How to Pass the One-Step Evaluation in Prop Firms: Tips, Tricks, and Strategies
10/8/2024, 12:28:57 PM
The one-step evaluation is a lucrative prop firm program. FundingPips offers one of the best programs in the industry. Delve into more details on passing the challenge effectively.
Proprietary trading firms have become popular because they allow skilled traders to manage significant capital without risking their own money. These firms share profits with the traders with a particular split ratio. To qualify, a trader must pass an evaluation, and one popular evaluation model is the One-Step Challenge.
This article breaks down the one-step evaluation, highlights common failure reasons and provides tips to pass the evaluation.
What is the One-Step Challenge?
The One-Step Evaluation is a simple process for evaluating traders’ abilities. Unlike two-step and three-step challenges, which have multiple phases with objectives like profit targets and drawdown limits, the one-step evaluation has only one phase. Traders must meet profit targets without breaching risk parameters. If they pass, they progress to the master stage, where they can withdraw profit.
Understanding the Program Rules
The one-step evaluation rules vary among prop firms. However, the most common ones are:
- Profit target: Usually, you need to generate 8-10% within a specific time.
- Maximum drawdown: The maximum overall loss limit is 5-10%, and the daily loss limit is 4-6%.
- Time limit: The time limit is 30 to 60 days to pass the challenge.
Thanks to FundingPips, which provides you unlimited time to pass the evaluation. Hence, you have no pressure to trade daily to meet the profit target. FP’s criteria are to meet the 10% profit target while keeping the daily drawdown under 4% and the overall drawdown under 6%. You can buy a $100k one-step evaluation for only $499. Isn’t it too good?
Now, let’s move to the practical side to guide you on how to pass the evaluation.
Tips to Pass the One-Step Challenge
Here are some critical aspects to consider that help you avoid failure:
Risk Management Expertise
This is an extremely crucial step. Most failures occur due to poor risk management. Two important constituents of risk management are position sizing and the risk-to-reward ratio.
Now, take this example. Suppose you have a $100k one-step challenge of FundingPips. Your max daily loss is $4,000, and your overall loss limit is $6,000. Meanwhile, your profit target is $10,000.
Assume you take two positions daily, and the worst-case scenario is three consecutive days of losses. This means that your loss should be under $4,000 after one bad day, and after three successive bad days, you should not hit the $6,000 max loss limit. Hence, you should set a $1,500 daily loss limit to stay safer.
Assuming your strategy’s risk-to-reward ratio is 1:2, risk allocation per trade is $750. So, you fail the challenge only when you hit more than eight consecutive losses. Half the risk is $375 per trade if you want to play further conservatively.
Trading Plan
Create a detailed plan before starting trading. Your plan should be based on your strategy. You can easily carve a plan with enough data (backtest and forward test). Choose the assets you want to trade. Fix the risk per trade, record consecutive losses and winners, and work on the profit factor and Sharpe ratio. Most importantly, stay on the plan. Do not make random trades.
It may seem tempting to chase losses, but doing so can result in further losses. Hence, stick to your trading strategy and assess your performance weekly. You can do this using a trade journal.
Trade Timing
Always trade during active market hours because there is high volatility and liquidity. Such times offer the opportunity to grab. Mostly, it is the London and New York open timings. You must consider the timing factor if your strategy is based on lower time frames.
Emotional Discipline
Always stick to the plan and never change your stop loss or increase your lot size. Greed pushes you to go for more oversized lots or remove your stop loss in the worst case. On the flip side, if you fear loss, you may become a victim of under-trading and miss many high-probability setups.
What’s most disturbing is a series of losses that trigger your survival instinct. You think of recovering your losses aggressively, but such revenge trading pushes you further into the hot waters.
Common Mistakes to Avoid
Now, let’s examine the common mistakes traders commit that result in failing the evaluations. Avoiding these mistakes can increase your odds of success.
Ignorance of Rules
Every prop firm has specific rules. If you break the rules, you are disqualified even if you are profitable. For example, you are disqualified if you trade news or prohibited instruments. Luckily, FundingPips doesn’t restrict you from news trading or impose any other tricky conditions. For a clearer perspective, read the rules page thoroughly.
Focusing on Profits Alone
Most traders desire to move to the funded stage quickly, so they try to hit the profit target sooner. They take excessive risks, and just one lousy day ruins it all. Hence, focus on the process and not the profits. Once you have a well-defined process, profit will come, too.
Recency Bias
Many traders come under pressure after a few losses. Hence, they develop a mental condition called “recency bias”. In this condition, a trader thinks he will always lose money whenever he trades. Such pressure results in an emotional state where the trader can fall quite easily. Therefore, a loss is considered the cost of running a business. Incurring a cost does not mean an end to your business. Again, focus on the process, not the profit or loss.
Chasing Losses
Impulsive trading carries a significant risk that is uncontrollable. If you lose one trade, do not impulsively open another to recover your losses. Treat every trade independently. Some traders aggressively average their losing positions, and that’s also a recipe for disaster.
Know When Not to Trade
Even if you are a day trader, trading every day is unnecessary. Some days are very rough and chaotic. Stops are hunted in both directions. Also, there are days when there is no valid trade setup. So, you should not force a trade when there isn’t.
Strategies to Pass the One-Step Challenge
Now, look at some common strategies you can learn before taking a challenge. Remember, every strategy is subjective; you can carve it to test what works for you.
Scalping Strategy
Scalping involves quick entry and exit. Using scalping strategies on 1-minute or 5-minute charts, you can take several positions daily. Scalping has a high risk and high reward.
Trend Following Strategy
This strategy is ideal when the markets follow a clear trend. You can find the trend bias on higher time frames and follow the trend. You can also use trailing stop to secure your floating profit.
Range Trading Strategy
The markets aren't always in a trending mood. Sometimes, markets form a range wobble with it. Hence, you can buy at the bottom of the range and sell at the top. Remember, ranges do break. So, trading without a stop-loss is never recommended.
News Trading
Traders with sound fundamental analysis skills may benefit from a news trading strategy. You should know the economic calendar, high-impact data and interpretation of results to trade news effectively. However, notice that spreads go wild during news releases, and slippages are common.
Final Thoughts: Sharpen Skills to Pass One-step Challenge
Passing your one-step challenge is not just about reaching the profit target alone. It’s also about not breaching the risk parameters and other program rules. Always focus on risk management and refine the trading process to avoid undesirable losses. FundingPips can be a great companion in the one-step challenge.
