What is a Prop Firm Challenge? How to Pass Like a Pro
- Ankit Gupta
- June 27, 2025
A prop firm challenge is an evaluation where traders show their skills by hitting certain trading goals and following risk rules. If they succeed, they get a simulated funded account, allowing them to trade with the firm’s capital and share rewards.
What Is a Prop Firm Challenge?
Proprietary trading (prop trading) involves trading financial assets and instruments with a firm’s capital in the market.
Prop trading provides an opportunity for traders to earn a share of the profits by placing trades using a prop trading firm’s money in the market. As a trader, to start trading on a prop trading firm’s platform, an individual needs to prove their trading skills by participating in a kind of trading skill test popularly known as “Prop Firm Challenge.”
A Prop Firm Challenge is a skill test that is used to evaluate an individual’s trading skills by a prop trading firm or company. It’s considered as the best way to find out and evaluate the skilled and talented traders. If an individual succeeds in clearing the challenges, they will be allowed to trade using the firm’s capital to make profits.
The typical structure of any prop firm challenge usually consists of two main parts: the evaluation phase and the verification phase.
Evaluation Phase 1:
The evaluation phase is the first stage in which you need to show your trading skills by meeting the profit target and managing the risk. Prop firms typically set some terms and conditions under which they test your ability to trade successfully in the market.
Evaluation Phase 2:
After clearing the first stage of evaluation, you will move to the next phase. Here, you will have to demonstrate how long you can perform well by managing the trades during the market volatility. Simply, it’s a stage to test your trading performance and to ensure that the clearing of your first phase wasn’t just luck.
After successfully completing both phases, you will be eligible to use the prop trading firms’ capital to make profits
Key Elements of a Prop Firm Challenge?
In a prop firm challenge, traders are checked on multiple parameters such as profits, losses, risk management, and more. Let’s discuss the key elements of a prop firm
1. Profits Targets
Prop trading firms usually set some profit targets (a certain amount of profits) that a trader needs to attain to pass the trading challenge.
2. Risk Management
When it comes to trading, risk management plays a significant role. As a trader, you need to show how well you can manage risks effectively in the market. Prop trading firms will evaluate you on the basis of the profits and losses you make.
3. Rules and Requirements
The other important key elements of the prop firm challenge are the rules and requirements, or terms and conditions, set by the prop trading firm.
4. Maximum Drawdown
Maximum Drawdown is a rule in which a limit is set on how much money or capital you can lose in total. If you lose more than the fixed amount, then you will fail the challenge.
5. Minimum Trading Days
Prop trading firms also set minimum trading days as a challenge to evaluate your trading skills and consistent performance in the market. The minimum number of days for a prop firm challenge varies from firm to firm. Typically, these range from 2 to 5 days.
Therefore, taking note of the aforementioned key elements will help you to clear the prop firm challenges effortlessly. By following these steps, you will increase the chances of your success.
Benefits of Participating in a Prop Firm Challenge?
Being a part of a prop firm challenge offers you a great opportunity to increase your knowledge and skills and also to take your trading experience to the next level. Prop firm challenge adds a layer of advantages that help you to grow as a trader and manage risk more efficiently in the market.
Let’s take a look at some of the major benefits of participating in a prop firm challenge:
1. Capital Access:
One of the major advantages of participating in a prop firm challenge is that you get a chance to access the substantial capital provided by the prop firm for trading. Additionally, large capital access allows you to place more trades and generate high profits, which may not be possible with your own funds.
2. Learning and Growth:
The second benefit is learning and growth. Participating in a trading competition helps you in skill development and learning in real-time market conditions. If you are looking forward to learn more about trading, Hola Prime even provides free trading lessons to help traders get started on the right foot.
3. Reduced Personal Risks:
Prop firm challenges another advantage is that it limits your personal financial losses. As a trader, you do not need to worry about your personal funds, which directly makes you a safer way to gain experience and pursue success.
After understanding the major benefits of a prop firm trading challenge, you must be curious to give it a try. If you have trading knowledge and skills, then you should test your hands in prop trading.
How to Choose the Right Prop Firm Challenge?
Choosing the right prop firm challenge, like Hola Prime is important for your success. Here are the best ways to choose the right one:
1. Reputation and Reliability:
Before making your first move in choosing a prop firm challenge, research the history of the specific prop trading firm by reading reviews from other traders.
Researching a prop firm’s reputation helps to ensure whether the firm is trustworthy and reliable or not.
2. Challenge Structure and Rules:
Always check the challenge structure and rules of a trading competition before participating in it. Check whether the structure and rules of the challenge are aligned with your trading style or not. Evaluating the structure and checking the rules of the challenge will surely help you choose the best one for you.
3. Support and Resources:
Good prop trading firms always provide resources like educational materials, training resources, and great customer support services. Therefore, before entering into a prop firm challenge, make sure to check whether the firm is providing support and resources or not. It will be beneficial in case you need any kind of help during the challenge.
4. Fees and Payout:
As a trader, you should check the challenge fee and the payout structure of the firm. There are firms that may charge high fees and take a large percentage of your profits. Carefully check that the fees charged are reasonable and payouts are favourable. Hola Prime is popular for processing payouts within just one hour of the request.
5. Flexibility and Conditions:
Always look for firms that offer more flexibility in terms of trading hours and schedules. There are firms that require you to trade a certain number of days or hours, while others may be more flexible. Choose the firms that allow you to trade without too many restrictions.
Choose a prop firm challenge that aligns with your trading goals and enhances your chances of success. Take time and research well so that you can grow as a trader and achieve your financial goals in life.
How to Pass a Prop Firm Challenge?
In a prop firm challenge, you need to meet the profit targets while keeping the losses within limits. Hence, to pass the challenge, you need to be very mindful and clear about your strategies. Below are some excellent tips that can help you pass a prop firm challenge:
1. Develop an Ingenious Trading Plan:
It’s very important to make a clear and thoughtful trading strategy. A clear trading plan helps you to know when to buy and sell based on your analysis and testing. Always stick to your plan and avoid making any decisions in a hurry. Staying disciplined and sticking to your trading plan will help you stay ahead of the game and increase your chances of success in the challenge.
2. Effective Risk Management:
Learn how to manage your risks effectively in the market. Make a suitable plan to limit your losses and use techniques like stop-loss orders in order to prevent huge losses in the market. If you incur huge losses, you may lose the challenge, as there are conditions in the proprietary firm challenges regarding daily loss limits and maximum drawdown limits.
3. Maintain Discipline:
Discipline is the key to success in trading. Avoid making trades based on emotions and impulses. Stick to your planned trading strategy even when you feel emotionally unstable. Discipline is the factor that helps you to protect yourself from costly mistakes.
4. Continuous Improvement:
The market is constantly changing, and it’s important to keep learning and adapting new trading techniques and strategies as per the requirements of the market. It’s advisable to regularly review your trades, monitor your performance, and stay updated on the market trends.
5. Patience and Persistence:
You must have heard that “Success doesn’t come overnight”, so it’s necessary to stay patient and persistent even if you face challenges or setbacks in the market. Keep working hard and stay consistent as both are essential qualities for long-term success in trading.
Challenges in Passing a Prop Firm Challenge:
It’s common to face some challenges or problems while attempting a prop firm challenge. Let’s check some of the common challenges faced by traders during a prop firm challenge:
1. Pressure to Perform:
Most traders often feel pressure when performing the challenge in order to achieve more profits and control losses. This pressure can be quite challenging and stressful. Therefore, it’s advisable to stay calm during this situation because your stress can affect your decision-making and trading performance in the market.
2. Adherence to Rules:
A prop firm challenge often comes with some strict rules and restrictions. It’s advisable to follow these rules closely, like maximum drawdown limits and trading within the specified hours. Remember, if you fail to follow the rules, you might end up losing the challenge.
3. Consistency in Performance:
Many traders consider “consistency in performance” as the hardest part of a prop firm challenge. It’s tough to maintain consistent trading results. It’s advisable to stay disciplined and stick to your trading plan.
Therefore, by managing stress, following rules, and staying consistent, you can increase your chances of success in a prop firm challenge.
Conclusion
By choosing the right challenge and managing common obstacles like pressure to perform, adherence to rules, consistent performance, and continuous improvement, you can set yourself up for success.
Remember, success in trading requires patience and persistence. Therefore, following your trading plan and staying disciplined while continuously improving your trading performance can help you navigate the prop firm challenge and lead you towards your trading success.
Frequently Asked Questions about Prop Firm Challenges:
1. Do traders have to pay to participate in a proprietary trading firm’s challenge?
Yes, traders have to pay a small fee to participate in a trading challenge.
2. What are the conditions of a trading challenge?
Generally, a trader has to make a preset percentage of profit while staying within the daily loss and max drawdown limits.
3.How many steps are there in a prop firm challenge?
Different prop firms have different steps. Usually, there are 1 to 3 steps in a challenge.
4. Do I need to do KYC to participate in a challenge?
No, you don’t need to do KYC to participate in a trading challenge.
5. Is there any minimum number of trading days in a trading challenge?
Yes, usually you have to trade for at least 2 days.
Disclaimer: All information provided on this site is for educational purposes only, related to trading in financial markets. It is not intended as financial advice, business or investment recommendation, or as an opportunity or recommendation to trade any investment instruments. Hola Prime only provides an educational environment to traders, including tools, materials and simulated trading platforms which have data feed provided by Liquidity Providers. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local laws or regulations.