Prop firms provide traders with an amount of capital to start their trading career. But these firms first require traders to complete an evaluation process to get access to funded accounts. If you’ve ever attempted a prop firm evaluation then you must have an idea that passing this evaluation is not an easy task. Many traders come with big dreams of trading a firm’s capital but most of the traders fail the challenge in a matter of days or weeks. It’s frustrating, discouraging, and sometimes even makes you question if trading is for you. But here’s the thing most traders fail for the same handful of reasons. Once you understand these reasons and mistakes then you can take steps to avoid them and significantly improve your chances of passing. Those people who come to learn how to make money online can also get the advantage of prop firms evaluation process by avoiding these mistakes. So let’s discuss in detail these common reasons that traders fail prop firm evaluations and how you can avoid these mistakes.
Ignoring the Rules & Not Understanding the Evaluation Criteria
This might sound obvious but you’d be surprised how many traders fail simply because they didn’t take the time to fully understand the evaluation rules. Prop firms have strict guidelines including daily drawdown limits, maximum drawdowns, profit targets, trading time limits, news restrictions, and even consistency rules.
How to Avoid It:
- Read the rulebook. Not just once but many times. Know the risk parameters like the major component to focus on.
- If the firm provides a free trial or demo account then use it to get a feel for the platform and rules.
- Create a written plan that incorporates the firm’s risk management rules into your own strategy.
Revenge Trading After a Loss
We’ve all experienced it as you lose but instead of accepting it, you immediately want to recover what you lost. This emotional reaction mostly provides you with even bigger losses and is a major reason traders fail evaluations.
How to Avoid It:
- Have a set rule that after two consecutive losses, you’ll step away for the day.
- Keep a trading journal to track your emotions and spot revenge trading tendencies.
- Remind yourself that one loss doesn’t matter in the grand scheme of passing the evaluation.
Overleveraging & Taking on Too Much Risk
Prop firm evaluations are all about risk management. Many traders think they need to hit the profit target as quickly as possible which causes excessive leverage. This might work in the short term but one bad trade can wipe you out.
How to Avoid It:
- Stick to a fixed risk per trade usually 1-2% of the account.
- Use proper position sizing to ensure you’re not violating drawdown rules.
- Focus on steady and consistent gains rather than trying to hit home runs.
Overtrading & Lack of Patience
Some traders think they need to take as many trades as possible to increase their chances of hitting the profit target. But overtrading frequently results in emotional decisions with bad setups and increased commission/spread costs.
How to Avoid It:
- Set a maximum number of trades per day.
- Focus on quality over quantity and wait for A+ setups.
- Learn to walk away when there are no high-probability trades.
Failing to Adapt to Market Conditions
Markets change constantly. What worked yesterday might not work today. Traders who constantly stick to one approach without adapting face difficulties.
How to Avoid It:
- Stay updated on market conditions and news events that could impact volatility.
- Learn to recognize different market environments like trending, ranging, and choppy and adjust accordingly.
- Have a playbook of setups suited for various conditions.
Not Managing Drawdown Properly
Prop firms set strict drawdown limits, and traders often fail because they don’t manage their losses effectively. When they reach a daily loss cap they continue trading in the hopes of recovering but this is in vain and they continue to lose money.
How to Avoid It:
- Set a personal daily loss limit lower than the firm’s limit for example if the firm’s limit is 5% then stop at 3%.
- If you hit your limit then stop trading for the day.
- Focus on protecting your capital first then worry about making profits.
Letting Emotions Control Your Trades
Fear and greed can destroy a trader’s chances of passing an evaluation. Whether it’s hesitating on a good trade or cutting winners short emotions always affect your performance.
How to Avoid It:
- Use a trading journal to track your emotions and find patterns.
- Implement meditation or breathing exercises before trading.
- Stick to mechanical and rule-based trading to remove emotional decision-making.