Passing prop firm challenges can be an extremely daunting task. Especially with no framework.I’m going to share my top 3 frameworks for passing a challenge with ease!
Framework 1- Risk management
Before anything else is decided, you need to firmly decide on the exact risk management protocol you’ll be utilizing. For myself, I have a strict .5% risk per trade with my minimum reward being 3R or in this case 1.5%.
By setting this in stone, it takes away the chance for me to impulsively take too much risk based off of my emotions when pulling the trigger on a trade.
Framework 2 – Taking profit
There are two ways to take profits. Discretionary or Mechanically.
Discretionary provides more flexibility based off of the unique market volatility but the downside is that this can cause trading mistakes due to the fact that we become biased based off of emotion.
We can remove our take profits because we believe that the market will continue impulsing in one direction.
I’m sure you’ve done this and seen the tragic outcome that comes after more than not.
Mechanically taking profit is systemized just like our risk. We can choose to either have one hard TP where we take all profit or multiple levels we will partial out at.
For example:
TP1 Partial 30% @ 3R
TP2 Partial 30% @ 7R
TP3 Take Full Profits @ 11R
This once again takes emotion out of your decision making. Either the levels hit or they don’t.
This is the best way to trade. The less things we have to decide on repetitively the better.
Framework 3 – Knowing when to stop
Now this is one of the toughest parts of trading. Getting up and leaving your trading desk after you’ve taken some losses can feel like swimming out of quick sand.
Our mind tries to make us believe that if we stay and take one more shot it’ll be the winner and we can leave our trading desk for the day being RIGHT.
At the end of the day that’s what our ego and mind want. Is to be right.
Unfortunately, that doesn’t aid us with profitable trading.
The more and more we go down the rabbit hole the worse our PnL gets.
I personally advise setting a hard limit of 2-3 losses per day.
This means with .5% risk a max of -1% to -1.5% on the day.
This a very normal drawdown and will not affect your psychology as badly as seeing more volatile swings.
Nonetheless, I hope you found value in this quick post and would love to hear how you implement this into your own trading!