One of the most professional methods to get more capital is through prop trading. In this form of trading, a prop firm will provide you with the capital to trade. But, they don’t just give you the money. You first have to pass the prop challenge. In this article, we are going to take a look at the most basic and yet helpful tips for you to passing the prop challenge even if you are a beginner in this domain.
What is a Prop Trading Challenge?
Before we tell you how to pass a prop challenge, let’s make sure we know exactly what a prop challenge is. A prop challenge is a trading challenge proposed by a prop firm for those traders who wish to receive capital from the prop firm. It is actually very easy to understand. You want equity from a firm, and the first needs assurances that they are giving their money to a reliable trader. So, you need to pass their challenge to reassure them that you are indeed worth their equity and make them profits. While prop challenges can be quite varied and depend on the firm offering it, by and large they include the following:
Profit targets
They usually define a profit target for traders which must be attained in a certain time frame.
Drawdown limits
They also define a threshold for drawdown which basically defines the most amount of money that you could lose in the challenge.
Trading rules
And then there are other rules and restrictions based on the prop firm. For example, they might limit the number of traders, the lost size, even the trading hours.
So here is the overall definition of a prop challenge. Remember that the goal of such challenges is to make sure that traders are skilled and able to make profits.
Now, let’s turn to the tips for passing the prop challenge.
Tips for Beginners to Pass the Prop Trading Challenge
Focus on Risk Management
The very first step to making money is to make sure you don’t lose money! And it is only appropriate to begin the tips for passing a prop challenge with risk management. During the challenge you must pay special attention to all measures and steps of risk control to make sure you do not lose money.
You have to first protect that capital given to you for the challenge. Here are some of the steps that can help you with that:
Set a Stop-Loss for Every Trade
Remember that every single trade must have stop loss. Do not get careless during the challenge process. Using a stop loss will make sure that you manage the risk for each position that you open.
Use Appropriate Position Sizing
Additionally, be cautious in the size of the e positions that you open. There is a general rule that says in each position, you should NOT risk more than 1% to 2% of your account balance.
Start Small and Build Slowly
Although there are usually time limits in prop challenges, you still need to make sure to take your time and don’t act hastily. It is also worth mentioning that come prop firms are less strict about time limitations of their prop challenges. But time limitation or not, a good approach is to start small and build slowly.
Avoid Aggressive Trading
Do not be aggressive in your trading approach. This is not really the time for risking it all. Go steady and count on consistent profits.
Stick to a Trading Plan
Something that can really help you in going steady and consistently is to have a trading plan. Once you have one developed specifically for the prop challenge, make sure to stick to it no matter what.
Master One Trading Strategy
If you do not have enough experience at the time, then you need to master one trading strategy and become the go-to trader for that strategy. The specific strategy really depends on you, your skills, your expectations out of forex trading, and basically your own preference. But whatever it is you pick, study it and know it through and through. Remember that you need to be the so-called master of that trading strategy. Once you reach that level, then you can rely on your own expertise in that particular strategy and use that to pass prop challenges.
Understand the Prop Firm’s Rules and Conditions
When it comes to the actual challenge and the tests that you have to pass, there are also considerations to keep in mind. Read and memorize all the rules and conditions of the challenge as perfectly as you can. These include anything that is part of the rules of the prop challenge. For example, the profit targets that are defined for you, the drawdown which you must not pass, and also the amount of time that you are allotted for the goals.
Each prop trading firm has its own set of rules and conditions for the challenge. It’s essential to thoroughly read and understand these rules before starting. This will help you avoid costly mistakes and stay within the firm’s parameters.
You can write these rules on a board and make sure that you stick to them throughout the entire process of the challenge.
Stay Calm and Emotionally Balanced
Passing a prop challenge can be quite a mental strain. It can wear you out easily. But remember that you are passing the prop challenge to receive capital from the prop firm and become a professional trader. That is exactly what you are going to be. A professional trader means that you are not just trading to make money for yourself, but you are trading to make money for a firm. Trading is your job.
So under these conditions, you need to think what kind of a trader you want to be? You need to exhibit professionalism right from the beginning. One of the ways you can be a professional right from the beginning is to remain calm and composed throughout the entire process of the prop challenge.
Being calm and disciplined can help you in the process to make better decisions and be consistent with your results.
How XAUBOT Can Increase Your Chances of Passing a Prop Challenge?
XAUBOT has countless features that are specifically useful and beneficial for passing prop challenges. For instance, XAUBOT is compatible with ALL currency pairs in the forex market. This means there will be no limitation with regard to the pair that you have to trade for the prop challenge.
Also one of the main trading strategies of XAUBOT is known as the multi-level trading strategy. This approach to forex trading can be quite ideal for prop challenges. The way this trading strategy works is through the increasing of the position size as trades go on and on.
In this way, even if you lose money on a trade or two, because you are proportionally increasing the size of your positions, once one of the positions ends in profit, it will make up for all the previous losses and also provide you with additional profit.
And of course just like any other feature of our amazing expert advisor, this trading strategy is fully adjustable and optimizable. You can go through the targets for the prop challenge and also the rules that you have to follow and then optimize the multi-level strategy on XAUBOT to be ideal for them.
However, when you purchase XAUBOT for the purpose of passing a prop challenge, you can contact our support team and tell them about the specific prop challenge that you want to pass. Then our support team will provide you with a set file that is optimized for the rules, conditions, and also the targets of the prop challenge. In this way, you don’t even need to go through the process of EA optimization. You can just load the set file you receive for the prop challenge and be on your way to becoming a prop trader. But keep in mind you must use this feature at your own discretion, as there are no guarantees in the forex market.
Conclusion
A prop challenge is a trading challenge that is offered by a prop firm. This process is intended to test the skill and expertise of traders who want to receive equity and capital from the prop firm. In this article, we talked about basic tips for beginners who wish to pass prop challenges. We also discussed the notion of a prop challenge and what is included in such trading challenges. As you saw, aside from all the tips, you can use the amazing features of XAUBOT which can be specifically applied to passing prop challenges.
