5 common prop firm trading mistakes and how to avoid them

The data is out there: most traders fail prop firm challenges. But they fail because of very common mistakes that could have been avoided.

In this article, we’ll cover the most common mistakes prop firm traders make and how to avoid them on your road to becoming a funded trader.

1. Trading Without a Plan

One of the fastest ways to fail at prop firms is to jump in without a clear, structured trading plan.

Prop firm challenges are hard enough to pass with their specific rules and strict risk management. Buying evaluation accounts without having any idea how, what, and when to trade is a recipe for disaster.

Spend some time educating yourself and demo trading before considering spending any money on prop firm challenges. Some essentials to focus on before buying a challenge are:

• Finding a good mentor and paying for education
• Backtesting a trading approach that suits your needs and personality
• Understanding the fundamentals of trading, how it works, and how to leverage trading prop firms

2. Not Understanding Prop Firm Challenge Rules

Every prop firm has different evaluation rules and requirements, and trading a prop firm account before fully understanding them is one of the most common mistakes.

Many traders jump into trading their newly-purchased challenge account, only to realize too late that they’ve violated some kind of rule they brushed off and didn’t read about.

You should understand all of the following things before even placing your first trade in your prop firm account:

Maximum and Daily Drawdown

Some firms base these on balance, others on equity, and some have a trailing drawdown. Understanding these two rules is crucial to your success as a prop firm trader.

News Trading Restrictions

Certain prop firms prohibit opening or closing trades around high-impact news, usually in a 10-minute window. Ignoring this could result in having your profits from the news trade deducted, or at worst, a breach of your prop firm account.