What Happens When You Fail a Prop Firm Challenge?

Failing a prop firm challenge is disappointing, but it’s not the end of your trading journey. Understanding what happens next, and your options for moving forward, can help you make better decisions about retaking the challenge or trying a different firm.

The short answer: When you fail a prop firm challenge, you lose the challenge fee you paid. However, most prop firms offer discounted retake options, some provide free resets, and you can always start fresh with the same or different firm. The key is learning from the failure and adjusting your approach.

Understanding Why Traders Fail Prop Firm Challenges

Before diving into what happens after failure, it’s helpful to understand the common reasons traders fail:

Most Common Failure Reasons:

1. Hitting maximum drawdown (daily or total) – Most frequent cause
2. Breaking consistency rules – Earning too much profit on a single day
3. Violating trading rules – Trading during restricted hours, prohibited instruments, or using banned strategies
4. Not reaching profit target in time – Running out of trading days
5. Emotional trading after losses – Attempting to recover losses too aggressively

According to industry data, approximately 10-15% of traders pass prop firm challenges on their first attempt. This means failure is extremely common, even among experienced traders adjusting to new rules and risk parameters.

What Immediately Happens When You Fail

When you violate a rule or hit your drawdown limit, here’s the typical sequence:

Immediate Effects:

• Your trading account is automatically disabled
• You receive an email notification explaining which rule was violated
• Your challenge fee is forfeited (non-refundable)
• All open positions are closed (if any remain)
• You lose access to the trading platform for that specific challenge

What You Keep:

• Access to your statistics and trading history (most firms provide this)
• Any educational resources or community access the firm provides
• The experience and data from your attempt
• Eligibility to retake the challenge (with most firms)

What You Don’t Get:

• No refund of your challenge fee
• No partial credit for progress made
• No ability to “finish” the challenge or continue trading

Retake Options and Pricing

Most prop firms offer multiple ways to try again, often at discounted rates:

Retake/Reset Options

Option 1: Discounted Retake

• Most firms offer 20-40% off your next challenge purchase
• Discount typically applies within 30-90 days
• You start completely fresh with a new account
• Same rules and targets as original challenge

Option 2: Free Resets (Some Firms) Some prop firms include free resets with certain challenge packages:

• Typically 1-2 free resets included with higher-tier accounts
• Must be used within specified timeframe
• Same account size and rules
• Common with: TradeDay, Apex Trader Funding

Option 3: Instant Restart

• Some firms allow immediate repurchase at full price
• No waiting period required
• Can start same day or next trading session

Option 4: Different Account Size

• Many traders who fail large accounts ($100k+) restart with smaller accounts
• Lower risk, easier profit targets, less pressure
• Build confidence before scaling up
• See: Best $25k Funded Accounts, Best $50k Funded Accounts

Typical Retake Pricing Examples

Prop Firm	Original Challenge	Retake Discount	Free Resets
TopStep	$150 (50k)	30% off	1 free reset
Apex Trader Funding	$147 (50k)	40% off	2 free resets
TradeDay	$132 (50k)	25% off	1 free reset
Earn2Trade	$200 (50k)	20% off	None
OneUp Trader	$150 (50k)	30% off	None

Pricing and policies vary – check individual firm reviews for current offers

Can You Try a Different Prop Firm After Failing?

Absolutely. There are no restrictions preventing you from:

• Signing up with a different prop firm immediately
• Taking challenges with multiple firms simultaneously
• Switching firms based on rules that better fit your trading style

Why Traders Switch Firms After Failing:

1. Different rule sets – Some firms have no consistency rules, others use trailing drawdown
2. Better retake policies – Cheaper resets or included retries
3. More suitable profit targets – Lower targets may be more achievable
4. Different trading days – More time to reach targets
5. Platform preferences – Access to preferred trading platforms

Prop Firms with More Forgiving Rules:

• Prop firms without consistency rules
• Prop firms with trailing drawdown
• Cheapest prop firm challenges

Should You Retake Immediately or Wait?

This is a critical decision that affects your long-term success rate.

Reasons to Wait Before Retaking:

Wait if you:

• Failed due to emotional trading or tilt
• Don’t understand why you failed
• Haven’t identified what you’ll do differently
• Are still feeling frustrated or disappointed
• Haven’t reviewed your trades thoroughly
• Failed multiple attempts in quick succession

Recommended waiting period: 1-2 weeks minimum to:

• Review all your trades with a clear mind
• Identify specific mistakes and patterns
• Practice new approach with paper trading
• Develop specific rule modifications for next attempt
• Let emotions settle completely

Reasons to Retake Immediately:

Retake quickly if:

• You know exactly what went wrong (one specific mistake)
• The failure was due to a technical error or platform issue
• You were very close to passing (hit profit target but violated minor rule)
• You have a clear plan for what to adjust
• Your trading psychology is still strong
• You’ve already practiced the adjustment

What to Do Before Your Next Attempt

Failing a challenge provides valuable data. Use it strategically:

1. Thorough Trade Review

Analyze your failed challenge:

• Which rule did you violate and why?
• What was your consistency ratio? (if applicable)
• What was your average win rate?
• What was your risk/reward ratio?
• What time of day did you trade best/worst?
• Which instruments were profitable vs unprofitable?

Use a trading journal to document patterns:

• Best trading journals for prop traders
• Track not just what happened, but why you made each decision

2. Adjust Your Strategy

Based on your review, make specific changes:

If you hit maximum drawdown:

• Reduce position sizes by 30-50%
• Use tighter stop losses
• Trade fewer contracts/shares per trade
• Implement maximum loss per day rule (beyond firm’s requirement)

If you violated consistency rules:

• Set profit targets per trade (cap winners)
• Diversify trades across multiple days
• Use alerts when approaching daily limits
• Consider firms without consistency rules

If you ran out of time:

• Trade more frequently (but not recklessly)
• Focus on higher probability setups only
• Consider shorter timeframe strategies
• Look at firms with more trading days

3. Paper Trade Your New Approach

Before paying for another challenge:

• Practice your adjusted strategy for at least 20 trading days
• Use realistic position sizes (what you’ll use in challenge)
• Follow ALL prop firm rules during paper trading
• Achieve profit target in paper trading before retaking challenge

Best paper trading platforms:

• TradingView – Excellent for stock/futures paper trading
• Your prop firm’s platform often includes paper trading mode
• NinjaTrader SIM mode for futures

4. Consider a Different Firm or Account Size

Sometimes the issue isn’t your trading, it’s the fit between your style and the firm’s rules:

Consider switching if:

• The consistency rule doesn’t match your strategy (some big winners, few small losses)
• The drawdown calculation method doesn’t fit (static vs trailing)
• The platform is difficult to use or unreliable
• The profit target seems unrealistic for your style
• You need more trading days

Compare firms systematically:

• Best futures prop firms comparison
• Best forex prop firms comparison
• Apex vs TopStep comparison
• TradeDay vs Earn2Trade comparison

5. Start Smaller

There’s no shame in scaling back to build confidence:

Benefits of smaller accounts:

• Lower pressure and stress
• Smaller absolute drawdown amounts
• Easier to achieve profit targets
• Less expensive to retry if you fail
• Builds psychological momentum

Account size progression:

1. Start: $25k account
2. After passing: $50k account
3. After success: $100k+ accounts

See our guides: Best $100k funded accounts, Best $150k funded accounts

Do Failed Challenges Affect Your Trading Record?

Good news: Failed challenges typically do NOT:

• Show up on any industry-wide record or database
• Prevent you from applying to other prop firms
• Affect your ability to get funded elsewhere
• Impact your personal trading accounts or credit

Each prop firm operates independently. One firm has no visibility into your results with other firms.

However:

• Some firms track your personal attempt history internally
• Repeated failures at the same firm may limit future offers
• Some firms restrict how many simultaneous challenges you can have

Success Rates: Second and Third Attempts

While exact statistics vary by firm, general industry trends show:

Pass rates by attempt:

• First attempt: 10-15%
• Second attempt: 15-25%
• Third attempt: 20-30%
• Fourth+ attempt: 25-35%

Why pass rates increase:

• Traders learn the specific rules and requirements
• Emotional pressure decreases (you’ve “been there before”)
• Strategy adjustments based on previous data
• Better risk management from experience
• Improved understanding of prop firm environment

The traders who succeed eventually:

• Learn from each failure specifically
• Adjust strategy between attempts
• Manage risk more conservatively
• Focus on consistency over home runs
• Choose firms that match their trading style

Alternative Approaches After Multiple Failures

If you’ve failed 3+ challenges, consider these alternatives:

1. One-Step Challenges

Some firms offer instant funding with one-step challenges instead of two-step:

• Faster path to funding
• Less time under evaluation
• Single set of rules to master
• See: Best one-step prop firm challenges

2. Instant Funding Programs

A few firms offer immediate funding with:

• Higher monthly fees
• Profit sharing starts immediately
• No evaluation period
• More forgiving rules

3. Build Your Own Capital

If challenges aren’t working:

• Trade your own small account to build track record
• Use conservative strategies to grow slowly
• Return to prop firms once you have proven consistency
• Some funded traders started this way

4. Practice More Before Trying Again

Extended practice period:

• 3-6 months of profitable paper trading
• Build a track record of consistency
• Master risk management completely
• Come back to challenges when truly ready

Cost Analysis: How Much Do Failures Really Cost?

Let’s look at the realistic financial impact:

Example: $50k Futures Challenge

Scenario 1: Pass on second attempt

• Attempt 1: $150 (failed)
• Attempt 2: $105 (30% discount, passed)
• Total investment: $255
• Result: Funded with $50k account, 80% profit split
• Break-even: Need $319 in profit distributions

Scenario 2: Pass on fourth attempt

• Attempt 1: $150 (failed)
• Attempt 2: $105 (failed)
• Attempt 3: $105 (failed)
• Attempt 4: $105 (passed)
• Total investment: $465
• Break-even: Need $581 in profit distributions

Perspective: Even with 4 attempts, your total cost is less than a single profitable month for most funded traders.

Psychological Impact and How to Handle It

Failing a challenge affects your confidence. Here’s how to maintain healthy psychology:

Normal Emotional Reactions:

• Disappointment and frustration
• Questioning your trading ability
• Wanting to immediately retry to “prove yourself”
• Feeling pressure about the lost money
• Comparing yourself to traders who passed

Healthy Coping Strategies:

1. Recognize failure is normal – 85-90% of first attempts fail
2. Treat it as data – You paid for valuable information about your trading
3. Take a break – At least a few days to a week
4. Review objectively – Use journal, not just memory
5. Connect with community – Most traders have failed multiple times
6. Focus on improvement – Each attempt should show progress

Red Flags to Watch For:

• Revenge trading mentality (“I’ll show them”)
• Taking increasingly risky setups
• Buying multiple challenges simultaneously without addressing issues
• Blaming the firm’s rules rather than adapting
• Hiding failures from accountability partners

If you notice these patterns, take a longer break and consider working with a trading coach or mentor.

Key Takeaways

When you fail a prop firm challenge, remember:

1. It’s normal – Most traders fail first attempts
2. You have options – Retake discounts, different firms, smaller accounts
3. Learn from it – Each failure provides valuable data
4. Adjust specifically – Identify exact issues and fix them
5. Practice first – Paper trade your new approach
6. Consider alternatives – Different firms, different rules, different account sizes
7. Manage psychology – Take breaks, review objectively, stay patient
8. Keep perspective – Total cost of multiple attempts is still relatively small

The traders who succeed with prop firms aren’t necessarily the most talented, they’re the ones who learn from failures, adjust their approach, and persist with improved strategies.

Ready to Try Again?

If you’re preparing for your next challenge attempt:

Recommended Next Steps:

1. Review our consistency rule guide if that was your issue
2. Understand trailing drawdown if drawdown was the problem
3. Compare prop firms without consistency rules for easier rules
4. Check out the cheapest prop firm challenges to reduce retry costs
5. Read how to pass a prop firm challenge first try for detailed strategy
6. Learn more about trading multiple prop firm accounts at the same time

Compare Top Prop Firms:

• Best futures prop firms
• Best forex prop firms
• All prop firm reviews

Consider These Beginner-Friendly Options:

• TradeDay review – Free resets, trailing drawdown
• Apex Trader Funding review – Multiple free resets, no consistency rule on some accounts
• Funded Trading Plus review – Flexible rules, good support

Remember: Every funded trader you see started where you are now. The difference is they kept going, learned from each attempt, and adjusted their approach. Your next attempt could be the one that changes everything.