One-step challenge prop firms give traders an easier way to get beyond the hurdle and gain access to funding accounts. With only one phase and well-defined trading rules and criteria, traders can simply pass this evaluation process. Trading methods are necessary for traders to pass this evaluation process. If traders have control over risk, they may easily pass the review procedure and stay in their funded account for a longer amount of time. If you’re new to prop trading, let’s take a closer look at how one-step evaluation prop firms perform and how traders can overcome this hurdle with little risk.
What are One-Step Evaluation Prop Firms and How do these firms work?
Before giving traders access to their funding accounts, firms conduct a testing process. Traders are required to stick to drawdown limits, daily loss limits, and other challenges while meeting a profit target. The one-step challenge enables traders to qualify in a single phase, as compared to the two-step challenges that require many verification processes. Traders must meet a variety of profit requirements in order to pass this evaluation process. One-step challenge prop companies only require traders to complete one phase.
Common Rules in a One-Step Challenge
Traders must balance profitability with effective risk management in order to pass the challenge with a small amount of risk. One-step challenge prop companies use many trading guidelines, such as:
- Usually, traders are required to reach a profit target of 8% to 10% of the initial investment.
- The trader can’t lose more than 10% of the account amount because the maximum drawdown is often about 10%.
- A daily loss limit of 5% of the account amount is frequently used.
- trading period, since some companies apply a 30- to 60-day time limit for traders to finish the challenge, while others don’t.
- Although leverage might vary, the majority of companies provide leverage in the 1:10 to 1:100 range.
- Trading restrictions that certain companies forbid, such as news trading, high-frequency trading, or martingale.
Step-by-Step Guide to Pass a One-Step Challenge
Choose the Right Prop Firm
The challenge rules, spread, and commission structures of the top prop companies change. Selecting a company with favorable conditions will help you overcome the challenge more easily. When selecting a company, you must consider into:
- Avoid companies with tight drawdowns or very high-profit expectations and set realistic drawdown limitations and profit targets.
- Minimal spreads and commissions since too many trading expenses can have a direct impact on earnings and complicate the task.
- Flexible trading regulations because some companies allow the use of hedging or Expert Advisors, both of which might be beneficial.
- Select a company with no time restrictions if you require additional time to trade carefully.
Develop a Detailed Trading Plan
A trading strategy is essential for completing the task with the smallest amount of risk. Your plan should include:
- Entry and exit criteria that specify when, in order with your strategy, should enter and exit trades.
- Risk per trade and keep it to between 0.5% and 1% of the total amount in your account.
- The main focus of trading sessions is on trading during periods with significant liquidity, such as the London and New York sessions.
- The ratio of risk to reward (RRR) aims for a risk-to-reward ratio of at least 1:2 or 1:3 to make sure that profitable trades balance losing ones.
Master Risk Management
Additionally, risk management is crucial to overcoming the hurdle without experiencing unnecessary losses. Examine the following guidelines:
Position Sizing
Use the right position sizing to avoid taking on too much risk. One popular calculation is Position Size = (Risk per Trade / Stop Loss) x Account Balance.
Stop-Loss Placement
Do not trade without a stop-loss. Be sure that your stop-loss is not set at a certain amount of pip values, but instead at a level that makes sense based on technical analysis.
Avoid Overleveraging
Leverage can both raise losses and have an impact on profits. Limit your use of leverage and stay away from full-margin deals.
Set a Daily Loss Limit
A personal limit of 2% to 3% should be set if the challenge permits a 5% daily loss limit in order to maintain safe margins.
Choose the Right Trading Strategy
Not every method works for overcoming a prop firm hurdle. The best plans maximize steady returns while minimizing drawdowns.
- Use the average directional index, trendlines, or moving averages to spot strong trends. When the risk-to-reward ratio is favorable, enter trades in the trend’s direction.
- Trade breakouts of important levels, including areas of support and resistance. Utilize retests or confirmation signs such as volume to verify the breakout.
- This approach performs well in a variety of markets. Examine overbought/oversold situations with indicators such as Bollinger Bands or RSI.
- Scalping is a method of making quick, little trades to profit from slight changes in the market. But it needs a prop company with low commissions and narrow spreads.
