Why Do Most Traders Fail Their Prop Firm Challenges?

Trading is usually romantically highlighted as the path towards financial freedom with its promises of flexible working hours, earning potential and the ability to work remotely from anywhere on the globe. 

Proprietary trading firms, also known as programs, promote this opportunity of leveraged trades to prospective traders with resources such as large capital and sophisticated trading modules. 

While, on the positive side, there are plenty of profitable opportunities that prop firms represent, at the same time the overwhelming majority of traders are unable to get around the difficult challenges they are tested with by these platforms.

We will take an in-depth look at the causes of the high failure rate among aspiring prop traders in prop firm challenges. Through analyzing the reasons for traders’ failure, we aim to prepare traders (experienced traders or beginners) with the necessary skills and methods to reasonably increase their chances of success.

The main attraction of prop firms is that they give traders a chance to trade a huge amount of funds, access the most advanced trading platforms, and possibly earn a fortune. Although, the road to success is not without some challenges. 

The challenges of traders are multiple and complex such as stringent risk management protocols to the psychological pressures of trading with firm capital.

We'll take you through what you need to know to avoid the most common traps prop traders fall into, from the lack of proper risk management procedures to the psychological traps of trading with other people's capital. 

In addition, we shall investigate the contributions of inadequate planning, unrealistic anticipation, and absence of a systematic trading plan to trader collapse

Moreover, we will look into the effect of issues such as market upheavals, regulative changes, and technological disruption on traders in prop trading firms. 

We achieve this by presenting a holistic outlook of the challenge that aspiring prop traders face; as a result, readers can retrieve tactics and insights to manage their trading operations successfully.

We must also understand that failures come as a necessary consequence and that they are stepping stones towards achieving learning. 

Thus, by going to the root of the causes of prop trading firms' challenge failure and having a sufficient plan for tackling risks, traders can increase their chances of success within prop firms. 

Why Do Traders Fail Prop Firm Trading Challenges?

Aspiring traders often find themselves facing different hurdles while going through the tests of prop firms, which makes a lot of participants lose the challenge and drop out. The capacity of these traders to pass these obstacles is largely dependent on the policies and practices of the prop firm. 

Compared to the proprietary trading firms that have clear rules or conditions, like Goatfundedtarder,  those with ambiguity attached to them and those that observe stricter periods for challenges, get a lesser success rate of traders who can access the funding in their prop firms.

One of the key issues aspiring prop traders face is selecting the right prop firm, this is crucial for trading success. 

It is undeniable that you should look and pick a prop firm that coincides with your trading style, interests and targets. There are some types of prop firms whose source of income is from the failure of traders when they pay to attempt the challenge, so these prop firms use a lot of means to create impossible obstacles for traders so they can fail. 

Real prop firms, on the other hand, put their traders as a priority. Authentic prop firms make money via traders’ success in the markets which, in turn, encourages real prop firms in their business to create such an environment where consistently profitable traders tend to grow and succeed.

The difference between prop firms that profit from traders' failures and those that thrive on traders' successes underscores the different paths available to aspiring traders. The knowledge of proprietary differences and the choice of a reputable prop firm, which focuses its effort on the trader's success, will enable aspiring traders to overcome the problem of facing an impossible task in the prop firm challenges, thereby, taking the first step towards the the trading success..

Today, we will focus on the typical faults of aspiring prop traders leading to failure in the prop firm trading challenges 

1) Lack Of Clarity Concerning The Rules

The major obstacle that many traders who aim to join prop firms have to deal with is the lack of clarity regarding the rules of the engagement. 

All prop firms, from the smallest to the most powerful, operate through a framework of rules, regulations, and ethical standards that build fairness and transparency in the trading program. 

Nonetheless, the degree of regulation and fairness greatly depends on the individual firm.

Sadly, many aspiring traders, overlook how crucial it is to take some time and get to know these rules inside out, and just tend to let the rules pass unnoticed, hoping instead to rush with their trading business. 

This lack of knowledge could result in the occurrence of undesirable situations like the good number of traders who show surprise on trading platforms when their accounts are suspended or they fail challenges due to errors they made.

While reputable prop firms value both simplicity and transparency of the rules, traders need to also take the initiative to be knowledgeable about the terms of trading once they start getting involved in any relevant activities. 

The lack of knowledge of the rules is not an acceptable excuse anymore in the field of prop trading where the observance of rules might be determinant to the success or failure of this trader.

For people who are interested in prop trading and to be successful, it is essential to take the trading rules with extreme seriousness and thoroughness. Pushing the time aside and putting in the energy to master the rules in detail will help you avoid expensive errors and get a much more stable and profitable trading journey. For prop trading competitions, ignorance is never bliss, it is a recipe for failure.

2) Lack of Moderation in Risk-taking

Another major pitfall that the traders fall victim to in prop trading challenges is overtrading i.e., the excessive buying or selling of a stock. People get lured by huge gains that they often overtrade to hit their profit objectives. 

This approach may look like getting a quick win but eventually, it fails, making traders run through their funds and quickly end up broke.

Every trader should remember that survival in the market should be the primary goal, not any short-term gain. Instead of being obsessed with one-time profit making, traders should discipline themselves with risk management and focus on managing their capital in the long run. 

This mainly requires adopting a cautious approach to prevent the amplification of upside risk and the management of downside risk.

This can be done when traders conduct comprehensive backtesting of their trading strategy before seeking capital from prop firms or even if they utilise the demo accounts provided by the prop firms. 

By putting their strategy through tough backtesting, traders achieve unique knowledge about their pessimistic and optimistic outcomes when having done hundreds of trades. Equipped with this data, traders can use it to size their positions and decide on their risk strategies, but in doing so, they must also make sure that they allocate their capital responsibly and avoid huge losses.

An essential preventive measure against being overoptimistic in risk-taking is to assume the worst-case scenario that is, having a losing streak and using risk per each trade to stand against it. By using a conservative position sizing strategy, traders will find it possible to be more immune from negative market movements and see less of their portfolios decline during market fluctuations.

3) Lack of Trading Plan

The absence of a trading plan is an essential mistake that considerably diminishes the achievement of many traders in prop firm contests. It seems surprising that some traders get ready to obtain the funded accounts from prop firms without having a clear and well-established trading plan. Without proper preparation, traders become exposed to many things such as inferior decision-making, increased levels of stress and ultimately breaking down under pressure.

Having a coherent trading plan is a major determinant of a trader's success, as it encompasses all the necessary elements for success such as trading strategy, risk management protocols, trading psychology, daily loss threshold, and the best hours of the day to trade. Every aspect of a trading plan ensures that traders can grasp the intricacies of the markets while protecting them from some kinds of irrational trading caused by emotions.

The lack of one is a prevalent problem, which results in stress and anxiety among traders trying to get funding from prop firms. Without some form of a structure, traders become entangled in an ocean of questions and choices which leaves them with only a sense of being caught in a web of indecision and frustration.

As a result, the lack of trading plans heightens the psychological-related challenges of prop firm tests increasing the already tough job of meeting the testing criteria. Traders without a solid plan tend to be more affected by their emotions, which can diminish logical thinking and thus is a formula for a disaster for the trader in the world of proprietary trading.

The purpose of a trading plan is to remove the cognitive burden and simplify the decision-making process. Through the outlining of clearly defined targets, tactics, and risk management parameters, traders can decrease the mental stress connected with trading and be more focused on performing their plan precisely and with discipline. In essence, the adage "fail to plan, plan to fail" rings true in the realm of prop firm challenges. 

4) Implementing An Unprofitable Trading Strategy

Approaching the prop firm tests with an ineffective trading strategy is considered to be one of the most widespread rookie mistakes in prop trading. 

As a result of the many advantages that the power of capital and financing may bring to the trading table, traders sometimes fail to understand the single ground rule which is to have a winning trading strategy.

Some traders are stuck in a loop where their decision-making leads them time and again to be in a position of poor performance as reflected in their strategy that generates losses even on 100 or more trades. 

Such a situation reminds us of the crucial necessity to learn expert assessment of various projects using backtesting. Backtesting plays the role of an impartial arbiter by offering traders data that articulate the reality of their trading systems where over a large number of trades their profitability is quantified.

First of all, traders should not jump into the rave of seeking funding opportunities till they have carried out a careful self-examination to be sure that their strategies have been time-tested and work better than the rest. 

Lack of effectiveness or prevailing issues noted during initial backtesting should be perceived as handicaps, which should in turn trigger constrain in seeking funds until the trader has reevaluated and refined the strategy.

Luckily, in this digital age, traders can get successfully with all the needed resources and information available online as this allows them to develop profitable strategies. 

The published online reports or newsletters from established trading firms give the traders the priceless opportunity to cross-check the performance of their strategies with the industry's benchmarks. Using these resources helps traders make decisions based on facts as they adopt strategies that have shown previous evidence of success. 

Therefore, enthusiasm must be replaced by the identification and practice of reliable, lucrative trading strategies, which means, the key to prop firm competition is in the development and confirmation of profitable trading strategies.

5. Being On A Long Streak Of Successive Losing Trades

When working with a funded trading account, all traders may come across their particular unbearable streak of losing trades, especially when at the stage of applying for such accounts. Although such individuals pose net gains in the long-term, some of them may be losing for a long and critical period. Although disheartening, it’s a crucial fact that a losing streak is a part of the game and there is no need to let it demoralize you and step away from your trading dreams.

Methods to deal with the challenges that accompany a losing streak may require the application of a proactive strategy which is grounded in detailed risk management and strategic planning. The first hurdle is an understanding of one's risk tolerance or rather how many trades one can lose in a row when calculated from the historical data/backtesting results. Being equipped with such information, requirements of risk per trade can be established by traders enabling the restrictions of drawdown value and preservation of trading capital.

It is important to state that despite all this, some traders can still fail to get through the unexcepted losing streaks. In such situations, however, the traders must keep faith in their trading strategies and exercise the willpower to refrain from going off their defined plan of action. Consistency and discipline are key and changing strategy when there are temporary losses of objectives can result in more uncertainties and damage the longer-term success.

Instead of surrendering to despair or negative emotions, traders should consider periods of loss as invaluable knowledge and part of their growing legacy as traders, Through consciously retaining faith in themselves and sticking to their strategy traders may have the chance to survive this period of losing streaks and realise the fruits of their persistence.

6) Picking the Wrong Prop Firm

Failing to choose the right prop firm may negatively influence an aspiring prop trader quite a lot in the prop trading challenges, so doing your research is an essential part of the account-funded process. In the vast field of proprietary trading, traders typically encounter two distinct categories: demo prop firms and real money prop firms, each one having its own set of motivations and unique set of operational dynamics.

Demo prop companies are structured in such a way that they earn income from the fate of traders who fail their trading challenges. In this setup, the firm’s profitability is linked to the failure rate of traders thus, pushing them into creating as challenging an environment as possible for traders to fail the challenges. Subsequently, traders may face the dilemma of meeting up with over-rigorous assessment procedures and unfriendly support facilities, hence their possibility of succeeding may be limited.

Contrarily, real money prop firms get profit by sharing percentages of profits from their successful investors. Unlike demo prop trading companies, genuine prop traders focus on the success and profitability of their traders, with features such as holistic support, mentorship, training, analytics, and a suitable trading environment including risk reduction measures that are deliberately put in place to maximize the chances of traders achieving the profitability mark.

Realizing this distinction will help traders to select firms for trading in an informed manner. Contrary to the lure of lucrative payouts and superficial marketing methods indicated by social media platforms, traders should be driven by clarity, robust support infrastructure, and interest alignment when selecting a prop agency.

Traders must choose knowingly; otherwise, they risk being deceived by false promises of high returns without hassle. The prospect of achieving big winnings is very attractive and traders need to beware of that but the key to success in prop trading is having a stable base which includes trust, transparency, and mutual understanding.


In the world of proprietary trading, success hinges on navigating through a myriad of challenges, from mastering risk management to crafting profitable strategies. As we dissect the common pitfalls faced by aspiring traders, one key factor emerges: the choice of a prop firm. Amidst a sea of options, selecting the right firm is paramount. 

Enter Goatfunded Trader, a beacon of trust and reliability in the realm of prop trading. Unlike firms that profit from traders' failures, Goatfunded Trader prioritizes its traders' success, offering a supportive environment and a clear path to profitability. In the pursuit of trading success, choose wisely—choose Goatfunded Trader.