If you’re dreaming of taking advantage of a prop firm’s funded account for your trading journey, but keep getting stuck at the first hurdle, you’re certainly not alone.
Many traders attempt prop firm challenges with high hopes, but a large percentage fail before reaching their profit target. While skill plays a role, the most common reasons for failure have little to do with strategy and more to do with risk management, emotional discipline, and preparation.
Passing a prop firm challenge isn’t about finding an elusive perfect trade and crossing your fingers… It really is about consistency, controlled risk, and following a structured approach. While, yeah, there are financial targets in a prop firm challenge, how to pass it comes down more to mentality, managing your emotions, and sticking to a plan (a frustrating thing to read, we know!).
The bottom line is that traders who understand the rules, stick to their plan, and manage their emotions are the ones who successfully qualify for a funded account. So, if you’re looking to improve your chances of passing, here’s what you need to focus on.
1. Understand the Prop Firm’s Challenge Rules
One of the biggest reasons traders fail is that they don’t fully understand the rules of the challenge before starting. Each prop firm has specific requirements, different trading rules, and different guidelines that affect how a trader should approach the challenge — It’s definitely not a one-size-fits-all kind of situation.
Common prop firm challenge rules include:
- Profit targets – Many firms, including Falcon Funded, require a 7.5% profit in Phase 1 and 5% in Phase 2.
- Drawdown limits – Most challenges have a daily drawdown limit (e.g., 4%) and an overall drawdown limit (e.g., 11%).
- Minimum trading days – Some firms require traders to trade for a certain number of days to pass.
- Consistency rules – Prevent traders from passing with a single large trade by ensuring profits are made steadily.
- Prohibited strategies – Many firms restrict high-frequency trading, arbitrage, and hedging across accounts.
Hint: Check out our trading glossary to brush up on your trading terminology if you’re about to embark on a prop firm challenge.
Understanding these rules allows traders to adjust their strategy accordingly, avoiding unnecessary disqualifications.
2. Create a Trading Plan That Fits the Challenge
Not every trading strategy is suitable for a prop firm challenge. Traders need an approach that aligns with the challenge’s rules while remaining consistent and manageable.
A strong trading plan should include a risk management strategy, a trading style, a market selection (that you stick to), and a trading schedule that fits in your day and brings your best to the trades. Your trading plan should also include time to write in your trading journal after and before you begin trading, so you can spot trends and take advantage of this info once you have your funded account ready.
Remember: A structured trading plan removes guesswork and provides a clear strategy to follow throughout the challenge.
3. Master Risk Management to Stay in the Challenge
The reality is that most traders fail… Not because they can’t hit the profit target, but because they break risk management rules.
Understanding how to manage risk effectively, is key to staying in the challenge long enough to pass.
- Risk no more than 1-2% per trade to stay within drawdown limits.
- Use a 1:2 or 1:3 risk-to-reward ratio to ensure that winning trades outweigh losses.
- Avoid overtrading – More trades don’t necessarily increase success.
Set a daily loss limit – Stopping for the day after reaching a certain loss helps prevent emotional decision-making.
4. Develop the Right Trading Psychology
Emotions are one of the biggest obstacles traders face in a challenge. Fear, greed, and frustration lead to poor decisions that cause traders to break their own rules.
Have you ever watched a trade move, felt that itch of FOMO, and gone all in, only to watch your hard-earned profits disappear? Have you ever had a bad day, seen it was time to call it quits, and promised yourself that just one more trade will have you back in the black? Have you ever pulled off a risky trade, only to lose all your earnings making an overconfident call the next trade?
All of these are common emotional mistakes that experienced traders will recognize. But keeping yourself in check, following a written plan to the letter and building psychological discipline are key aspects of successful trading. Ignore this step at your peril.
Traders who stay calm, follow their plan, and focus on long-term consistency are far more likely to pass their challenge.
5. Track Performance and Making Adjustments
One of the best ways to improve trading consistency is by analyzing past trades and making adjustments based on performance.
How to track performance effectively:
- Use a trading journal and record every trade, including the reason for entry, exit, and outcome.
- Review win rate and risk-to-reward ratio to make sure profits are sustainable over multiple trades.
- Analyze drawdown patterns and identify whether certain mistakes are leading to unnecessary losses.
Traders who actively review and adjust their approach based on data improve faster and avoid repeating mistakes.
6. Practice, Practice, Practice!
Many traders fail because they enter a prop firm challenge without testing their skills first.
A challenge is not the time to experiment. It’s the time to execute a well-practiced strategy.
Make sure to prepare for a challenge by practicing with demo trading, building a small personal account and tracking win/loss ratios and performance metrics to confirm readiness. Traders that pass first time on a stroke of luck rarely keep their accounts for long, anyway. Instead, think of a challenge as an exam you need to prepare for.
7. Avoiding Common Mistakes That Lead to Disqualification
Even skilled traders fail challenges due to simple but costly mistakes. Here are the most common errors and how to avoid them:
| Mistake | How It Leads to Failure | How to Avoid It |
| Overtrading | Taking too many trades leads to increased risk and emotional decisions. | Stick to a fixed number of high-quality trades per day. |
| Ignoring drawdown limits | Exceeding daily or total loss limits results in immediate disqualification. | Always check drawdown levels before placing a trade. |
| No clear strategy | Randomly entering trades without a system leads to inconsistent results. | Follow a structured, backtested trading plan. |
| Letting emotions take over | Emotional reactions cause traders to abandon risk management. | Set daily loss limits and take breaks when needed. |
By recognizing and avoiding these mistakes, traders can stay in control and pass their challenge with confidence.
Final Thoughts
In the trading industry, it’s often the traders who shout the loudest about their profits, how they passed a challenge first time, how much money they’re making etc. etc. who are the first to lose their account.
A prop firm challenge isn’t about taking the most trades or making the biggest profits. It’s about staying consistent, managing risk, and keeping emotions in check. Traders who focus on understanding the challenge rules, following a structured trading plan, and managing risk effectively have the best chance of securing a funded account — and keeping it for longer.
Ready to prove your skills and start trading with firm capital? Sign up today and start your journey with Falcon Funded.
