5 Common Mistakes to Avoid in the Prop Challenge

If you are able to successfully pass the prop challenge of a good firm, you can become a prop trader and trade with a great amount of capital. This way, you will be able to increase the ratio of the profits that you can make. But whenever there is a great reward, the risk is great as well. This means the path to successfully passing a prop challenge can be difficult and risky. There are so many things that you need to consider and be careful of. That is exactly what we are going to talk about in this article. We will go over 5 of the most common mistakes that traders usually make during a prop challenge and we will also show you how to avoid them. 

Overtrading and Chasing Profits

Remember that just passing the prop challenge is not the goal. Becoming a prop trader for the long term is the goal. Don’t focus on momentary profits. And certainly don’t chase profits by overtrading. The purpose of the prop challenge is to prove yourself to the prop firm as a reliable and skilled trader. 

A reliable and skilled trader does not overtrade due to irrational decision making because they want quick profits. Instead, a professional trader who wants to become a prop trader will go after profits thoughtfully and with a plan. 

Why Overtrading Happens:

1. Traders might be in a hurry to quickly hit the profit goal of the prop challenge 
2. Overtrading might also be a result of fear of not being able to hit the profit goal 
3. It might also come from the misconception that the more you trade the more profits you make. Remember, more trades do not necessarily mean more profits. 

How to Avoid Overtrading:

1. Stick to your strategy: don’t get creative all of a sudden. Remember that you should have come into the challenge with a clear strategy. So, just stick to your trading strategy. 
2. Focus on quality, not quantity: a true prop trader is a high quality trader. So, on the path to become a prop trader, make sure to value quality traders over the quantity of the trades. 
3. Set a maximum trade limit: if you think you might get impulsive or afraid, then you can set a trade limit for yourself for every day. 

Ignoring Risk Management Rules

Ignoring proper risk management can be devastating and lead to serious losses. This is something that you need to keep in mind during the prop challenge process and even when you successfully pass the challenge and become a prop trader. Risk management guarantees your sustainable and long term success as a prop trader. 

Right from the start when you decide to take on the prop challenge, you must pay careful attention to risk management and do everything you can to minimize unnecessary risks. 

Why Risk Management is Crucial:

1. Remember that prop firms will usually define a drawdown limit for the prop challenge process which tells you the maximum amount that you can lose. 
2. Lack of risk management can easily lead to losses. 

How to Avoid Lack of Risk Management:

1. Use stop-loss orders: this is the first line of defense. Every single one of your positions during the prop challenge must have a stop loss. You might even opt for tighter stop losses just to increase the safety. 
2. Monitor your drawdown: unfortunately, hitting the drawdown is like the off button on your prop challenge. It will end everything suddenly. A huge mistake would be to forget drawdown altogether. 

To avoid this mistake, make sure to always keep an eye on drawdown and monitor it carefully. 

Lack of Consistency in Trading Strategy

What is the aim of a prop challenge? Prop firms want to make sure that they give their equity to a trader who is reliable and consistent in trading. You need to exhibit consistency and apply it to your trades during the prop challenge. 

Why Inconsistency Happens:

1. Traders, especially those without enough experience might jump from one trading strategy to another, which is an all too common mistake. 
2. Another reason why inconsistency might occur during a prop challenge is that traders react too quickly to any market change. 

How to Avoid Inconsistency:

1. Stick to one strategy: first and foremost, do not switch between different trading strategies because this is clearly a sign of an inexperienced trader. Stick to one trading strategy and be consistent in this way.
2. Test your strategy: you need to test your trading strategy quite well before beginning the prop challenge. Use any means necessary to test the strategy before actually using it with a prop challenge. In this way, your strategy can be more reliable.

Letting Emotions Drive Trading Decisions

Trading in forex under normal circumstances can be quite exhilarating and even scary. Now think about what it would be like if you were trading under a deadline, rule, restrictions, and goals to obtain? Well, this is exactly what a prop challenge is. A prop challenge is trading under difficult conditions. 

This can make traders quite emotional. But this is exactly what you should avoid. If you let your emotions affect your trading process, your decision making gets under the influence of your emotions. And emotional thinking is considered risky behavior for a trader. 

Why Emotions Are Dangerous:

1. Fear: this is the most powerful and dangerous emotion that can happen to you while passing a prop challenge. Due to the pressure of attaining goals within a deadline, you can be overcome by fear. 
2. Frustration: this is another form of emotion that is seen often during a prop challenge. Again, because of the pressures of a prop challenge, you could get frustrated and make unreasonable decisions.

How to Avoid Emotional Thinking:

1. Develop mental discipline: if you really want to become a prop trader, you must train your mind and develop discipline mentally as well as in your trading.
2. Take breaks: whenever you feel like things are getting too tough and you are beginning to get emotional, remember that it is okay to take a break.
3. Implement a strict plan: something that can remove emotional thinking from the process of passing a prop challenge is to have a trading plan and stick to it.

Underestimating the Importance of a Trading Plan

Last but not least, another common mistake that many traders make while trading to pass a prop challenge is not having a proper trading plan. 

The lack of a trading plan can cause many issues such as lack of discipline, consistency, and even leads to emotional thinking. 

On the other hand, having a well-defined and clear trading plan can bring a lot of discipline and consistency for you. 

Why a Trading Plan is Essential:

1. Having a trading plan can show you a clear direction to follow when passing a prop challenge. 
2. Having a trading plan will prevent you from jumping to different trading strategies. 
3. Having a trading plan can also help you stay logical in your decision making process and avoid getting emotional. 

How to Avoid This Mistake:

1. Create a detailed trading plan: of course the very first step to avoiding this mistake is to develop and create a clear and detailed trading plan.
2. Stick to your plan: but having a trading plan is only like half of the process. The rest is your devotion and dedication to the plan. Make sure to stick to your plan no matter what.

How to Avoid All Mistakes in the Prop Challenge? Automate the Process with XAUBOT

Perhaps the greatest method to avoid all of these mistakes is to automate the entire process of the prop challenge with the help of our expert advisor XAUBOT. 

XAUBOT AI is an intelligent expert advisor that uses the power of artificial intelligence and machine learning to automate trading in the forex market.

Using XAUBOT to pass the prop challenge can have many advantages and eliminate all of the mistake mentioned in this article: 

1. It provides comprehensive risk management with stop losses that can be set daily. 
2. XAUBOT has extensive technical analysis features which use powerful indicators and also artificial intelligence 
3. XAUBOT has an excellent and powerful trading strategy known as the multi-level trading method which is particularly good for passing a prop challenge 
4. Once you receive XAUBOT, you can contact the support team, send them the rules for prop challenge and receive a set file specifically for your prop challenge. Then you can load the set file which is ideally configured for the challenge. 

Conclusion

In this article we focused on the process of passing a prop challenge and the common mistakes that traders usually make in this process. We discussed five of the most common mistakes which were overtrading, ignoring risk management, inconsistency, emotional decision-making, and lack of a solid trading plan. 

We discussed how each of these mistakes can be damaging to the prop challenge process and also how to avoid these mistakes. We also saw how using our expert advisor the XauBot AI can fully automate the prop challenge process and be your ideal prop challenge trading bot.