Prop trading is an innovative form of trading. Traders can start their trading even without having enough capital. But getting funded is not an easy task. Prop firms first require traders to complete an evaluation process but these challenges are designed to be tough. Prop firms aren’t in the business of handing out money to just anyone. They want traders who can prove they’ve got the skills, discipline, and mindset to handle risk like a pro. But if you have the right trading strategy and approach then you can easily pass this challenge and achieve profit targets. So let’s discuss everything you need to know—from preparing mentally to fine-tuning your strategy.

Understand the Challenge Rules Inside and Out

Before you even place a trade, you need to fully understand the rules of the challenge you’re taking. Every prop firm has slightly different requirements but most follow a similar structure:

• Profit target – The percentage you need to grow the account by usually 5-10%.
• Max daily drawdown – The most you can lose in a single day before failing.
• Overall max drawdown – The total amount you can lose before being disqualified.
• Time limits – Some challenges have a minimum trading period of 10 days or a maximum time frame of 30 days.
• Trading restrictions – Some firms limit lot sizes, news trading, or weekend holding.

Read the fine print and make sure you’re not accidentally breaking any rules. The last thing you want is to hit your profit target only to fail because you overlooked a simple rule.

Develop a Solid Trading Plan

A solid trading plan is your way to success. If you’re just winging it then you’re already setting yourself up for failure. Here’s what your plan should include:

Your Trading Strategy

Stick with what you know. If you’ve been consistently profitable using a certain strategy then don’t suddenly change it just because you’re in a challenge. Some common strategies that work well in a day trading in a prop firm challenges include:

• Breakout Trading – Catching moves as the price breaks out of important levels.
• Momentum Trading – Riding strong price movements in the direction of the trend.
• Scalping – Quick in-and-out trades for small gains.
• Mean Reversion – Trading price reversals at key support/resistance zones.

Risk Management Rules

This is where most traders mess up. The biggest reason traders fail these 2-step challenges isn’t because they can’t hit the profit target—it’s because they blow their account by over-leveraging or ignoring risk management. Here’s how to stay in control:

• Risk per trade – Keep it low usually 1% or less per trade.
• Daily loss limit – Set a personal max loss per day ideally half of the firm’s max daily drawdown.
• Position sizing – Don’t go all-in on one trade. Calculate lot sizes based on your risk percentage.

Trading Hours & Sessions

Know when you trade best. If you thrive in high volatility, focus on the London and New York sessions. If you prefer slower moves, stick to Asian session trading. Having a set schedule keeps you disciplined and prevents overtrading.

Master Your Psychology

Trading is a mental game as much as it is a technical one. A solid strategy is useless if you’re making emotional decisions. Here’s how to keep your head in check:

Avoid Revenge Trading

If you take a loss, accept it and move on. Chasing losses with reckless trades is a one-way ticket to blowing up your account. Stick to your plan and don’t let emotions drive your decisions.

Stay Cool Under Pressure

When real money is on the line (even if it’s a simulated challenge account) then the pressure is real. The best way to stay calm? Trade small at first. Build confidence with consistent wins before increasing your lot sizes.

Take Breaks

Staring at charts all day can lead to overtrading and burnout. Step away, go for a walk, or do something non-trading related to reset your mind.

Trade Smart, Not Hard

Trading more doesn’t mean making more. Overtrading is a common reason traders fail these challenges. Instead, focus on quality over quantity. A few solid trades per day are better than 20 impulsive ones.

• Wait for A+ setups – If it doesn’t meet your criteria then don’t trade.
• Use alerts – Set price alerts so you don’t have to stare at charts all day.
• Limit your screen time – Decide on a fixed trading window and stick to it.

Leverage a Demo Account First

Before taking on a paid challenge, test your strategy in a demo account that mimics the challenge conditions. This helps you:

• Get comfortable with the rules and drawdown limits.
• Identify weaknesses in your strategy.
• Build confidence before risking real money.

If you can consistently pass the challenge in a demo environment then you’ll be much more prepared when real money is on the line.

The foreign exchange market is one of the most exciting and dynamic financial markets. But remember that it is also full of challenges so if you trade without a plan then you’re basically just gambling. That’s why a solid trading plan is crucial, especially when you’re just starting out.

A trading plan is like a way in which you have to run and get the right direction. It keeps you focused, prevents impulsive decisions, and helps you trade with confidence. But how to make a simple forex trading plan that will help you to execute successful trades? Let’s discuss this in detail. 

Step 1: Define Your Trading Goals

You want to trade forex, but why? Do you want to work full-time or do you just want to earn a little additional money? Perhaps all you want to do is follow the markets because they pique your interest.

Whatever your motivation, be sure your goals are specific and attainable. Don’t expect to make a million dollars overnight if you’re starting with a modest account. Instead, concentrate on consistent progress. An excellent illustration of a realistic objective may be: 

• Earn 5% profit per month
• Stick to a max loss of 2% per trade
• Trade for at least six months before deciding whether to go full-time

Your objectives must be clear, quantifiable, and doable. You stay disciplined and motivated when you have a clear objective. 

Step 2: Choose Your Trading Style

Now, let’s talk about trading styles. Here’s where you make your trading decisions. Do you like things to go quickly or do you like things to happen slowly? 

Here are the main trading styles:

• Scalping is small and fast trades that take between a few seconds to a few minutes. Excellent for those looking for excitement but it demands quick decisions and a lot of screen time.
• Day trading is the practice of opening and closing trades on the same day. Perfect if you want to do frequent action but want to prevent hazards overnight.
• Swing trading is the practice of holding trades for several days or weeks. Ideal if you don’t want to spend your entire day staring at charts.
• Long-term trading that lasts for a number of months or weeks is known as position trading. Ideal for people who want to concentrate on fundamental analysis and take a more laid-back approach. 

Pick the one that matches your personality, schedule, and risk tolerance.

Step 3: Set Your Risk Management Rules

Risk management is non-negotiable. If you ignore this part then you’ll likely blow up your account faster. Here are some golden rules:

• Risk only a small percentage per trade – Many traders stick to the 1-2% rule meaning they never risk more than 1-2% of their account on a single trade.
• Use stop-loss orders – Always have a stop-loss in place to prevent massive losses. No exceptions.
• Have a risk-to-reward ratio – A common approach is 1:2 meaning for every $1 you risk you aim to make $2.

Step 4: Choose Your Currency Pairs

Not all currency pairs are created equal. As a beginner, it’s best to start forex trading for beginners with the major pairs since they’re more stable and have high liquidity. Examples include:

• Euro/US Dollar, or EUR/USD
• The British pound to the US dollar, or GBP/USD
• US Dollar/Japanese Yen, or USD/JPY
• The Australian dollar to the US dollar, or AUD/USD

At first, limit yourself to one or two pairings. By doing this, you’ll be able to understand their behavior and prevent information overload. 

Step 5: Develop Your Trading Strategy

A trading strategy is a set of rules that guide your entries, exits, and trade management. It can be based on technical analysis, fundamental analysis, or a mix of both.

Basic Components of a Strategy:

• Rules for entry: What signs will you watch for before making a trade? This can be predicated on support resistance indicators.
• Exit guidelines: When will you cash in on your gains? When are you going to stop losing money?
• Timeframes: Do you plan to trade on the daily, one-hour, or five-minute charts?

A simple strategy could be:

• As a trend indicator, use the 50-day moving average.
• When the price rises over the moving average, you should enter a buy trade.
• Set a take-profit at a 2:1 risk-to-reward ratio and a stop loss below the most recent low.

Don’t complicate things. It is more difficult to follow a plan that is more complex. 

Step 6: Keep a Trading Journal

This might sound boring but trust me a trading journal is a great tool. It helps you track your progress, identify mistakes, and refine your strategy.

What to include in your journal:

• Date and time of the trade
• Currency pair traded
• Entry and exit price
• Reason for taking the trade
• Outcomes like profit or loss
• What you learned