1% risk and on a 4 to 1, it means you’re making a 2% gain on your account in just that one trade when it hits the profit target.
So you need to have that. So we can certainly help you with a proven strategy for trading. Have a look on this page or if you’re listening to the podcast, have a look somewhere on the page and you’ll find details to how we can help you with our proven online Forex trading coach course, which has been trading and helping traders for 14 years.
I’ve been personally trading for a lot longer than that, but we’re up to 14 years this year at the Forex Trading Coach, something we’re incredibly proud of.
Use Blueberry Markets if you want a good broker
Now lastly, if you’re out there looking for a good broker, I can highly recommend Blueberry Markets that based over the ditch over in Australia. I’m of course here in New Zealand. But doesn’t matter where you live in the world in most countries around the world, you can open an account with Blueberry Markets.
Fantastic, fantastic group of people, real good, honest, friendly people. You can get on the phone, you can talk to them. They’re incredibly responsive with emails, really good trading platforms on MT4. And now of course on MT5, a good variety of markets, good tight spreads. So have a look at Blueberry Markets again, I’ll put a link to them on this post and the podcast.
Like & Subscribe and leave a comment
Don’t forget to like and subscribe. If you’re watching on YouTube or any other or any other video channel and any questions, as always, leave them in the comments box and any any topics you like me, discuss on future videos and podcasts just like this one taught them. And let me know and I’ll be helpful and glad to the guide to cover those for you on on Future editions.
So this is Andrew Mitchem here at the Forex Trading Coach. I see this time next week, enjoy a pop firm’s be real low risk, high reward risk. Good strategy.
Ensure you are profitable first before opening a prop firm account
One thing I forgot to say, make sure that you are profitable first on a live account. Doesn’t matter what the size is, but be profitable on a live account before even thinking about top firms.
It’s there’s two things in trading you need to control. Once you head, once your heart in your emotions got to keep that under control and you got to know that you can trade properly, correctly, with low risk first on a live account before you put more money into something else. So otherwise you’re wasting your money going into prop firms.
They are fantastic if you know what you’re doing. I hope that helps. See next week.