Why 99% Traders FAIL | Prop Firm Trading

Summary

This 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

• 📉 Only 10% of traders pass phase 1 of prop firm challenges, and only 24% of those pass phase 2.
• 💼 Out of 10,000 traders, only 8 successfully reach their first profit split, demonstrating the difficulty of the challenges.
• 🚨 A major reason for failure is that 60% of traders don't use stop-losses, increasing their risk of losing accounts.
• ⚠️ Prolonged market volatility leads to high failure rates due to poor risk management and emotional trading.
• 🕒 Traders who hold positions over the weekend have a 60% chance of losing their accounts, highlighting risky behavior.
• 💰 Even traders who reach record payouts often lose their accounts within weeks due to taking unnecessary risks.
• 📊 Successful traders maintain a risk management strategy, risking less than 3% of their capital per day.
• 🔄 Adaptability is crucial; traders who stick to outdated strategies fail in the dynamic financial markets.
• 🧠 Trading psychology, controlling emotions like fear and greed, is key to preventing impulsive, poor decision-making.
• ⏳ 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 traders’ 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 traders’ 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

00:00

📉 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.

05:01

💡 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.

10:03

😟 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.

🔄 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.

💰 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.

⏳ 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.

💥 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.

🎯 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.

Keywords

💡Prop Firm

A prop (proprietary) firm is a company that funds traders, allowing them to trade using the firm’s capital after they pass specific challenges or evaluations. This video explains that prop firms often design challenges to test a trader's risk management, patience, and trading skills, setting rules that frequently lead to failure for inexperienced or undisciplined traders.

💡Trading Challenge

Trading challenges are tests traders must pass to gain access to a funded account with a prop firm. These challenges are often structured in phases, such as MyForexFund’s two-phase challenge, where very few traders reach the final profit-sharing stage. The challenges aim to assess skills like risk management and emotional control under pressure.

💡Risk Management

Risk management is the practice of limiting financial losses through strategies such as setting stop-loss orders and managing trade sizes. The video notes that 60% of traders fail to use stop-loss orders, leading to high risks of significant losses, especially in volatile markets. Successful prop firm traders typically limit risk to below 3% per day.

💡Profit Split

A profit split is a payout system in which traders share their profits with the prop firm after achieving a successful trading milestone. In the video, it is noted that only 3% of traders who reach the funded phase of MyForexFund achieve their first profit split, illustrating how rare consistent profitability is in this setup.

💡Market Volatility

Market volatility refers to the degree of variation in asset prices over a given time. Volatile conditions pose challenges for traders, as price swings can trigger stop losses or impact strategies. The video describes extended volatility as a 'blood bath,' where traders without strong risk management often suffer considerable losses.

💡Stop Loss

A stop-loss is a predetermined price level at which a trader closes a position to prevent further losses. The video stresses the importance of using stop-loss orders, as 60% of traders who fail do not use them. This lack of risk control significantly contributes to their inability to pass prop firm challenges.

💡Emotional Control

Emotional control is the ability to manage feelings of fear, greed, and impatience when trading. The video explains that emotions play a critical role in trading success, as impulsive or irrational decisions can lead to significant losses. Prop firms design challenges to test traders' emotional discipline under strict rules, knowing many will fail.

💡Time Limits

Time limits are deadlines set by prop firms for traders to complete each phase of a challenge. The video suggests that time constraints increase the likelihood of failure by pressuring traders to make rushed decisions, often leading to errors and poor outcomes. FundedNext, a firm with no time limits, is recommended for those seeking more flexibility.

💡Capital Management

Capital management is the method of planning and controlling trade sizes and risk exposure to sustain long-term profitability. The video emphasizes that effective capital management includes following rules like keeping drawdowns below 10% and consistently using stop-loss orders, helping traders minimize potential losses and improve their chances of success.

💡Adaptability

Adaptability is a trader’s ability to adjust strategies according to changing market conditions. A story of a trader named Gerald highlights the pitfalls of inflexibility, showing how sticking to outdated strategies led to losses. The video underlines that successful prop firm traders are adaptable, updating their methods as markets evolve.

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 in  

prop firm trading challenges  successfully pass phase 1? 

Out of these 10%, just 24% manage  to overcome the hurdles of phase 2. 

This is according to stats released by  MyForexFund - a popular Forex prop firm. 

But wait, there's more. Of those that managed to  

cross the phase 2 hurdle, an astonishingly low 3%  of these traders reach their first profit split. 

Let's bring this into context and  show how ridiculous these stats are; 

Imagine a scenario where 10,000 traders  purchased an account with the prop firm  

and embarked on the challenge. According to their stats,  

out of the 10,000 traders who purchased an  account, 1,000 successfully pass phase 1 

Just 240 traders from the 1000 prove their mettle  and advanced through the “less demanding” phase 2. 

And of the 240 traders that got funded, only  8 of them reach their first profit split. 

I guess you are wondering why only a few  succeed at making a profit with prop firms. 

Well, the company also gave some  insight into why this is the case; 

It was revealed that over 60% of traders  in their database do not use a stop loss,  

and thus, have a high risk of ruin. When the market is more volatile;  

more traders fail because of a  lack of risk management discipline. 

And when this volatility is prolonged,  it’s a blood bath of epic proportions. 

Traders who hold trades over the weekend have a  60% chance of failing or losing their accounts. 

All the traders who received record payouts lost  their accounts within 3 weeks of the payout;  

due to taking excessive risks,  which they didn’t need to take. 

At this point in the video, I know you  want to ascertain with every fiber in your  

body that the idea of “Prop firms” is a scam. But before you do that, listen to this first; 

The company also shared insights into  the habits and trading patterns of the  

very few successful traders on their platform; Traders who have made it to their 4th pay cycle  

all have a risk management strategy  of below 3% risk on any given day. 

When this data was published, 5 traders were on  their 8th payout on evaluation live accounts;  

and they all traded conservatively  to ensure they got paid. 

None of these successful traders  risked more than 2% per trading day,  

and they stopped when they reached 4 to 8%  in profit until the pay cycle has ended. 

Lastly, the profitable traders are in  the market less than 4 hours per day. 

If you’re thinking about it, yes, you are correct! The successful prop firm traders do  

things differently! Now, ask yourself:  

Will I ever pass a prop firm challenge? Will I ever be a successful trader on  

these platforms? If your answer is  

a resounding “Yes”, then congratulations. But if it’s not, I also say congratulations. 

Because this video is made specifically for you. And it could be the change you’ve been  

looking for to become a successful  trader, and maybe a funded one too.

What you should know first and  foremost is that the Prop Firms’  

challenges are designed so you can fail them. Yes. That’s the real Prop Firm money-making model. 

But as the stats suggested, traders who  are in the right mental state and truly  

know their edge still get funded and  consistently make a profit every month. 

In this video, we go over 5 factors that  are the main contributors to why traders  

fail prop firm challenge, how you can pass  and make consistent profits from them.

Number 1. Emotions and Psychological Factors 

Emotions like fear and greed can  significantly impact trading decisions. 

Most beginner traders do not know the  role emotions and trading psychology  

play in their overall success. But the prop firms know this  

and are taking advantage of it! The drawdown rules, time limits,  

and the minimum trading days requirements  are there so you would make mistakes,  

lose trades and lose your head. Traders who fail to control their  

emotions may engage in impulsive or irrational  behavior, deviating from their trading plan,  

and start making poor decisions  based on short-term market movements. 

I made a video that talked about  5 practical tips that will help  

you improve your trading psychology; I  will leave a link in the description.  

Number 2. Adaptability 

A trading mentor once told me the story  of a very successful trader named Gerald  

—who found success using a particular  trading indicator he had mastered. 

He reveled in his accomplishments,  riding the waves of consistent profits. 

Market landscape evolved, new trends emerged,  and unforeseen events impacted movement of  

the asset he was trading at the time. As the market began to shift, Gerald  

stubbornly clung to his outdated strategy. Convinced that his tried-and-true methods  

would continue to work, he refused  to acknowledge the changing dynamics. 

Unfortunately, this resistance to adaptability  led to missed opportunities and mounting losses. 

The moral of this story is that the financial  markets are dynamic and ever-changing. 

As a trader or one hoping to get  funded, you need to be adaptable! 

Traders who fail to adapt to  shifting market conditions,  

fail to adjust their strategies accordingly. 

They fail to recognize when their  approach is no longer effective. 

And they struggle to achieve consistent  profitability, especially as a prop firm trader.  

Number 3 Capital Management 

It is essential to recognize that some rules  and requirements are put in place to ensure  

risk management and long-term success. One aspect is the drawdown rule,  

which is commonly set between 8 to  10% across various online prop firms. 

This rule serves as a risk control measure  to prevent excessive losses and protect  

both the trader and the firm's capital. It encourages traders to manage their risk  

appropriately and avoid overexposing  themselves to potential drawdowns. 

The stats from the popular prop  firm claim that over 60% of traders  

in their database do not use a stop loss. This is a concerning trend as stop losses  

are vital risk management tools that  help limit losses and protect capital. 

Traders who neglect to utilize stop losses  are at a higher risk of suffering significant  

drawdowns and facing adverse consequences. Proper capital or risk management is indeed  

crucial for long-term success in trading. While it is essential to be mindful of the  

challenges and rules set by prop  firms, it's equally important for  

traders to take responsibility for  their risk management practices. 

Building a solid risk management plan is a key  factor in achieving sustainable success in the  

trading industry. Number 4 

Discipline and Patience A friend once made a claim that  

Prop firms intentionally set time limits on their  challenges to increase the likelihood of failure. 

And that, even if it’s true that some traders  manage to secure funding within the given  

timeframe, oftentimes, this is a function of  luck rather than exceptional trading skills. 

While it is true that patience is indeed closely  tied to the concept of time, and that successful  

traders understand the importance of patience and  waiting for the right trading setups, it must be  

said that they don't act impulsively or succumb  to the pressure of time constraints either. 

These skilled traders recognize that a significant  portion of their time is spent observing the  

market rather than constantly opening positions. It's important to note that prop firms may have  

time limits in place to assess traders'  abilities to handle pressure and make  

sound decisions within a specific timeframe. While this can be seen as a challenge, it  

also simulates real-world trading scenarios where  traders need to act efficiently and effectively. 

Ultimately, the intention behind time  limits set by prop firms may vary, but  

traders must develop discipline, patience,  and strategic thinking to navigate the  

challenges presented within these constraints. If you lack discipline and patience, you may  

deviate from your trading plans, chase trades  impulsively, prematurely close winning positions  

or jumping into trades without waiting for proper  setups or fail to adhere to risk management rules. 

An alternative approach to prop  firms time limitations challenge,  

is to consider purchasing accounts from  companies that offer no specific time limit. 

One of such prop firms is FundedNext,  this is the prop firm I personally use. 

They have no time limits and this affords me the  opportunity of being disciplined and also having  

the patience to wait for my trading setups. If you’re thinking of opening a prop firm  

account and you want one that will afford  you the time to take the right setup,  

then I would recommend FundedNext. There’s a link in the description  

of this video that will take you to  their platform. If you register through  

that link, I get paid a commission. A quick disclaimer before we continue: 

I’m not claiming that FundedNext is the best prop  firm out there, or that it’s the only one without  

time limits, or that if you open an account  with them, you’re guaranteed to make money. 

Also, I’m not saying you must buy a challenge  account from them or through my link. 

No, far from that! I’m saying it’s the one I use and  

I have a good experience with them. By all means, do your own  

research and own your decisions. Now that we got that out of the way,  

let’s get back to the last factor that will help  you pass prop firm challenges and make money with  

them in the long run. Number 5 

Ability to Handle Pressure. Volatility can create challenging  

and unpredictable market conditions that require  traders to make quick and informed decisions. 

If volatility persists over an extended period,  it can indeed lead to significant losses for  

traders who are not equipped to handle the  pressure and adapt their strategies accordingly. 

This is what is referred to as a "blood bath  of epic proportions" in the data provided,  

describing a situation where market volatility  causes widespread and severe financial losses. 

Handling the pressure that comes with trading  is a crucial skill many traders struggle with. 

The ability to remain calm, make  rational decisions, and stick to a  

well-defined risk management plan is essential. Trading can be a high-pressure environment,  

particularly when trading prop firms’ funds. It's important to note that while  

these challenges can contribute to  failure, they are not insurmountable. 

Traders who are aware of these potential pitfalls  can work on developing their skills, knowledge,  

emotional control, and discipline to  increase their chances of success in  

a prop trading environment. To sum up, I would like to  

mention that I am currently a funded trader. I have successfully completed three funded  

challenges, but it's important to note that  I faced failures before reaching this stage. 

However, I have gained valuable insights from  those failures and learned from my mistakes. 

The video emphasized the factors that I  

found particularly noticeable and  challenging throughout my journey. 

I would encourage you to watch the video  up here on trading psychology which will  

certainly help fortify your mindset and  set you on the path to being fully funded. 

If you made it to the end of  this video, I congratulate you. 

And if you’ve found this video helpful  at all, please destroy that like button,  

subscribe to the channel, and turn on the  notification bell so you don’t miss it when  

I drop videos like this in the future. Thanks for watching!