So, you are new to prop trading and wondering how you can pass your first trading challenge? There are several things you should know before starting a challenge. Prop firms offer traders like you an ideal passway to access capital, with the only condition that you pass their trading challenge. With that said, you should know that passing prop trading challenges needs so much more than having market knowledge. You might be surprised to know that many newbie prop traders fail to meet the challenges due to poor planning, emotional decision-making, and poor risk management skills. 

Comprehend the Rules and Goals

Before starting a prop firm challenge, you must understand the goals and rules first. This is also the first step to pass a challenge because your chances of passing the challenge are incredibly low if you are not familiar with the prop firm rules. With that said, each prop firm has its specific set of rules that traders must thoroughly understand before they start trading or working on the challenges. 

Key Elements of Prop Trade Challenges

You should understand the key elements of prop trades, including the risk management protocols, drawdown limits, and potential profit targets. For instance, when it comes to profit targets, some prop trading firms give traders 10% profit targets. As a trader, you can break this target into smaller goals as a way to reduce the potential risk of overleveraging, which will simultaneously help you with effective risk management and passing the challenge. Nonetheless, understanding the rules inside out is absolutely crucial so that you can actually pass the prop firm challenge.

Have A Realistic Trading Plan in Place

The next step is to build a realistic trading plan to improve your chances of actually winning the challenge. With that said, start by planning a trading strategy that is aligned with the challenge of the prop firm. Also, you should break the profit target into smaller daily or weekly goals to make the process more manageable and increase your chances of passing the challenge. Stick to the general rule of never risking more than one percent of your trade. By doing so, you can prevent a single bad trade day from jeopardizing your potential chances of winning a prop trading firm challenge. 

Always Test Your Strategy First

It is incredibly important for you to check your strategy first. Ideally, you should backtest and forward test your trading strategy so that you can be absolutely sure that you have a winning strategy. With that said, you should simulate various trading market conditions so that you can get a clear picture of where your trading strategy struggles and where it fails. 

Conclusion

Another incredibly important thing to know to pass the prop trading challenge is to leverage the stop-loss order. Make sure that every single trade comprises a stop-loss order to protect you against large losses. This aspect is also the key to passing a prop firm challenge. Also, you should look at the positive side and focus on smaller wins because the smaller wins are more sustainable than the larger wins.