How to Pass Prop Firm Challenges with Andrew Mitchem & Etienne Crete

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#596: How to Pass Prop Firm Challenges with Andrew Mitchem & Etienne Crete

In this video: 00:05 – Passing a prop firm challenge. 00:19 – Talking prop firm challenges with Etienne Crete. 00:45 – Horror stories from traders starting a prop firm too early. 02:08 – How to start trading on a prop firm account. 03:13 – How to pick a prop firm. 06:10 – How much should you risk per trade. 08:10 – Treat a demo, a live and a prop firm account the same. 10:25 – Have a proven strategy first before getting on a prop firm account. 15:28 – Does the prop firm have the markets you trade available? 17:15 – How to find us and how to join us at The Forex Trading Coach

Passing a prop firm challenge.

Andrew Mitchem If you’re on a $10,000 prop firm, you know, you you’re risking quite tiny amounts, but that’s fine, you know? But just go very, very small because just don’t get stopped out and you’ll eventually, you know, if you’re trading good enough, you’ll eventually get to that profit target.

Talking prop firm challenges with Etienne Crete.

Etienne Crete Sitting down today with Andrew Mitchem. we want to do an episode specifically about prop firms and what it takes to become a funded trader, but also kind of scale things up. And you get to the next level of performance to scale it up to, we can make more money trading with more capital. So Andrew welcome back on the podcast. Continue here.

Etienne Crete Let’s start with this. I actually get people who reach out to you and kind of ask you about prop firms and how they should go about it. What’s your first train of thought into what is the right time to go for prop firm?

Horror stories from traders starting a prop firm too early.

Andrew Mitchem Okay, I find that so many people tell me stories. In that kind of horror stories, they jump in too quick. And I think people aren’t doing it realistically. They jump in because they see it as maybe I don’t have enough money myself. And it’s a it’s a good way of potentially earning funds and, and commissions, etc., but they don’t have any, background into trading properly themselves.

Andrew Mitchem You know, they don’t have a strategy, the confident in them. And they have proven themselves first. And I think that’s the pitfall that too many people jump into.

Etienne Crete Definitely like trying to get capital before you are profitable trader.

Andrew Mitchem Yeah. I mean, I just tell people maybe you look at it and, you know, 6 to 12 months time, be real about this. Yes, look prop firm can be absolutely fantastic once you know what you’re doing. But spend some time upfront to learn the process of trading. Forget how much money you make. Don’t even look at money.

Andrew Mitchem Just understand the process of trading. You know, low risk, etc., low drawdowns, because ultimately that’s the thing. It’s going to get you through a pot firm. And if you don’t understand that hitting that drawdown criteria is what’s going to make you lose your money.

Etienne Crete How do you someone interested in the process? Because a lot of people are going to, of course, focus on the outcome, trying to get the result, how do you get them to, first of all, follow the process? But they kind of have to be interested in then involved in it too.

Andrew Mitchem How to start trading on a prop firm account.

Andrew Mitchem Yeah, it’s a tricky one because everybody wants the results and everybody wants the money. I suppose all I can do is probably a little bit like is keep going on and on and on with the same story, because ultimately that’s the best way you’re going to get a result. You know, you almost got beaten into people was like, please don’t waste your time away or waste your money, focus on the process of knowing how to trade or just make sure you’re consistently profitable. I do suggest to people that when they start, use a demo, you know, for a reason, be profitable on that. Go on to a small live account. Be consistently profitable on that, then maybe a slightly bigger live account, and use all those like that experience and those emotions that you’re going to have.

Andrew Mitchem And get that right first before going on to a prop fund, because otherwise you’re just spending $500 and wasting you money.

Etienne Crete In terms of platform, there’s a lot of choice. Are there? You can think, of course, so many different names is one that’s been around for a longer time, some that are newer and more competitive or kind of nicer offerings. How do you actually get to pick the prop firm and then maybe have some thoughts on this?

How to pick a prop firm.

Andrew Mitchem But yeah, no, it’s I suppose you want to look at potentially, you know, a company’s been around for a long time. That’s always, I suppose, a good starting point. But the other one is I like, personally, I like prop firms that have slightly bigger drawdown allowances and, the some of those that I personally use that have two stages of a challenge before you go to live money, a lot of them would have like a 10% profit target and maybe like a 5% drawdown.

Andrew Mitchem I think that’s it’s a little bit of a tight criteria for a lot of people. Whereas I’m now using prop firms that have a maybe like a 10% profit, 10% drawdown. And then you go on to another stage where you have to maybe make like a 5% profit again, within a 10% drawdown. And then you go to real money.

Andrew Mitchem So yes, it might take longer, but having that bigger drawdown just allows a little bit more wiggle room for you as a trader. And I also think it’s really important that people don’t have a prop firm that has a time restriction. I, I really would avoid that. When you see these prop firms that say, you’ve got to do this, you know, 10% within 30 days.

Andrew Mitchem And then realistically that might only be, say, 20, 20 trading days, you know, then the market conditions aren’t good every day. So, you know, they almost forced you to gamble. So, I would have something that doesn’t force you on a time restriction to get to your profit target. And also something allows a slightly bigger drawdown.

Etienne Crete I think the, the time roll is mostly gone for a lot of performers. Most don’t offer this and most don’t have this anymore as a rule, because people are really tired of it. I think the rule that now is kind of simplify for people is the, the trailing drawdown. So the more you profit, even a few trades are open, but not close yet.

Etienne Crete That counts as your highest like profit level, your highest watermark. Then the jobs calculate from there. So you could have a trade that runs like really fast and comes back and then that hits to your drawdown level.

Andrew Mitchem Yes. So I suppose a lot of that then comes back to, as I mentioned, to try and have a prop firm that has a little bit bigger drawdown. To give you that flexibility, but also don’t rush to pass it. And probably, you know, the way that obviously everybody fails on a prop firm is they hit the drawdown and get stopped out or, you know, they get closed.

Andrew Mitchem So making sure that your risk for trade is very, very low, I think is crucial as well. You know. Yes it may. Let’s say you’re doing on your own normal account. It might take you a month, but let’s say half that risk again and it might take you two months. It’s like, well really it shouldn’t matter. Just pass the thing within the drawdown is the is the most important point, not how long it takes you.

How much should you risk per trade.

Etienne Crete How do you calculate the risk for a trade that you should go with? Is it the specific number that you always follow, or is there some math behind it? Or what do you tell people to focus on?

Andrew Mitchem For me, I’m just talking purely me personally. I mean, what people do is entirely up to them. Of course, I personally risk only a quarter of 1% of my account on a trade, and if I split that position into two, which quite often I do, you know, like if I’m taking a buy trade, I’ll take a market order and a buy limit just the way that I trade.

Andrew Mitchem I’ll have like an eighth of 1% of my risk on each of those two positions. So in other words, if both positions got stopped at, I lose only a quarter of 1%. So, you know, you need effectively four whole trades to go wrong to lose 1%. You know, so yes, it will take me longer to get to the profit target because naturally my gains will be smaller as a percentage.

Andrew Mitchem But the chances of me being stopped out and blowing that I can really quite like small.

Etienne Crete And then I’ll let people have this issue of they say, oh, well, of course you can do this because they have a big account. But what about guys who have the small account they trade? Well, maybe $10,000 might be able to take all the trades with 0.25%. How would they go about it?

Andrew Mitchem They can still do that. I mean, if you’re on a prop firm, you know, with a I mean, most people that I so speak to are slightly higher amounts on a prop then, but yeah, like, I suppose if you’re on a $10,000 prop firm, you know, you, you’re risking quite tiny amounts, but that’s fine. You know, 1% is $100, so you’re risking $25 per trade on a $10,000 account.

Andrew Mitchem It’s still the same risk percentage. I mean, I think if you went down to 10,000, you might have a little bit more difficulty with real, accurate position sizing. But just go very, very small because just don’t get stopped out and you’ll eventually, you know, if you’re trading good enough, you’ll eventually get to that profit target.

Treat a demo, a live and a prop firm account the same.

Etienne Crete One of the beliefs people have is that the way you pass the valuation is different from the way you should trade the account. Once you fund it, like they try to pass more aggressively to kind of get the income faster. And if they fail, then we get to buy a new one. When they get funded, they they go a bit slower, a bit, more like, structured. Do you agree with that? And you kind of truth, everything the same and just follow the same stuff all the time?

Andrew Mitchem I’m treated exactly the same. I mean, that’s to me, that’s how I would do it. And I see why people do that. But I don’t think you should. One of the things I’ve always tried to do with prop firms is not even really look at trading. I don’t trade the prop firm as such. I, I personally, put my prop firm onto a virtual server with a bit of trade copier software, and I just focus on trading my own live account, because if I can trade that one, you know, on it, because the head and the heart are two things that play with people’s mind, aren’t they?

Andrew Mitchem When they get real money, you know, it’s emotions. So why do I want to see like multiple hundred, $250,000 accounts behind the scenes? Because it’s nice to play with what your brain. To me, it’s easier to focus on your live account or, you know, even the demo, but let’s say your own personal account and get that one trading in the right direction properly, and then have those same trades mirrored behind the scenes.

Andrew Mitchem I just think that’s so much easier because if I have, let’s say, five prop firms, I’m not wanting to go into every single one and calculate the risk and the lot size. And it’s like, oh, now what a close part of the position. Okay, I go in five times. That’s just a pain. Focus on one account trader properly and have it copy behind the scenes.

Etienne Crete That’s a good point. Yeah. You know, if you look at the account, I feel like a lot of people have pressure from the fact that they’re funded with the fact that they pass and then they can lose a capital. If you don’t think you want to just trade the same account, then that definitely makes a lot of sense.

Andrew Mitchem Absolutely. To take the emotion out of the as best you can. Because realistically, if you’re on a 100,000 live money, you know, not many people are used to doing that with their own accounts. So it can really start to play with you with your head. So, just focus on your normal account. Get that right. Just do nothing different.

Have a proven strategy first before getting on a prop firm account.

Etienne Crete Let’s go to some of the common mistakes people make with prop firms. What do you see as the main ones that people make when they go for a prop firm?

Andrew Mitchem Yeah, I think it’s not they’re not choosing the right one. But it’s a it’s about not having this strategy sorted first. I think that’s the biggest issue is that honestly, is that jumping in too early onto a prop firm when as a person and as a trader, you’re probably not ready. So I would just say to people, just give themselves a realistic chance of getting it right, because you’ve got to have confidence, full confidence in your ability to trade that strategy before you go into it.

Andrew Mitchem Because like you said, you might just fluke him, get through your your demo account or, you know, but when it comes to real, you start self doubting. So I just think, yeah, it’s a getting that confidence in yourself, your strategy, your ability to do this properly over a period of time and then consider it.

Etienne Crete Have you fail any prop firm accounts before?

Andrew Mitchem Yeah I did in the early days. Yeah I did, and I ended up, taking a few trades that were too big a risk and, and they got stopped out. So I learned from that, you know, pretty early on that just go lower and lower risk.

Etienne Crete It’s interesting because I love people see prop firm as like, a thing you pay and then you should get the account. And sometimes, like in trading, you can never really predict whether a trade will work out to or not. So it’s good to take a step back and accept you could lose an account, you could be funded and lose it and just have to kind of get the consistency and get back to it to, get new account possibly. But yeah, it’s about the reason.

Andrew Mitchem It’s when I probably, you know, was risking, a little bit, I mean, only very, very low amount of risk. But I had multiple trades open. And like you said, they take that I didn’t hit the stop loss level. But with the open trades and the amount of open trades, it did it. And I suddenly looked at it one day knowing I was pretty safe.

Andrew Mitchem And I go, oh, that’s. So they’ve closed my account and I wasn’t aware of that rule. So that’s another thing to be aware of. So that’s why I reduced the trades, reduce the risk per trades. And ever since then I’ve been fine.

Etienne Crete What do you think profits are going I think there’s been a lot of feedback for years. Has been some profits closing down because they had maybe bad practices, some of the ones opening up, of course, a lot of these new ones, it kind of always tried to lower the price and then always kind of try to make the rules match each other.

Etienne Crete Also what do you think that’s going what do you think it’s going to become in the future of these platforms?

Andrew Mitchem Is it tricky. And I suppose that, you know, I’m now personally using those ones that have been around for quite some time and I’m using ones that are associated with good brokers behind the scenes who I trade with anyway and know. So those are my kind of criteria when selecting a prop firm. You know, I know who they’re using as a broker.

Andrew Mitchem I know the brokers are good. I know that that big. I know that there’s no issues with, being able to take a trade. And I think that’s probably the key where it’s going. Well, you’re right, like, I mean, we went through a stage, what, a couple of years ago when a whole heap of them appeared and then disappeared.

Andrew Mitchem There was a few issues a few years ago when some of them couldn’t trade MetaTrader. Then they could, then they couldn’t. I think that sorted a lot of them out. Yeah. At the moment I personally don’t look at new ones. I’m not really kind of aware of who’s out there. I’ve got my ones who I like, and I’m kind of sticking with them and and I think leading on from that is that when you do find one who you like and you like the roles and you pay, it’s a good, etc., then what’s to stop you not opening more accounts, you know, rather than going searching for another, prop phone company,

Andrew Mitchem you know, you could like as an example, I’ve got a client, one of my clients in Singapore, who each week opens a new prop firm account, he says, constantly opening new accounts. And so he, you know, some of them might get stopped and some of them will be hitting profit, like now. And, you know, and just with market conditions, you never know what’s going to happen.

Andrew Mitchem So he’s constantly going through a valuation passing evaluation, maybe failing a valuation passing and just keeping lots of them going. And, you know, that’s, his aim is to get up to $1 million, pretty quickly on live accounts. And, and it’s like, get on him. But rather than having $1 million one account and, you know, I’m blowing it, why not have lots of smaller accounts constantly being opened and you accumulated, you know, totals a million or possibly more.

Andrew Mitchem I think that’s another really good way of trading because you kind of then if you do have a bad week or so, you’re kind of not like losing everything in one go.

Etienne Crete I think it’s a good point, but you definitely got to diversify with different prop firms too. I just wouldn’t trust one prop firm by itself. It surely there might be around. They might have some glitches, some issues with technology or something that will make it tough to trade. And having these other accounts can be definitely useful.

Does the prop firm have the markets you trade available?

Andrew Mitchem Yeah, and also making sure that the prop firm that you choose, has the markets that you trade, you know, if you like as a forex trader. Yes. I now look at metals and cryptos and commodities etc. like that. So I want to make sure that prop firm offers those. There’s no good me in my real trading saying taking maybe 20% of my trades is non forex pairs.

Andrew Mitchem And then I go to a prop firm or oh, they don’t offer bitcoin or they don’t offer XAU/AUD or anything like that. You know which of some of my, you know, favored pairs for example. So I think it’s really important that you find a prop firm that offers what you like. Also as an example, if you were trading, say, monthly charts or weekly charts and you might want to leave those trades open over the weekend in your real day to day trading, does that prop firm allow you to keep trades open every weekend?

Andrew Mitchem You know, so all these extra little things that are determined by your own criteria, your trading strategy, making sure they align with their rules.

Etienne Crete Give a preference for actual prop firms platforms or sometimes prop firms that are offered by brokers.

Andrew Mitchem Yeah, there’s two that I’m mostly using. I mean, I can name them if you want. So I like The5ers. I’ve used them. I think, you know, they’ve been really, really good. And, blueberry funded is another, you know, the blueberry markets, they’re relatively new, but, you know, I know the guys at Blueberry Markets as the broker.

Andrew Mitchem Yeah. Pretty. Well, and I think that they’re good. And so by having their kind of backing, with a prop firm’s good, there’s a number of other prop firms that are using EightCap, and they seem very good as well. So I think it’s important that you get that backing of a decent broker behind the scenes.

How to find us and how to join us at The Forex Trading Coach

Etienne Crete There of people can reach out to you, they want to learn from you or kind of ask you questions after this. This podcast.

Andrew Mitchem Yeah, sure. So my website’s the TheForexTradingCoach.com, and, we’ve been running for 16 years this year, so, very prior to that and, you know, probably one of the longest companies out there, and we’ve got clients right around the world and, and one of the things that we do is we specifically like to focus on that low risk, but high reward, high risk trades, because that, to me is one of those keys and the secrets to getting through a prop firm.

Etienne Crete Definitely for the thing below the in the decision will give can take you out there to there. Hopefully they can learn from you. See what you’re doing. You put a log yourself on on YouTube and on your podcast as well. And I appreciate you for what you’re doing there for me. So thank you, Andrew. Appreciate. And hopefully people can, connect with you and, Yeah. Talk to yo soon.