After analyzing thousands of trader results, we've identified the most common reasons prop firm challenges end in failure. Understanding these pitfalls is the first step to avoiding them.
Mistake #1: Over-Leveraging
The most common killer of prop trading accounts is excessive position sizing. When you're trying to hit profit targets quickly, it's tempting to use maximum leverage.
The Problem: One bad trade can blow your daily loss limit or even your entire account.
The Solution: Never risk more than 1-2% per trade. Yes, it takes longer to hit targets, but consistency wins.
Position Size = (Account × Risk %) ÷ Stop Loss in Pips × Pip Value
Mistake #2: Trading During Major News
Unless specifically allowed by your firm, trading during major economic releases is extremely risky.
High-Impact Events to Avoid:
- Non-Farm Payrolls (NFP)
- FOMC Announcements
- GDP Releases
- Central Bank Decisions
Mistake #3: Revenge Trading
After a losing trade, the urge to "make it back" is powerful but dangerous. Revenge trading leads to:
- Abandoning your strategy
- Increased position sizes
- Poor trade selection
- Emotional decision-making
Take a break after losses. Your edge doesn't disappear, but your emotional stability might.
Mistake #4: Ignoring the Rules
Every prop firm has specific rules. Violating them, even accidentally, can end your challenge instantly.
Common Rule Violations:
- Trading outside allowed hours
- Holding over weekends when prohibited
- Exceeding maximum position size
- Trading restricted instruments
Solution: Print out the rules and review them daily.
Mistake #5: No Trading Plan
Trading without a plan is gambling. Your plan should include:
- Entry criteria
- Exit criteria (both profit and loss)
- Position sizing rules
- Maximum trades per day
- Times you will/won't trade
Mistake #6: Switching Strategies
If you fail with one strategy, don't immediately switch to another. Often the problem isn't the strategy—it's the execution.
Focus on:
- Backtesting your strategy thoroughly
- Understanding its win rate and expected drawdowns
- Trusting the process during losing periods
Mistake #7: Unrealistic Expectations
Prop trading is not a get-rich-quick scheme. Setting unrealistic expectations leads to:
- Frustration
- Reckless behavior
- Abandoning profitable strategies
Realistic Goals:
- 1-3% monthly returns
- 40-60% win rate (depending on strategy)
- Several losing days per month
The Path to Success
Avoiding these mistakes won't guarantee success, but it will dramatically improve your odds. Focus on:
- Risk management above all else
- Consistency over big wins
- Patience in the process
- Learning from every trade
Remember: The goal isn't to make money quickly. It's to prove you can trade consistently and safely manage risk. Do that, and the profits will follow.
Ready to start your prop trading journey? Check out our firm reviews to find the best fit for you.
