Passing a stock prop firm challenge can be difficult if you start without the right preparation. However, with the right steps, even beginners can pass a challenge and get funding to propel their trading career. This article will guide you on the steps to ensure you pass a challenge.
START SMALL
DNA Funded challenges
When picking a challenge to work on, it is better to start with a small account. However, most times, traders let the emotion of greed push them to start with the biggest account, even when they have little money to spend.
Starting with a small account will give you time to familiarise yourself with the prop firm and gain confidence trading with set rules. Moreover, a small account is usually the cheapest with most stock prop firms like FTMO and Trade The Pool. This will ensure you are not constantly afraid of messing up and losing your initial fee. Therefore, there is less pressure to pass, allowing you to focus and achieve the best performance possible.
On the other hand, a big account is expensive and comes with a lot of pressure to perform. It will be harder to detach from your emotions if you can only afford to buy the challenge once. These emotions can affect your performance.
UNDERSTAND THE RULES
Trade The Pool rules
Understanding the rules is another major step in passing a stock prop firm challenge. These rules will guide your trading and ensure you aren’t eliminated for violations. Most stock trading prop firms have clear guidelines on trading practices. The major ones focus on risk management. Moreover, there are objectives you must meet in a given period. Knowing all of them will help you plan your trading well.
A prop firm might have a rule that all open trades must have stop losses to ensure proper risk management. They might also allow you to make several mistakes before taking action. Therefore, if you don’t fully understand all the rules, you might open positions without a stop loss, which could lead to a closed account.
Meanwhile, other prop firms might have an inactivity rule. These mostly apply for evaluations with an unlimited amount of time. For instance, the firm can close your account if you fail to open a position for over 20 days.
PICK A STRATEGY
You must pick one strategy that you will use to pass the challenge. A clear strategy will give you structure and confidence while trading. Moreover, it will ensure you manage risk well enough to survive in the market.
There are many stock trading strategies you can pick from online. Moreover, if you have the experience, you can develop your own strategy. A good strategy should clearly show the conditions for entering or exiting trades. It should also have risk management guidelines, like where to place stop losses and the risk-reward ratio to use.
However, it is important to work with a strategy that aligns with the rules and objectives of the challenge.
Join FTMO and get funding with a profit split of up to 90%. Join TradeThePool today and get funding with a profit split of up to 80%. Use a wide variety of tools to improve your trading performance.
BACKTEST YOUR STRATEGY
After picking or developing a strategy to work with, the next step is to backtest this strategy before applying it to a challenge. Most traders get too excited to start a challenge and skip this step, leading to a failure.
Backtesting will give you the data you need to know whether the strategy will win in the long run. At the same time, it will allow you to tweak things that will improve its performance. Finally, backtesting gives you familiarity and confidence using the strategy to pass a stock prop firm challenge.
After back testing, it will be easier to maintain discipline while trading because you know that following the strategy will lead to a positive result. On the other hand, when using a strategy without backtesting, the future is uncertain, and you can easily lose confidence when you meet a losing streak. This can lead to strategy hopping which will result in failure.
CONDUCT PROPER FUNDAMENTAL AND TECHNICAL ANALYSIS
FTMO calender
When trading, proper fundamental and technical analysis improves your performance. Therefore, to pass a stock prop firm challenge, use all the tools available to conduct fundamental and technical analysis.
Most prop firms will give you the best technical and fundamental analysis tools. Technical analysis will help you identify patterns and trends, giving you great trading opportunities. Meanwhile, fundamental analysis will ensure you anticipate market volatility when trading. This will ensure you manage risk properly.
KEEP GOOD RECORDS AND ANALYSE YOUR PERFORMANCE
DNA Funded analysis metrics
Another step to ensure you pass a stock prop firm challenge is to keep good records and constantly analyse your performance. Most prop firms have amazing tools that help you keep good records. However, most traders ignore these tools.
A good stock prop firm will give you a comprehensive analysis of your performance with each new trade. These statistics are crucial for your future performance because they will show you what you are doing right and what you are not. On top of this, you can create your own journal where you document each trade you take with a before and after chart image. This will show you whether you are following the rules of your strategy.
MANAGE RISK
Although prop firms have their own risk management rules, traders must work on their risk management to ensure they pass a challenge. If you have a daily stop loss of $100, it would be too risky to use a stop loss of $50 per trade because this would only give you two trades in a day to violate the rule.
Therefore, you must manage your risk well to ensure you don’t violate the rules but also grow your account balance.
SUPPORT AND MENTORSHIP
FTMO mentor app
Stock prop firms offer their traders support and mentorship that can improve their long-term performance. However, most traders ignore these little treasures. For instance, with FTMO, traders get the mentor app and performance coaches who help you improve your trading.
A performance coach will look at your traders with fresh eyes, meaning they can easily spot your strengths and weaknesses. Therefore, they can help you work on your weaknesses to ensure you pass a challenge.
Join FTMO or TradeThePool today and start working on a challenge. Use the above tips to improve your chances of passing a challenge and getting funded.
