Why 99% Traders FAIL | Prop Firm Trading
Summary
TLDRThis video delves into the challenges traders face in prop firm trading challenges, highlighting sobering statistics from MyForexFund. It reveals that only a small percentage of traders make it through the stages and reach profitability, largely due to poor risk management, lack of stop losses, and emotional factors like fear and greed. The video emphasizes the importance of trading psychology, adaptability, capital management, and discipline in overcoming these hurdles. Successful traders follow strict risk management strategies, limit trading hours, and remain calm under pressure. Viewers are encouraged to reflect on their trading habits and mindset.
Takeaways
- š Only 10% of traders pass phase 1 of prop firm challenges, and only 24% of those pass phase 2.
- š¼ Out of 10,000 traders, only 8 successfully reach their first profit split, demonstrating the difficulty of the challenges.
- šØ A major reason for failure is that 60% of traders don't use stop-losses, increasing their risk of losing accounts.
- ā ļø Prolonged market volatility leads to high failure rates due to poor risk management and emotional trading.
- š Traders who hold positions over the weekend have a 60% chance of losing their accounts, highlighting risky behavior.
- š° Even traders who reach record payouts often lose their accounts within weeks due to taking unnecessary risks.
- š Successful traders maintain a risk management strategy, risking less than 3% of their capital per day.
- š Adaptability is crucial; traders who stick to outdated strategies fail in the dynamic financial markets.
- š§ Trading psychology, controlling emotions like fear and greed, is key to preventing impulsive, poor decision-making.
- ā³ Time constraints in prop firm challenges test traders' discipline and patience, essential for long-term success.
Q & A
What percentage of traders pass the first phase of a prop firm challenge?
-Only 10% of traders pass the first phase of a prop firm challenge, according to statistics from MyForexFund.
How many traders reach the first profit split after passing both phases?
-Only 3% of the traders who pass both phases of the challenge manage to reach their first profit split.
Why do so many traders fail prop firm challenges?
-Many traders fail due to poor risk management, lack of discipline, emotional trading, and not using stop losses. For example, over 60% of traders don't use a stop loss, which significantly increases their risk.
What is the impact of market volatility on traders during prop firm challenges?
-High market volatility increases the chances of failure because traders without a solid risk management strategy are more likely to make impulsive decisions, leading to large losses.
What risk management strategies do successful traders use?
-Successful traders risk no more than 2-3% per day, stop trading after reaching a 4-8% profit during the pay cycle, and trade for fewer than 4 hours per day.
How do prop firms benefit from traders failing the challenges?
-Prop firms design challenges with time limits, drawdown rules, and trading requirements that often lead to mistakes. This increases the likelihood of failure, which is part of their business model to generate profits.
What emotional factors contribute to tradersā failure?
-Fear and greed are major emotional factors. Traders who fail to control these emotions often make impulsive decisions, deviate from their trading plan, and react poorly to short-term market movements.
Why is adaptability important in prop firm trading?
-Markets are constantly changing, and traders who fail to adapt their strategies when conditions shift often miss opportunities or suffer losses, as seen in the story of a trader named Gerald.
What role does discipline and patience play in prop firm trading?
-Discipline and patience are key to success. Many prop firms have time limits to test tradersā ability to manage pressure. Traders who act impulsively or chase trades without waiting for proper setups are more likely to fail.
Are there prop firms without time limits, and how does this affect traders?
-Yes, some prop firms, like FundedNext, offer challenges without time limits. This allows traders to be more patient and disciplined in waiting for the right setups without the pressure of a deadline.
Outlines
š Startling Prop Firm Trading Success Rates
Only 10% of traders pass phase 1 of prop firm challenges, with a mere 24% advancing through phase 2, according to stats from MyForexFund. Among these, just 3% achieve their first profit split, resulting in only 8 out of 10,000 traders profiting. The stats suggest that a lack of stop-loss use and poor risk management, especially in volatile markets, lead to these failures. Despite initial success, traders often lose their accounts within weeks due to excessive risk-taking.
š” Key Insights into Successful Traders' Strategies
Successful prop firm traders manage risk carefully, with no more than 2-3% risk per day and fewer than 4 hours spent in the market daily. Prop firms profit when most traders fail, but disciplined traders who follow risk management strategies consistently succeed, as shown by a small group of traders making it to their 8th payout cycle. These traders demonstrate conservative and patient trading practices, proving that success is possible with the right approach.
š Emotional and Psychological Challenges in Prop Firm Trading
Emotional factors like fear and greed play a significant role in trading failures. Prop firms exploit these emotions through rules that force mistakes. The pressure to meet drawdown limits and time constraints leads to impulsive and poor decisions. Maintaining emotional control and avoiding impulsive trading are crucial to passing prop firm challenges. Developing a strong trading psychology is essential for long-term success.
š Adaptability: The Key to Surviving Market Changes
Traders must adapt to changing market conditions to succeed. The story of Gerald, a trader who stuck to an outdated strategy, highlights the dangers of being inflexible. Traders who fail to adapt miss opportunities and suffer losses. The markets are constantly evolving, and successful prop firm traders need to recognize when strategies become ineffective and adjust accordingly to maintain profitability.
š° Capital Management: Controlling Risk for Long-Term Success
Risk management is vital in prop firm challenges, with drawdown rules typically between 8-10%. Many traders fail due to poor risk management, like neglecting stop-losses, which leads to significant drawdowns. To succeed, traders must follow solid risk management practices and avoid exposing themselves to unnecessary losses. Proper capital management ensures long-term profitability and helps traders navigate the strict rules of prop firms.
ā³ Discipline and Patience: Navigating Prop Firm Time Limits
While time limits in prop firm challenges can increase failure rates, successful traders understand the importance of patience and discipline. These traders spend most of their time observing the market and waiting for the right setup, rather than rushing into trades. Prop firms test traders' ability to handle pressure, but traders who remain disciplined and follow a strategic plan are more likely to succeed. Some firms, like FundedNext, offer no time limits, giving traders more flexibility.
š„ Handling Pressure and Volatility in Prop Firm Trading
Trading in volatile markets requires quick decision-making and emotional control. Many traders fail to handle the pressure, leading to significant losses, as described by the 'blood bath' of market volatility. Developing the ability to manage stress and maintain discipline is essential for prop firm success. Traders must stick to their risk management plans and stay calm under pressure to navigate volatile markets effectively.
šÆ Becoming a Successful Funded Trader: Lessons Learned
The speaker, a successful funded trader, shares insights from their journey, having completed three funded challenges after initial failures. Key lessons include managing emotions, adapting to market changes, maintaining discipline, and handling pressure. By learning from failures and applying these lessons, traders can increase their chances of success in prop firm challenges. The video emphasizes the importance of trading psychology and offers practical advice for aspiring funded traders.
Mindmap
Keywords
š”Prop Firm
š”Trading Challenge
š”Risk Management
š”Profit Split
š”Market Volatility
š”Stop Loss
š”Emotional Control
š”Time Limits
š”Capital Management
š”Adaptability
Highlights
Only 10% of traders pass phase 1 of prop firm challenges, and just 24% of those pass phase 2.
An astonishingly low 3% of traders who pass phase 2 reach their first profit split.
Over 60% of traders do not use a stop loss, significantly increasing their risk of failure.
Traders who hold trades over the weekend have a 60% chance of losing their accounts.
All traders who received record payouts lost their accounts within three weeks due to excessive risk-taking.
Successful traders risk less than 3% on any given day and stop trading after reaching 4-8% in profit.
Profitable traders spend less than four hours per day in the market.
Prop firm challenges are designed to make traders fail, but those in the right mental state can still succeed.
Emotions and psychological factors, like fear and greed, can lead traders to make poor decisions.
Adaptability is crucial in trading, as sticking to outdated strategies can result in losses.
Over 60% of traders do not use a stop loss, making them vulnerable to significant drawdowns.
Disciplined and patient traders wait for the right setups rather than acting impulsively.
Traders must develop discipline and patience to overcome the time limits and pressure from prop firms.
Handling pressure is key to trading success, especially during periods of market volatility.
The video highlights the importance of trading psychology, discipline, and emotional control for long-term success.
Transcripts
Do you know that just 10% of traders who invest inĀ Ā
prop firm trading challengesĀ successfully pass phase 1?Ā
Out of these 10%, just 24% manageĀ to overcome the hurdles of phase 2.Ā
This is according to stats released byĀ MyForexFund - a popular Forex prop firm.Ā
But wait, there's more. Of those that managed toĀ Ā
cross the phase 2 hurdle, an astonishingly low 3%Ā of these traders reach their first profit split.Ā
Let's bring this into context andĀ show how ridiculous these stats are;Ā
Imagine a scenario where 10,000 tradersĀ purchased an account with the prop firmĀ Ā
and embarked on the challenge. According to their stats,Ā Ā
out of the 10,000 traders who purchased anĀ account, 1,000 successfully pass phase 1Ā
Just 240 traders from the 1000 prove their mettleĀ and advanced through the āless demandingā phase 2.Ā
And of the 240 traders that got funded, onlyĀ 8 of them reach their first profit split.Ā
I guess you are wondering why only a fewĀ succeed at making a profit with prop firms.Ā
Well, the company also gave someĀ insight into why this is the case;Ā
It was revealed that over 60% of tradersĀ in their database do not use a stop loss,Ā Ā
and thus, have a high risk of ruin. When the market is more volatile;Ā Ā
more traders fail because of aĀ lack of risk management discipline.Ā
And when this volatility is prolonged,Ā itās a blood bath of epic proportions.Ā
Traders who hold trades over the weekend have aĀ 60% chance of failing or losing their accounts.Ā
All the traders who received record payouts lostĀ their accounts within 3 weeks of the payout;Ā Ā
due to taking excessive risks,Ā which they didnāt need to take.Ā
At this point in the video, I know youĀ want to ascertain with every fiber in yourĀ Ā
body that the idea of āProp firmsā is a scam. But before you do that, listen to this first;Ā
The company also shared insights intoĀ the habits and trading patterns of theĀ Ā
very few successful traders on their platform; Traders who have made it to their 4th pay cycleĀ Ā
all have a risk management strategyĀ of below 3% risk on any given day.Ā
When this data was published, 5 traders were onĀ their 8th payout on evaluation live accounts;Ā Ā
and they all traded conservativelyĀ to ensure they got paid.Ā
None of these successful tradersĀ risked more than 2% per trading day,Ā Ā
and they stopped when they reached 4 to 8%Ā in profit until the pay cycle has ended.Ā
Lastly, the profitable traders are inĀ the market less than 4 hours per day.Ā
If youāre thinking about it, yes, you are correct! The successful prop firm traders doĀ Ā
things differently! Now, ask yourself:Ā Ā
Will I ever pass a prop firm challenge? Will I ever be a successful trader onĀ Ā
these platforms? If your answer isĀ Ā
a resounding āYesā, then congratulations. But if itās not, I also say congratulations.Ā
Because this video is made specifically for you. And it could be the change youāve beenĀ Ā
looking for to become a successfulĀ trader, and maybe a funded one too.
What you should know first andĀ foremost is that the Prop FirmsāĀ Ā
challenges are designed so you can fail them. Yes. Thatās the real Prop Firm money-making model.Ā
But as the stats suggested, traders whoĀ are in the right mental state and trulyĀ Ā
know their edge still get funded andĀ consistently make a profit every month.Ā
In this video, we go over 5 factors thatĀ are the main contributors to why tradersĀ Ā
fail prop firm challenge, how you can passĀ and make consistent profits from them.
Number 1. Emotions and Psychological FactorsĀ
Emotions like fear and greed canĀ significantly impact trading decisions.Ā
Most beginner traders do not know theĀ role emotions and trading psychologyĀ Ā
play in their overall success. But the prop firms know thisĀ Ā
and are taking advantage of it! The drawdown rules, time limits,Ā Ā
and the minimum trading days requirementsĀ are there so you would make mistakes,Ā Ā
lose trades and lose your head. Traders who fail to control theirĀ Ā
emotions may engage in impulsive or irrationalĀ behavior, deviating from their trading plan,Ā Ā
and start making poor decisionsĀ based on short-term market movements.Ā
I made a video that talked aboutĀ 5 practical tips that will helpĀ Ā
you improve your trading psychology; IĀ will leave a link in the description. Ā
Number 2. AdaptabilityĀ
A trading mentor once told me the storyĀ of a very successful trader named GeraldĀ Ā
āwho found success using a particularĀ trading indicator he had mastered.Ā
He reveled in his accomplishments,Ā riding the waves of consistent profits.Ā
Market landscape evolved, new trends emerged,Ā and unforeseen events impacted movement ofĀ Ā
the asset he was trading at the time. As the market began to shift, GeraldĀ Ā
stubbornly clung to his outdated strategy. Convinced that his tried-and-true methodsĀ Ā
would continue to work, he refusedĀ to acknowledge the changing dynamics.Ā
Unfortunately, this resistance to adaptabilityĀ led to missed opportunities and mounting losses.Ā
The moral of this story is that the financialĀ markets are dynamic and ever-changing.Ā
As a trader or one hoping to getĀ funded, you need to be adaptable!Ā
Traders who fail to adapt toĀ shifting market conditions,Ā Ā
fail to adjust their strategies accordingly.Ā
They fail to recognize when theirĀ approach is no longer effective.Ā
And they struggle to achieve consistentĀ profitability, especially as a prop firm trader. Ā
Number 3 Capital ManagementĀ
It is essential to recognize that some rulesĀ and requirements are put in place to ensureĀ Ā
risk management and long-term success. One aspect is the drawdown rule,Ā Ā
which is commonly set between 8 toĀ 10% across various online prop firms.Ā
This rule serves as a risk control measureĀ to prevent excessive losses and protectĀ Ā
both the trader and the firm's capital. It encourages traders to manage their riskĀ Ā
appropriately and avoid overexposingĀ themselves to potential drawdowns.Ā
The stats from the popular propĀ firm claim that over 60% of tradersĀ Ā
in their database do not use a stop loss. This is a concerning trend as stop lossesĀ Ā
are vital risk management tools thatĀ help limit losses and protect capital.Ā
Traders who neglect to utilize stop lossesĀ are at a higher risk of suffering significantĀ Ā
drawdowns and facing adverse consequences. Proper capital or risk management is indeedĀ Ā
crucial for long-term success in trading. While it is essential to be mindful of theĀ Ā
challenges and rules set by propĀ firms, it's equally important forĀ Ā
traders to take responsibility forĀ their risk management practices.Ā
Building a solid risk management plan is a keyĀ factor in achieving sustainable success in theĀ Ā
trading industry. Number 4Ā
Discipline and Patience A friend once made a claim thatĀ Ā
Prop firms intentionally set time limits on theirĀ challenges to increase the likelihood of failure.Ā
And that, even if itās true that some tradersĀ manage to secure funding within the givenĀ Ā
timeframe, oftentimes, this is a function ofĀ luck rather than exceptional trading skills.Ā
While it is true that patience is indeed closelyĀ tied to the concept of time, and that successfulĀ Ā
traders understand the importance of patience andĀ waiting for the right trading setups, it must beĀ Ā
said that they don't act impulsively or succumbĀ to the pressure of time constraints either.Ā
These skilled traders recognize that a significantĀ portion of their time is spent observing theĀ Ā
market rather than constantly opening positions. It's important to note that prop firms may haveĀ Ā
time limits in place to assess traders'Ā abilities to handle pressure and makeĀ Ā
sound decisions within a specific timeframe. While this can be seen as a challenge, itĀ Ā
also simulates real-world trading scenarios whereĀ traders need to act efficiently and effectively.Ā
Ultimately, the intention behind timeĀ limits set by prop firms may vary, butĀ Ā
traders must develop discipline, patience,Ā and strategic thinking to navigate theĀ Ā
challenges presented within these constraints. If you lack discipline and patience, you mayĀ Ā
deviate from your trading plans, chase tradesĀ impulsively, prematurely close winning positionsĀ Ā
or jumping into trades without waiting for properĀ setups or fail to adhere to risk management rules.Ā
An alternative approach to propĀ firms time limitations challenge,Ā Ā
is to consider purchasing accounts fromĀ companies that offer no specific time limit.Ā
One of such prop firms is FundedNext,Ā this is the prop firm I personally use.Ā
They have no time limits and this affords me theĀ opportunity of being disciplined and also havingĀ Ā
the patience to wait for my trading setups. If youāre thinking of opening a prop firmĀ Ā
account and you want one that will affordĀ you the time to take the right setup,Ā Ā
then I would recommend FundedNext. Thereās a link in the descriptionĀ Ā
of this video that will take you toĀ their platform. If you register throughĀ Ā
that link, I get paid a commission. A quick disclaimer before we continue:Ā
Iām not claiming that FundedNext is the best propĀ firm out there, or that itās the only one withoutĀ Ā
time limits, or that if you open an accountĀ with them, youāre guaranteed to make money.Ā
Also, Iām not saying you must buy a challengeĀ account from them or through my link.Ā
No, far from that! Iām saying itās the one I use andĀ Ā
I have a good experience with them. By all means, do your ownĀ Ā
research and own your decisions. Now that we got that out of the way,Ā Ā
letās get back to the last factor that will helpĀ you pass prop firm challenges and make money withĀ Ā
them in the long run. Number 5Ā
Ability to Handle Pressure. Volatility can create challengingĀ Ā
and unpredictable market conditions that requireĀ traders to make quick and informed decisions.Ā
If volatility persists over an extended period,Ā it can indeed lead to significant losses forĀ Ā
traders who are not equipped to handle theĀ pressure and adapt their strategies accordingly.Ā
This is what is referred to as a "blood bathĀ of epic proportions" in the data provided,Ā Ā
describing a situation where market volatilityĀ causes widespread and severe financial losses.Ā
Handling the pressure that comes with tradingĀ is a crucial skill many traders struggle with.Ā
The ability to remain calm, makeĀ rational decisions, and stick to aĀ Ā
well-defined risk management plan is essential. Trading can be a high-pressure environment,Ā Ā
particularly when trading prop firmsā funds. It's important to note that whileĀ Ā
these challenges can contribute toĀ failure, they are not insurmountable.Ā
Traders who are aware of these potential pitfallsĀ can work on developing their skills, knowledge,Ā Ā
emotional control, and discipline toĀ increase their chances of success inĀ Ā
a prop trading environment. To sum up, I would like toĀ Ā
mention that I am currently a funded trader. I have successfully completed three fundedĀ Ā
challenges, but it's important to note thatĀ I faced failures before reaching this stage.Ā
However, I have gained valuable insights fromĀ those failures and learned from my mistakes.Ā
The video emphasized the factors that IĀ Ā
found particularly noticeable andĀ challenging throughout my journey.Ā
I would encourage you to watch the videoĀ up here on trading psychology which willĀ Ā
certainly help fortify your mindset andĀ set you on the path to being fully funded.Ā
If you made it to the end ofĀ this video, I congratulate you.Ā
And if youāve found this video helpfulĀ at all, please destroy that like button,Ā Ā
subscribe to the channel, and turn on theĀ notification bell so you donāt miss it whenĀ Ā
I drop videos like this in the future. Thanks for watching!
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