Trader Funding Evaluations: How I Passed and Why Most Traders Can't

Why trader funding companies require you to complete an evaluation/challenge 

For simplicity's sake, I will refer to the testing to get funding as an evaluation in this article; some call it a challenge, but for now, let's call it an evaluation. The funding companies need to be able to ensure you can trade. This is true, and I believe this is part of the reason they require traders to complete an evaluation. The other reason is profits. 

Is it possible to pass funding evaluations?

Yes, it is possible. I know because I pass them on a regular basis. There are some things you have to change about your trading to pass evaluations on a regular basis. I will touch on this later in the blog. It is possible, but by no means simple. 

How many traders actually pass funding Evaluations 

I believe that only a small percentage of traders pass the funding evaluation stage, and an even smaller percentage of traders remain funded long enough to get a payout. No one actually knows the actual statistics. I have seen statistics showing that only 7% of all traders pass evaluations, and out of those 7%, only 10% reach a payout.

Why do so many traders struggle with funding evaluations? 

The answer to this question is quite easy to give. Traders have been taught to let winning trades run. With a trailing drawdown, this is the exact opposite of what to do. The funding companies know that you have been taught to hold winning trades. They designed the trailing drawdown with this in mind. Remember trader funding? Evaluations play a huge role in funding companies' revenues. So don't let them win. I want you to realize right now that these companies are in it for the profit! That doesn't mean it isn't a fantastic opportunity, because it is! 

Mental barriers 

When you start trading evaluations, you may realize they seem impossible to pass. I can tell you that once you pass one, the others become much easier. This is why I always recommend buying multiple evaluations it will help you relax knowing you have another chance and the Evaluations aren't breaking your bank 

Risk management

You need a risk-to-reward ratio of at least 2, which means you have to risk at least $50 to make $100. Risk management is very important; many fail trying to scalp tiny movements. Yes, scalping is a good strategy, but putting more money at risk than you make is a bad one. We need to win more than 75% of your trades scalping look at this risk reward table below  

Overleveraging 

I've seen traders attempt to pass evaluations with five to 10 contracts. That is a sure way to blow the account. Funding firms allow you to trade overleveraged in the hope that you will fail. When trading, you need to allow yourself losses. If you are using leverage that is too high, a few losses will destroy your confidence. The drawdown will be close to your balance, and you will stress yourself out. 

Tips to help with the mental side of trader funding evaluations. 

I quickly realized that something about the evaluations was having an impact on my trading. The need to prove yourself, prove yourself to your family, and succeed is amplified. Below you will find a few tips that have helped me.

Meditation before the trading day starts 

I meditate every single morning without fail. I sit somewhere quiet and spend at least 5 to 10 minutes in silence meditating. It will help clear the mind. Visualize the outcome of the trading day. See the trading balance in your mind. Visualize passing the evaluation and having a fantastic trading day.

Mindset

You need to begin your day ready to take on a set amount of risk per trade and accept the risk. Every trader has losing trades. Refusing to accept risk before the trading day begins may result in out-of-control losses.

Confidence 

You need to be confident that you can do this—not cocky, but confident. Come into the trading day ready to start this evaluation off with good trading. It is critical to begin, and the first few winning trades are winners. 

Greedy traders loose

Don't be greedy. Take the low-hanging fruit. That is, take the easy trades and profit. Greedy traders loose 

Trading concepts that will help you pass funding evaluations

Rid yourself of the concept of letting your winners run. Yes, I just said that. The truth is that if you let a winning trade run without taking profits, the drawdown from the high will count as a loss. 

Sell into strength

Always keep in mind that my account is at an all-time high. Anytime the evaluation account balance is at an all-time high, you have to exit into strength. If your account is already in drawdown from its all-time high, you can keep winning trades, and drawing down while in a trade has no effect on your trailing drawdown while in profit. 

Product to trade

I suggest the E-mini S&P 500 futures contract; it has little to no slippage and nets $50 a point and $12.50 a tick. You can go in and out of trades with market orders without having to worry. This is the most traded product in the world for a reason. 

Position sizing

With a $50,000 account, trade two E-mini contracts as you start your trading day. You may increase only if you are trading well. Two E-mini contracts are more than enough leverage. Especially with futures trading, it is easy to take on far too much risk per position. The maximum number of contracts you should trade with a $25,000 account is one E-mini contract. 

Risk management to pass trader funding evaluations

This is probably the most important aspect of passing funding evaluations. Limit your losing trades to no more than $300 in losses per trade. With two e-mini contracts, that is a 3-point stop. This will allow you to take nine losing trades in a row before your account is blown. Hopefully, you won't lose nine consecutive trades. If you lose three trades in a row, call it a day; it's not your day. I've found that once a losing streak starts, the only way to stop it is to call it a day and stop trading for the day. 

Stop placement 

Know where your exit is, and that's where your stop is going to go. If the proper stop placement involves too much risk, it's better to leverage down. Random stop placement will cause frustration. The market is likely to hit your stop. Then go the way you had planned. For me, that's a huge trigger that leads to tilt.

Scale out of positions 

Scaling out trades will make a significant difference. If you buy two contracts, exit the first one at 1 RR; this will eliminate the risk. If your stop is at 3 points and you sell the first one at 3 points, your current trade is risk-free. Once the trade is risk free you will be able to relax and analyze the market with a clear mindset 

Trades per day 

Overtrading is an evaluation killer. My belief is that you shouldn't be taking more than 10 trades a day. I personally try to only take three trades per day. 1 in at the NY opening, one at the London close, and the last trade in the afternoon. Limiting your trades to specific times of the day will help you avoid overtrading. I will give an example of risk management that will allow you to pass with only 10 trades below. 

Let's do some math

If you have a 50% win rate on all of your trades, you are risking $300 per trade. 

Your first scale out is at 3 points of profit, or $150 in profit. Your most recent scale out is at 10 points, or $500. That is a total of $650 in profits per winning trade. 

Total trades to pass funding evaluation

Let's do some math

If you have a 50% win rate on all of your trades, you are risking $300 per trade. 

Your first scale out is at 3 points of profit, or $150 in profit. Your most recent scale out is at 10 points, or $500. That is a total of $650 in profits per winning trade

You would only have to take 10 trades, and that includes the commission. Notice I didn't say winning trades? That's a 50% win rate after 10 trades. 

Trading Strategies to pass funding evaluations

I have traded every strategy known to man. Ema crosses, stochastics, volume profile, market profiles, opening drives, and so on are all examples. I found "The Inner Circle Trader," whose ideas don't use indicators and are based only on price action. I can assure you that there is no better trading strategy. Regardless of how you trade, you need to find a strategy that works for you. Then stick to it! 

I hope this blog helps you succeed in trading and pass evaluations 

If you're interested in learning more about how I trade and the strategies I use, you can follow me on Twitter. Just click on the tweet and it will take you to my twitter