Common Mistakes Traders Make with Prop Firms (2025) and How to Avoid Them

Introduction

Prop firms have become one of the fastest-growing paths for traders who want access to larger trading capital without risking their own savings. Instead of trading small personal accounts, traders can join a proprietary trading firm, pass an evaluation challenge, and get access to funded accounts.

But while the opportunity sounds exciting, most traders fail prop firm challenges on their first few attempts. In fact, some prop firms report that over 80% of traders fail evaluations in the first phase (source: FTMO Community Data).

Why does this happen? The answer is simple: most failures are caused not by market conditions, but by avoidable mistakes. In this guide, we’ll break down the most common prop firm trading mistakes—and more importantly, how to avoid them.

1. Over-Leveraging and Ignoring Risk Management

One of the top reasons traders blow funded accounts is over-leveraging.

• Many traders risk too much on a single trade to hit profit targets faster.
• Funded firms usually impose strict daily drawdown and overall loss limits. A single oversized trade can wipe out an account.

Example: On Reddit’s r/propfirmreviews, traders frequently report failing challenges within days because they placed trades risking 10–20% of the account instead of 1–2%.

How to avoid it:

• Stick to 1–2% risk per trade.
• Use stop-loss orders consistently.
• Focus on consistency rather than “all-or-nothing” trades.

2. Not Reading the Prop Firm’s Rules Carefully

Every prop firm has unique rules. Some firms allow holding trades over the weekend, others don’t. Some permit news trading, others strictly prohibit it.

Mistake: Traders treat all firms the same and don’t carefully read rules before trading.

Source: Trustpilot reviews of firms like MyFundedFX and The Funded Trader often highlight confusion around rule violations (source: Trustpilot MyFundedFX).

How to avoid it:

• Always read the firm’s Terms & Conditions before starting.
• Keep a rule checklist (daily drawdown, max loss, trading style restrictions).
• Ask support if anything is unclear.

3. Trading High-Impact News Events

Many prop firms restrict trading during major economic announcements like NFP (Non-Farm Payrolls) or FOMC meetings.

Mistake: Traders enter big positions before news events, hoping for quick profits, only to trigger a violation due to slippage or spikes.

Source: The Funded Trader’s community blog warns that trading news without reading rules is a leading cause of failed challenges (The Funded Trader BlogThe Funded Trader Blog).

How to avoid it:

• Check the firm’s news trading policy.
• Use an economic calendar (like Forex Factory).
• If trading news is allowed, reduce risk significantly.

4. Chasing Losses

Emotions run high after a losing streak. Many traders make the mistake of revenge trading—entering impulsive trades to recover losses.

Example: A Babypips forum discussion revealed that many new traders fail because they double down after losses, breaking both discipline and firm rules (Babypips Forum).

How to avoid it:

• Accept losses as part of the game.
• Step away after 2–3 losing trades in a row.
• Keep a trading journal to track emotional mistakes.

5. Lack of a Trading Plan

Jumping into a prop firm challenge without a strategy is like entering a boxing match without training.

Mistake: Many traders use random setups, switching between scalping, swing, and day trading without consistency.

Source: On Reddit’s r/Daytrading, funded traders often say the biggest difference between those who succeed and fail is having a structured plan.

How to avoid it:

• Build a strategy that fits your lifestyle (scalping, day trading, or swing trading).
• Backtest your system before applying to a prop firm.
• Follow your plan consistently.

6. Ignoring Psychology and Discipline

Trading psychology is often underestimated. Prop firm accounts come with strict rules that amplify psychological pressure.

Mistake: Traders panic when close to hitting max drawdown, leading to irrational decisions.

Source: A 2025 Investopedia article on trading psychology highlights that fear and greed are the two biggest killers of funded trading accounts.

How to avoid it:

• Practice on demo accounts under the same rules.
• Meditate or use mental exercises to stay calm.
• Trade smaller size until confident.

7. Overtrading

Some traders feel pressure to trade every day just to hit the profit target faster.

Mistake: Overtrading leads to burnout and unnecessary losses.

Source: Trustpilot reviews of Apex Trader Funding often mention traders failing because they overtraded instead of waiting for setups (Apex Trader Funding).

How to avoid it:

• Trade only high-probability setups.
• Set a maximum number of trades per day.
• Remember: funded accounts reward consistency, not speed.

8. Poor Time Management

Funded challenges are time-limited (often 30–60 days). Traders fail because they don’t balance patience with urgency.

Mistake: Waiting too long to start or trading too aggressively near the deadline.

How to avoid it:

• Create a schedule for trading days.
• Aim to hit profit targets steadily over weeks, not in one session.
• Use the full challenge period wisely.

9. Lack of Education and Preparation

Many new traders jump into a prop firm challenge without understanding basic trading concepts.

Mistake: Entering without knowledge of drawdowns, leverage, or economic calendars.

Source: On forums like BabyPips and EliteTrader, experienced traders stress education before attempting funded accounts (Elite Trader Forum).

How to avoid it:

• Take trading courses (many prop firms offer free education).
• Practice on a demo for at least 3 months.
• Learn firm-specific strategies from blogs and communities.

10. Choosing the Wrong Prop Firm

Not all prop firms are the same. Some have hidden fees, strict rules, or poor support.

Mistake: Traders join without comparing firms, then fail due to unexpected rules.

How to avoid it:

• Research reviews on Trustpilot and Reddit before joining.
• Compare drawdown, scaling, profit split, and fees.
• Use review platforms like TrueDealFinder to check coupon offers and reviews.

Quick Checklist: Mistakes to Avoid

✔ Don’t over-leverage (risk max 1–2% per trade)
✔ Always read the rules
✔ Avoid risky news trading
✔ Don’t chase losses
✔ Have a written trading plan
✔ Control emotions and psychology
✔ Don’t overtrade
✔ Manage challenge time wisely
✔ Educate yourself before trading
✔ Pick the right prop firm

FAQs

1. What is the number one mistake traders make with prop firms?
Over-leveraging and poor risk management. Many traders blow accounts in a single bad trade.

2. Can beginners pass a prop firm challenge?
Yes, but only if they prepare with education, demo practice, and discipline.

3. Are prop firm rules really that strict?
Yes. Rules like max daily drawdown and profit targets are non-negotiable. Violations mean instant failure.

4. Should I trade news events in funded accounts?
Only if the firm allows it—and always with reduced risk.

5. How do I pick the best prop firm?
Compare rules, reviews, fees, and community feedback. Sites like Trustpilot and Reddit are great research sources.

Conclusion

Prop firms offer an incredible opportunity for traders to access large capital and build a career in trading. But success requires more than just market knowledge—it requires discipline, rule-following, and preparation.

By avoiding common mistakes like over-leveraging, chasing losses, or ignoring firm rules, traders dramatically increase their chances of success in 2025 and beyond.