Prop firms provide their traders access to capital to start their trading career. If traders do not have capital or resources but they want to join trading then prop firms help them to start and grow their career. Prop firms do not provide capital to each trader but traders first complete an evaluation process then these firms give access to their funded trading account. But passing this challenge is not an easy task. Traders must have the skills and strategies to pass this challenge. If you don’t know how to pass this evaluation process then let’s see in detail about the best trading strategies that each trader must have to pass a forex prop firm challenge.
What are Prop Firms and How does the Evaluation Process Work?
Prop firms are trading firms that invest their own money and provide traders with the profits of successful trades. Traders can trade with large amounts of capital and can save larger positions to get higher profitability. But traders first complete a challenge given by the firm and then get access to live-funded trading accounts. This evaluation process consists of specific profit targets with strict risk management rules that traders must follow to achieve success. Most traders are given profit targets of up to 10% of their account balance. Traders execute trade by staying within the given loss limits. Once they successfully complete this process they get immediate access to a cheap funded account.
Choosing the Right Prop Firm
Different firms have different evaluation criteria so choosing the right prop firm is also a very critical step. Traders’ success and profitability depend on the right choice of prop firms. Some firms have a multi-step evaluation process in which traders complete different phases with different profit targets. There are also some firms that provide single-step evaluation and these firms are called one-step evaluation prop firms. The criteria of one-step evaluation is more strict as traders have to prove their skills in just a single step but it has less time as compared to multiple steps and is less confusing for traders. Some traders prefer one-step evaluation prop firms and others multi-step evaluation firms depending on their trading style and preferences.
Strategies to Pass the Evaluation Process
Trading Plan
The first thing that each trader needs to consider is having a detailed trading plan. This plan is developed based on capital and risk limits. It consists of all the important factors like trading strategy, your risk management approach, and how you will achieve your trading objectives. Make a plan and try to stick to it even if you face losses. Set your stop loss levels with entry and exit points according to profit targets. Try to make a plan according to your trading strategy so you can easily implement a trading plan and achieve those targets.
Risk Management
Risk management is also very important. When you control risk then you get success in the evaluation process. Set maximum per day risk and overall risk tolerance that you can afford on each trade. Try to use a risk calculator to calculate your risk and define pips, position size, and risk tolerance. Invest time in learning new risk management strategies according to market conditions.
Know the Firm’s Rules
Forex prop firms have very strict rules that traders must have to follow if they want success. When you choose a firm first check all their trading rules because each firm has its own specific rules. These rules include the maximum daily drawdown restriction, minimum profit targets, and maximum drawdown limits with a clear deadline for the evaluation process. Remember that when you break any of the firm’s rules your account will be suspended so when you trade first consider all the rules of the firm.
Use of technology
Before participating in the evaluation, get familiarized with the trading platforms and tools. Technology always helps you to make your trading more efficient. Prop firms also provide traders access to different tools. See the firms provided tools and make an understanding of how you will use this platform for more successful execution of trades.
Analyze Results
Most of the prop firms give traders a deadline of 30 days to complete the challenge. In this period of time, traders must apply different trading strategies according to their trading plan. If traders face losses then they need to analyze their results consistently and make adjustments according to the market conditions. Continuously monitoring helps traders to improve their trading strategies to reach profit targets.
Final Thoughts:
Prop trading requires traders to pass their challenge process and prove their skills. To pass this challenge traders must have a solid trading strategy plan that helps them to easily achieve the firm’s specific profit targets.
