Passing a prop trading firm challenge is a major step for any trader looking to trade with significant capital. Proprietary trading firms—often called prop firms—give you access to their funds (or a sim account), but only if you can prove you’re ready. That’s where the prop firm challenge comes in.

Prop firm challenges, or evaluation challenges are not just about hitting profit goals, only. They are purposefully designed to test your risk management protocols and discipline, too. Yes, profit targets are part of them, but it takes more than that to pass. Even experienced traders with a good strategy can be derailed by their emotions—or not fully understanding the challenge rules before diving in.

If you want to pass a prop firm challenge, you’ll need more than just technical skills. You need preparation, patience, and a clear understanding of what most prop firm challenges actually expect from you.

In this article, we'll unpack why many traders fail the evaluation process, and how you can best position yourself for success. So, keep reading!

Why do Most Prop Firm Challenges End in Failure?

The reality is that most traders don't pass the funded account challenge the first time around. In fact, the stats suggest that around 68% of people fail their first attempt. Yet, this doesn't necessarily mean these people are bad traders—there can be several other reasons for this high failure rate. We'll get more into these below.

For many traders, they don't really take the time to fully understand how the evaluation process works—and therefore start off on the back foot. Almost all firms charge a challenge fee to participate. So, if you fail, it's not just costing you time, it's costing you money too.

Thankfully, some prop firms—like Seacrest Funded—offer free challenges with no time limit. This means you can pace yourself and wait for the right setups, rather than just jumping into any trade because 'the clock is ticking'. However, you still need to have a genuine trading strategy; otherwise, you are setting yourself up for failure, regardless.

Understanding Challenge Rules: Drawdowns, Profit Targets & Time Limits

Here are the main things to look out for when embarking on a trading challenge.

Daily Drawdowns: Equity vs. Balance

An important thing to understand is how prop firms actually calculate daily drawdown limits. Some firms base them on your account balance (closed trades only). However, other firms base them on equity (which includes open trades). It might not seem that important, but it can make a massive difference.

With equity-based drawdown rules, even a small move against an open trade can break the drawdown limit and cause you to fail the challenge—even if the trade ends up in the green.

Maximum Drawdown Limits

Most prop firm challenges have a max drawdown limit of about 10%. But not all firms calculate it the same way. Some firms base it on your starting balance, but others use a trailing drawdown, which changes as your account scales in size.

This is why it's super important to adjust your position size and risk management as your account grows.

Profit Targets and Timeframes

In order to pass a prop evaluation challenge, you'll normally need to hit around 8-10% profit in phase 1. Then, in phase 2, the target is usually around 4-5% profit, with stricter risk management needed. Most of the time, you have 1-2 months to achieve this, which can put a lot of pressure on traders to abandon their plan.

However, Seacrest removes this time pressure, allowing traders to focus on making quality traders. If you're a swing trader, this can be a massive advantage.

Minimum Trading Days

If you hit your profit target early on in the challenge, most prop firms still require you to trade a minimum number of days—usually about 5-7 days. The purpose of this is to weed out traders who might have just got lucky.

News Restrictions & Holding Over the Weekend

A lot of prop firms limit traders from holding trades over the weekend or during major news events. The risk of market gaps or extreme volatility is much higher, and these rules are in place to protect the firm’s capital.

A simple gap on Monday or a wild move during an economic announcement can wipe out a good account. Knowing and respecting these trading restrictions is key to staying in the game.

Get Ready Before You Trade: Your Pre-Challenge Checklist

Backtest Your Strategy Thoroughly

Before risking real capital, test your strategy across different market conditions—trending, ranging, and high-volatility periods. Three months of backtesting can reveal whether your plan holds up or falls apart.

Even manual testing on charts helps you build confidence and spot patterns or flaws that might not be obvious otherwise. This step is often skipped by many traders, but it’s one of the most important.

Use a Demo Account That Matches the Challenge

Practice on a demo account with the same rules, spreads, execution speed, and lot sizes as the actual challenge. This helps you adjust and fine-tune your trading strategy under real-world conditions.

If something doesn’t work here, fix it now—before you're risking real money.

Set Up a Risk Management Calculator

You shouldn’t be guessing your lot sizes. Use a risk calculator to set trade size based on account size and stop-loss distance. This kind of disciplined trading stops you from going all-in on a single trade, even when you're feeling confident. Risk management rules protect you from blowing up your account.

Write Down Your Trading Plan

Your trading plan doesn’t need to be long, but it needs to be clear. What setups are you looking for? How do you enter, exit, and manage trades? What times do you trade? Where is your stop-loss placed?

Keep this plan in front of you every day. It keeps you on track when emotions kick in and reminds you to stick to your system.

Prepare Your Mind as Well as Your Charts

You can have the best setups in the world, but if you can’t stay calm, you won’t pass. The pressure of a prop trading challenge can trigger stress, fear, and panic.

Understanding your mental game—your triggers, your habits, your recovery process—is part of the work. It separates the amateurs from the professionals in the trading world.

Risk Management: Your Survival System

Risk management is super important when you're trying to pass a prop firm challenge. Here's what you need to be aware of.

Smart Position Sizing & Correlation Checks

Managing risk is not just about keeping trades small (although important). It's also about understanding how different currency pairs are correlated to one another. If you're trading several correlated currency pairs, a significant move in one of the currencies could hit all your positions.

Create Personal Risk Limits

While it's important to follow the firm's trading rules, it's equally important to have your own rules and boundaries in place. These rules should guide you on when it may be best to sit out the market.

These internal rules create guardrails and help you stay disciplined even during tough stretches.

Handle Drawdowns the Right Way

Every trader has drawdowns at some point, but the key is not to panic. Don’t try to make it all back in one trade by going big. Instead, trade less, focus on high-quality setups, and let your account recover gradually. Patience and strategy beat panic every time in prop trading.

Build Your Daily Routine for Success

If you don't already have a daily trading routine, consider implementing one. In fact, this should be non-negotiable for serious traders. Here's what it should look like:

Start with Pre-Market Prep

Before you start each trading day, check for any major news and look for overnight gaps. Then, mark key levels and scan for trading setups. This gives you somewhat of an 'action plan' before the day begins.

This also helps you avoid emotional trades and lets you stick to your trading plan.

Log Every Trade

Keeping track of every trade might seem tedious, but it's a good way to keep yourself in check. Note why and where you entered and exited, and what the result was. This will help you spot patterns in both your winning and losing trades.

Many successful traders credit their trading journal as their best teacher.

Review Trades Midday & After Hours

It's good to check in with yourself during the trading session. Ask yourself: Are you still focused? Are you chasing trades when they aren't there? If needed, take some more breaks.

Then, at the end of the trading day, do a full review and unpack what went well—or didn't. The goal is to get a little better every day.

Avoid These Challenge Killers

So, what are some of the most common pitfalls people fall into when doing an evaluation challenge? Well, they aren't too different from normal trading. Here are some of the most common ones.

Overtrading and Chasing Wins

Overtrading usually comes with overconfidence. If you have a few wins, it's easy to feel invincible and start chasing trades when the setup is not there.

To avoid overtrading, stay disciplined, take what the market gives you, and stick to your trading plan.

Letting Emotions Take Over

Fear, greed, and frustration can wipe out an account faster than a bad trade. If you feel emotional, step away. Reset. Come back with a clear head.

Emotional control is just as important as technical analysis.

Not Knowing Your Trading Platform

Think of using your proprietary trading platform like driving a car. You should be super familiar with navigating your way around it. You can't afford to fumble around in the middle of your trading activities.

Also, consider having some tech backup plans ready, like a second internet connection and a spare device. If you don't feel 100% comfortable using the trading platform, consider spending more time demo trading to further familiarize yourself.

What Happens After You Pass a Prop Firm Challenge?

So, if you've passed a prop firm challenge, what happens next? How can you keep growing your account?

Shift to a Long-Term Mindset

If you've passed your prop firm challenge, congratulations! But you're just getting started. Funded trading is about steady growth, protecting the firm’s capital, and maintaining good discipline.

Don't get caught up in the short-term gains; focus on building a sustainable trading career over months and years.

Scale Up Slowly and Smartly

Grow your account size little by little, following the firm’s rules and your own strategy. Don’t suddenly double your position size just because you’re funded.

Let your performance guide your growth. That’s how real traders scale.

Understand Payouts and Stay Organized

Familiarize yourself with the rules for getting paid, including profit splits, payout schedule, and the withdrawal process. Be sure to keep your trading records clean and your banking info ready.

This is your business, treat it like one.

Your Path to Prop Trading Success

Learning how to pass a prop firm challenge is about more than just good trades. It’s about mindset, discipline, preparation, and tight risk control, all crucial for a successful trading career. Prop firm challenges are tough for a reason—they’re designed to separate prepared traders from risk-takers

Whether you choose Seacrest Funded’s flexible model or another firm with more traditional rules, passing your first prop challenge is a major milestone. With the right preparation, emotional control, and a solid trading plan, you can join the 32% of traders who succeed and start building your place in the financial markets.

You’re not just trading for profit and managing financial risk —you’re building a professional future. Let this challenge be the first step in something bigger.