How to Pass Phase 1 and Phase 2 Without Violating
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If you are serious about becoming a funded trader, you surely know that the challenge offered by Prop Firms (Proprietary Trading Firms) is the main gateway. This challenge is generally divided into two critical phases: Phase 1 (Evaluation) and Phase 2 (Verification).
Many traders have profitable strategies, yet ironically, they fail not because they cannot generate profit, but because they violate rules. These rule violations—often related to risk management—are the leading cause of 90% of failures in challenges.
Therefore, the fundamental question that must be answered is: How to Pass Phase 1 and Phase 2 Without Violating the strict rules set by Prop Firms?
As an analyst, I will guide you step-by-step to achieve legitimate and sustainable success. This is not about secret trading techniques, but about discipline and very strict risk management. Let's begin.
Understanding Prop Firm Mentality: The Key to Passing Without Violations
Before we get into practical strategies, you need to understand why Prop Firms are so strict about loss rules.
Prop Firms give you large amounts of capital (tens to hundreds of thousands of dollars) which is actually company capital. They are not looking for gamblers who can make 10% in a day. They are looking for professional and consistent risk managers.
Every violation, especially the daily loss limit (Daily Loss Limit) and total loss limit (Maximum Drawdown), shows that you cannot control risk. In the Prop Firm's view, a trader who breaks rules is a huge risk to their capital.
Therefore, the best way to pass is by proving that you are a disciplined trader—the key to knowing How to Pass Phase 1 and Phase 2 Without Violating their terms.
Phase 1: Achieving Profit Targets with Anti-Violation Focus
Phase 1 (usually an 8% profit target) is the phase where you must demonstrate the ability to generate profit within a specified time (or without a time limit, depending on the Prop Firm). Psychologically, this phase triggers the desire to get rich quick. This is a fatal mistake.
Key Discipline Strategies in Phase 1
The main goal in Phase 1 is not reaching 8% as fast as possible, but ensuring you do not violate daily and total loss limits—the main principle to succeed in this challenge.
1. Set Consistent Risk per Trade (0.5% Maximum)
Many traders over-leverage in Phase 1 because they want to finish quickly. If your target is 8% and your daily loss limit is 5%, mathematically, if you risk 2% per trade, two consecutive losses almost make you fail for the day.
My advice, use a maximum Risk per Trade of 0.5%.
- Example: On a $100,000 account, 0.5% is $500.
- If you need 8% ($8,000) and your risk-to-reward (R:R) ratio is 1:2, you only need 8 successful trades (8 x $1,000 profit).
- This is a very realistic number within a few weeks without needing to break rules.
2. Understand and Manage the Daily Loss Limit
The Daily Loss Limit (usually 5%) is the most frequently violated rule. This limit is calculated based on the daily starting balance or the previous day's ending balance (depending on the Prop Firm).
Practical Tips for Anti-Daily Loss Violation:
- Calculate Real-Time: Don't just rely on memory. Calculate your daily loss limit before the market opens and note it in a visible place.
- Stop Trading after Two Losses: If you risk 0.5% per trade, two consecutive losses (1% total) are still far from the 5% limit. However, if you experience three consecutive losses, it is better to close the charts for that day. This is a psychological key to prevent revenge trading which can trigger violations.
3. Beware of Trailing Drawdown
If your Prop Firm uses the Trailing Drawdown rule (Maximum Loss that follows the highest balance), you must be very careful.
Tip: Don't be too euphoric when profitable. After making significant profit, you should lower your risk because your stop loss (in the context of Trailing Drawdown) is now closer to the market price, even if in terms of total balance you are still far from the initial loss.
Phase 2: Verification – Proof of Consistency and Risk Minimization
After successfully passing Phase 1, you enter Phase 2. The profit target in Phase 2 is usually smaller (e.g., 4% or 5%), and this is the verification phase. The Prop Firm wants to see if your success in Phase 1 was the result of a tested strategy and free of violations.
Strategy to Pass Phase 2 Without Violations
Phase 2 is about maximum discipline and risk minimization—this is your consistency test.
1. Reduce Lot Size and Risk per Trade
You must treat Phase 2 like you are already a true funded trader. If in Phase 1 you used 0.5% risk per trade, in Phase 2 you should lower it to 0.25% to 0.35%.
Why? Because the target is smaller, you have more "room" to get profit slowly and consistently, while ensuring that you will not violate daily loss limits.
2. Prioritize Minimum Trading Days
Many Prop Firms require minimum trading days (e.g., 5 or 10 days). Don't rush to finish Phase 2 in one or two days, even if you successfully reach the profit target.
- Do Micro Lot Trading: Once the Phase 2 profit target is reached, you just need to trade small (like 0.01 lots) on the remaining trading days just to meet the time requirement. This is a smart way to qualify without taking big risks that could violate Drawdown.
3. News Discipline (News Trading)
Pay attention to Prop Firm rules regarding trading during high-impact news releases (High Impact News). Many Prop Firms prohibit opening or closing positions within a certain time window (e.g., 2 minutes before to 2 minutes after Non-Farm Payrolls or interest rate releases).
News Trading violations will instantly blow your account! Always check the economic calendar and ensure your positions are safe before major news.
Fundamental Anti-Violation Checklist
To ensure you succeed in **How to Pass Phase 1 and Phase 2 Without Violating** Prop Firm rules, here are three non-negotiable golden rules you must have:
1. Understand the Consistency Rule
Some Prop Firms apply a Consistency Rule, which requires that your profit should not be dominated by a single very large trade. For example, one trade should not contribute more than 30% of the total required profit.
Violation Prevention: Always use relatively similar lot sizes and avoid "gambling" (drastically increasing lots) when you feel confident. Prop Firms want to see a smooth equity curve, not inconsistent vertical spikes.
2. Inactivity Rule
Although rare, some Prop Firms will consider your account failed if there is no trading activity for a certain period (e.g., 30 days). Make sure you make at least one small trade periodically if you need a break.
3. Time Limit Clarity
If your Prop Firm applies a time limit (e.g., 30 days for Phase 1), make sure you have a sufficient time buffer. If 3 days remain and you just reached 40% of the target, psychological pressure will increase drastically, increasing the likelihood of you violating loss rules. Choose Prop Firms without time limits if you feel time pressure is your biggest psychological barrier.
Conclusion: Discipline Is Your Real Capital
Passing a Prop Firm challenge, both Phase 1 and Phase 2, is not about how smart you are at reading charts, but how disciplined you are in respecting the capital entrusted to you. Remember, How to Pass Phase 1 and Phase 2 Without Violating is the core of the entire process to become a professional funded trader.
Make risk management your primary trading strategy, and profit strategy as a complement.
If you are just about to start this journey, take time to prepare thoroughly. Mental readiness is often more important than financial capital. We highly recommend reading our guide on mental preparation before buying a challenge account so you are ready to face the emotional pressure accompanying this evaluation.
Prop trading offers extraordinary opportunities to grow your career without risking large personal capital. Do it carefully, analytically, and most importantly, with anti-violation discipline.
Good luck on your trading journey!
By: FXBonus Team
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