How to pass a prop firm challenge: a rule-by-rule plan

Traders rarely fail a challenge because they could not find 10%. They fail because one day, or one trade, broke a loss limit. The usual causes:

• Sizing up to reach the target faster, so a normal losing streak becomes a breach.
• Trading on after two or three losses in a day to win it back, and hitting the daily limit.
• Letting a losing option position run without a stop because it might come back.
• Forgetting that charges count. Every order pays brokerage and statutory charges, and the limits are measured after them.

Decide how many losing trades in a row you want to survive, then size every trade so that streak cannot breach the maximum drawdown.

Max risk per trade = max drawdown in ₹ ÷ losing trades you must survive

Example, with made-up round numbers: a ₹1,00,000 2-Step account has a 10% maximum drawdown, ₹10,000. To survive ten losers in a row, risk at most ₹1,000 per trade, 1% of the account.

Then check it against the daily limit. The 2-Step daily limit is 5%, ₹5,000. At ₹1,000 a trade you can lose five trades in a day before a breach, so a personal stop at three losing trades leaves a comfortable buffer.

The daily loss limit is where the account ends, not where your day should. Pick a personal stop well inside it, for example 60% of the limit, and stop for the day when you reach it. Tomorrow the limit resets; a breached account does not.

Write the stop down before the session starts. A limit you decide on after a loss is not a limit.

IndieFunded's 1-Step and 2-Step challenges have no time limit, which changes the maths. A 10% target over 20 trading sessions is half a percent a day. There is no deadline to rush towards, so there is no reason to size up.

You do need at least 3 trading days to pass, and at least one trade every 30 days to keep the account active.

• Size on premium, not on the index. Risk per trade is the premium you could lose on your stop, times the lot size, times the number of lots. Lot sizes are set by NSE and change; check the current one.
• Time decay works against a buyer every day. A position that goes nowhere still loses value, so give every trade an exit by time as well as by price.
• Charges add up. On the simulator, one lot of 75 bought at ₹100 and sold at ₹120 pays about ₹68 in charges for the round trip. Frequent small trades need a bigger edge to overcome them.
• MIS positions are squared off automatically before the close, with a charge. Close them yourself, or use NRML if you intend to hold.

• 2-Step has the widest limits, 5% daily and 10% overall, and the lowest price. Most traders should start here.
• 1-Step is a single 10% target inside 3% daily and 6% overall. It suits a trader whose losing days are already small.
• Instant skips the challenge but trails the drawdown and checks consistency on every payout. Only for a process you have already tested. The end-of-day trailing option leaves more room for intraday swings.

1. 1How far is my equity from today's daily limit, and from the maximum drawdown?
2. 2What is my stop, and how many rupees do I lose if it is hit, including charges?
3. 3Is that within my per-trade risk?
4. 4Have I already hit my personal daily stop?
5. 5Is this trade in my written plan, or am I trying to win something back?