The Prop Firm Evaluation: How to Succeed and Get Funded

Video Transcript:

All right, guys, back with another video—Sterling here, obviously from Trader Dale. In this video, we’re going to talk about the prop firm evaluation process and how to succeed. In a prior video, we discussed the basic rules required to pass an evaluation. Those rules vary depending on the prop firm you’re with, but we covered an example of that process. This video is geared more towards answering the question: “Okay, those are the basic requirements, but how do you actually go about passing?”

The first thing I wrote down here is that success—or failure—is often determined before you even take the challenge. The simple way to measure this is what I always say: if you don’t have at least a month of profitable trading in a demo account, then you’re gambling. And if you know you’re gambling, by all means, do whatever you want—it’s like buying a lottery ticket. But if you’re trying to make money and treat this like a business, you need to be prepared. One of the things we do in the Funded Trader Academy before recommending someone tries to pass an evaluation is to ensure they have at least a month of track record in a demo account. Not only does this build your confidence, but it also provides statistical data on your performance—your max drawdown, average daily drawdown, win-loss ratio, reward-to-risk ratio, average hold time, and other key metrics. These metrics help you determine whether you’re getting lucky or if you’re genuinely ready to pass a prop firm challenge. That’s the baseline requirement.

Even if you pass the challenge—which many non-profitable traders do—you’ll lose the account if you’re not truly prepared. You have to achieve at least five days of profitable trading (e.g., $200 or more per day). But if you’re not prepared, one of those days you’ll likely give it all back and blow up the account. So, have a profitable demo trading record first. Otherwise, you’re just giving money to prop firms. If you’re looking to support local businesses, I’d recommend a different one than a prop firm—these guys are sharks! Seriously though, you’re gambling if you don’t have a track record of success before starting.

In 20 years of trading, I’ve never met a profitable trader who doesn’t have a trading plan. This plan is written and detailed. It outlines how you enter the market, how you manage trades, your stop-loss, take-profit, and the specific criteria you use to enter a position. It’s a step-by-step guide—step one, step two, step three—for formulating a trade. Success is determined before you even enter the market. I’ve been trading for 20 years. I started at 17, and now I’m 37—almost 38. In all my years, I’ve never met a profitable trader who didn’t have a defined plan. Sure, they might not need to reference it after 5, 10, or 15 years of trading, but they still follow those rules.

Another critical point is journaling your trades. If you’re not journaling, you have no way of truly knowing what you’re doing. The human mind suffers from recency bias, which can distort your perception of your trading performance. Only by seeing a full picture of statistical data can you assess your performance accurately. The brain is great at processing data but terrible at remembering specifics. This is why firsthand accounts of events, like crimes or adrenaline-pumping situations (like trading), often differ significantly. Journaling lets you record and review your trades with clarity. But journaling is pointless unless you compare those trades to your trading plan. You journal to ensure your plan is working and then review the journal monthly to see if you’re following the plan. This involves two steps: first, am I following the plan? (Often, 95% of the time, traders are not.) Second, does the plan work? This process is crucial before taking a prop firm evaluation.

Once these steps are in place, prove profitability in a demo account. As I mentioned earlier, at least a month of profitable trading in a demo account is a good starting point. If you can’t make money in a demo account, you won’t make money live. The emotional factor is significantly different. In a demo, trades don’t trigger fear or greed as much, allowing you to think and act logically. Additionally, the environment in a demo is easier—there’s no slippage, and your stops and entries are honored. For traders taking one to three trades per day, a 20-day track record is a good minimum before going live.

Before we move on, I want to take 30 seconds to talk about the Funded Trader Academy. Most of you are familiar with our self-study packages, the primary way people access Trader Dale. The Funded Trader Academy, however, offers a hands-on experience. You work one-on-one with Dale and other funded traders. You join live trading rooms, see them trade daily, ask questions live, review market setups, and even get video feedback on your trades. It’s a white-glove service designed to help you become a profitable, funded trader. If you’re interested, check out the FTA option in the main menu of Trader Dale and book a call to learn more.

Now, back to the video. There are two ways to approach the challenge. The first option is the quick and dirty approach, which I’ll explain with a disclaimer: this isn’t optimal trading, and it’s not how you’ll trade long-term. But for passing the challenge, it’s a viable strategy if you already know you’re profitable. For example, if you’ve had three months of profitable demo trading and are averaging 7% per month, the potential upside on a $50,000 account is $3,500. To get funded quickly, you could use multiple accounts and a hedging strategy, minimizing your risk while maximizing your chances of success. This involves opening multiple accounts, taking opposite trades in each, and ensuring at least one account gets funded. The math works out favorably, but it’s only recommended if you’re confident in your profitability.

The second option is the professional approach—trading exactly as you did in the demo account. If your demo strategy works, it should work live, provided you maintain proper risk management. Risking half a percent or less per trade allows room for several losing trades before reaching the drawdown limit. While this approach is slower, it’s more conservative and cost-effective. Ultimately, the best option depends on your goals, personality, and confidence in your profitability.

Hopefully, you found this video helpful regardless of which method you choose. I’ll see you all in the next one!