Avoiding Common Pitfalls In One-Step Challenge Prop Firm
The easiest way to enter the world of trading for a beginner is by showcasing exceptional talent through a step challenge. The one-step challenge is a simple test that assesses the skills of traders and decides whether they can showcase good trade performances on funded accounts. These challenges mainly consist of only a single step, and the trader has to adhere to the rules and regulations set by the proprietary firm.
However, traders must be careful while making trades with the evaluation test. There are common pitfalls that he has to avoid to showcase exceptional performance.
In this article, we shall discuss the common pitfalls associated with the step challenge offered by prop firms and ways the traders can avoid them.
Understanding The Concept Of One-Step Evaluation
As the name specifies, a one-step evaluation is a trial that consists of only a single step. It is categorized as the profit generation on the demo account provided to the trader by the prop firm while he adheres to the rules and regulations. Deviating from the rules and not following the guidelines can affect the final results negatively.
Here are some pitfalls to avoid while trying to score well in the one-step challenge by prop firms:
- Deviating From The Rules
Now, this is the first and most crucial element of the one-step evaluation. A lot of times, newbie traders get so involved in trading and generating profits on the demo account that they end up deviating from the rules. These rules include maximum drawdown and daily loss limits, along with numerous other points. Some prop trading firms also put restrictions on the usage of certain kinds of strategies or a combination of some strategies. Ignoring this rule is also one reason that may lead to the disqualification of the candidate.
Hence, it is necessary to stick to the rules strictly. For that, you should go through the list of rules and instructions before jumping to any action. Also, if you find regulations set by some companies extremely strict, you are free to skip them and move to a company that is a lot more generous and provides flexibility.
- Over-leverage Through Quick Actions
Aspiring traders with the spirit to prove themselves to the Best Prop Firms become victims of over-leveraging. Over-leveraging refers to taking actions that make one risk a massive volume of capital on one trade. This means the traders’ shots are enormous and filled with risk. Their motive behind high-value trades is to generate huge profit out of them instantly. However, it can affect the performance of the one-step challenge contender badly. He ends up depleting his demo account of the funds and reaches the loss limits set by the firm a bit too soon.
To avoid this, aspiring traders must be careful while making trades. It starts by creating a strategy and setting realistic trade plans. Alongside this, monitoring the trades and the results generated by them minutely and keenly helps avoid leveraging.
- Inconsistent Behaviour
Trade results showcasing inconsistent results are also one way of reducing the credibility of an individual as a dependable trader. A lot of times, aspiring traders try to make trades that will help them generate massive profits. They forget that such a thing can’t happen through single trades. This showcase of erratic performance reduces their chances of qualifying for the funded account. Hence, it is always recommended to the new traders to showcase discipline in their actions and only then will they be able to prove their mettle. Their trading actions must showcase some kind of strategy, planning, and consistency.
- Taking Actions Influenced By Emotions
It is generally considered that the newbies in the trading world are not able to hold their emotions. They either get so overwhelmed by a few consistent losses that they end up making extensive, irrational trades to cover up for them, or the few recent successful trades make them overconfident, and they take more actions to maximize profit. Both these kinds of actions are irrational and highly risky. Trades aimed to take revenge or double the profit are both absurd and unreasonable.
This behavior also showcases the need for more risk management strategies. Diversification of the trades while sticking to the stop-loss orders builds the credibility of a trader and makes him appear dependable for the prop firms.
- Using Just One Strategy
Traders need to play in the broader field and showcase versatility. For that matter, they have to utilize varied kinds of strategies and trading plans. As the market conditions change, they should also switch their strategy and shift to others for better performance and profit generation.
Final Thoughts
While chasing the goals set by the One Step Challenge prop firm, traders mostly get lost in the final aim of generating profits. This makes them forget the common pitfalls that may negatively impact their performance. To avoid disqualification from prop firms, it is necessary to showcase good decision-making capabilities and deliver consistent results using diverse strategies.