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
- 📉 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- 🔄 Adaptability is crucial; traders who stick to outdated strategies fail in the dynamic financial markets.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
📉 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.
💡 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.
😟 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.
Mindmap
Keywords
💡Prop Firm
💡Trading Challenge
💡Risk Management
💡Profit Split
💡Market Volatility
💡Stop Loss
💡Emotional Control
💡Time Limits
💡Capital Management
💡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 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!
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