Why Are Forex Prop Firm Challenges So Hard To Pass?

  • May 30, 2022
Lux Elite Traders Club in Porto Montenegro

As forex prop firms have become more popular, thousands of traders around the world have tried their luck in getting funded and obtaining large trading accounts. Although thousands of traders get started, you aren’t going to be seeing thousands of funded accounts being given out. This is simply down to many forex traders failing their prop firm challenges.

It’s estimated that only 4% of forex traders successfully pass forex prop firm challenges, with only 1% of traders holding onto their funded accounts for the long term by not violating any rules.

This number may surprise you, but it’s actually built this way by design. Let’s find out more…

How Many Forex Traders Get Prop Firm Funded Accounts?

It’s hard to be entirely sure of how many traders are failing prop firm challenges across the industry, but we have a pretty good idea! We estimate that around 4% of forex traders are actually obtaining funded accounts. Out of that 4%, only 1% of traders that started the challenge will be trading on the funded capital for the long term.

This is fairly eye-opening to most traders, as prop firms are often thought of as a way to bypass the years of learning to trade properly and just get started on a huge amount of assets under management.

By contrast, around 75% of traders fail within the forex markets, regardless of a trading challenge or not.

Thus proving that it’s actually harder to obtain a funded trading account than it is just to be profitable on your own capital. However, this is actually by design, as many prop firms don’t have the trader’s best interest at heart…

Why Are Forex Prop Firm Challenges So Hard To Pass?

In essence, forex prop firm challenges are hard to pass purely because the majority of companies offering funded accounts only get paid on subscription fees and have their traders sitting on demo accounts.

In fact, Lux Trading Firm is the only prop firm in the industry that has traders on real trading capital. This means it’s in our best interest for traders to succeed, as we earn our revenue through profit splits from profitable forex traders!

Where many firms make it extremely hard to actually succeed and get funded, it’s in our best interest to have as many profitable traders as possible and this is shown when looking at our trader success metrics and benchmarking against the rest of the industry.

Strict & Unrealistic Trading Rules

Depending on the prop firms you’ve been looking at, you’ll notice unrealistic expectations that are literally designed to cause traders to fail.

Let’s take the 30-day challenges, for example.

As a trader, some funding options will give you a maximum of 30 days to jump through the hoops needed to get funded.

This actually equates to maybe 20 trading days, with 1 of which being NFP and maybe 3 of which contain very high-impact news releases. Not only that, but you also have a maximum loss limit and a minimum trading day limit. You can see how this is meant to hamstring traders and cause 96% of traders to never be awarded a funded account.

This was our hypothesis, so we decided to put this to the test…

When we founded the Lux Trading Elite Club, we flipped the conventional ideas around. We decided that no time limit, realistic drawdown targets, limited leverage, and multiple account resets, along with high-level support, would give traders the freedom and conditions needed to actually succeed.

This is exactly what happened!

Now, 1 in 5 of our Elite Club traders is getting access to our live trading capital and actually starting their career development within the proprietary trading industry.

Support Given To Traders During Funded Account Challenges

 I say support in the loosest sense of the term… There is a huge lack of support given to traders across the industry. Traders purchase their funded account challenge. They’re emailed the MetaTrader 4 login details and set free into the world. That’s it. You won’t hear from the firm again until you either pass or fail (96% of the time, it’ll be failing)!

 This lack of support is one of the main drivers as to why traders find prop firm challenges so hard to pass!

 We decided to change this and see what happens if traders are given adequate support… In our Elite Club, we give traders…

  • Daily live trading room
  • 1-2-1 mentor with weekly calls
  • Risk desk
  • Auditing of results from KPMG
  • Advanced analytics and trading biases from Trading Central
  • And much more…

When we implemented this level of support from traders, guess what we noticed? The pass rate went as high as 20%! Meaning that 1 in every 5 traders is being funded with live trading capital from our Elite Club. It’s not enough for a prop firm to just offer traders a few blog posts and the odd email about support and resistance. Traders need to be supported like they would be on the trading floor in their first few months.

Risk Management During Trading Challenges

Risk management is one area that causes the majority of forex traders to stumble. It’s not easy. In fact, managing risk is the one component that can completely change the success a trader has in this fast-paced industry. Although risk management will always be important for traders, it’s even more important when you’re trading for a funded account. You need to ensure that you abide by the drawdown, exposure, and maximum loss rules that the firm has in place.

When surveying the industry, many prop firms don’t offer any kind of support, at all, when it comes to risk management. In fact, some firms are even offering 1:200 leverage to newbie traders, ensuring that they will fail within hours.

One of the main drivers of our 20% successful funding rate in the Elite Club is our risk management support. Beyond the training, our funded traders have a risk management desk that oversees all the trades taken and advise on ways to mitigate the risk exposure. Alongside the risk desk, advanced analytics are constantly provided on the virtual trading floor to ensure that traders have the tools necessary to actually manage risk proactively, rather than reactively.

Aggressive Trading To Reach Next Milestone

Funded accounts aren’t typically thought of as a career move. What do I mean by this? Well, many retail traders don’t see themselves as having “assets under management” as institutional traders do.

Typically, prop firms come with much more of a gambling mindset. However, this approach needs to be flipped on its head.

Firstly, we provide our funded traders with the tools needed to actually trade sensibly…

  • No short time durations for challenges
  • No over-leveraging
  • No pressurized environment

This drives traders to actually focus on consistency of trading results, rather than quick wins. This, again, has helped drive our success rate from the industry benchmark of 4% to 20% of our challenge accounts being given live capital.

Once we can see consistent results, within 7 stages we will scale up the capital under management to $10,000,000 and even more in rare cases.

For us, being a funded forex trader is a genuine career – not a side hustle.

This may sound like an infeasible amount, but it’s worth bearing in mind that our business is structured around profitable traders. If we have 100 unprofitable traders, we aren’t making any money!

In Conclusion – Is It Possible To Pass Prop Firm Challenges?

In summary, it’s possible to pass prop firm challenges and start trading on funded accounts, but this depends on the conditions you’re given, as a trader. Historically, retail prop firm challenges have been designed to set traders up to fail. They’re given harsh targets, limited time, no support, and huge leverage – a perfect storm! It’s not surprising that 96% of traders fail their challenges!

With our Elite Club, we offer traders an actual career path, with increasing trading capital, a mentor, weekly calls, and a live trading floor. This, combined with realistic rule sets, has massively increased the number of traders getting funded with us to around 20%!

 Are you interested in having the best chance possible to become a funded trader? Find out more!