Introduction
One of the revolutionary things that has happened in the Forex Industry is the invention of Proprietary firms. These firms are usually called Prop firms. Typically, prop firms give traders access to capital to trade financial assets. In exchange, traders share a percentage of their profits with the firm.
However, these prop firms usually have a set of rules you have to follow and adhere to without violating the rules. Some traders, consider these rules to be strict and limiting. Working with a prop firm isn't easy. Today, we will be learning some tips on how to increase your chances of passing a prop account and securing funding.
Tips for Success in Forex Prop Trading
1. Understanding the Rules
When it comes to trading a prop firm account, the right thing to do is to read and understand the rules. It is important to say that different prop firms have their rules, evaluation criteria, rules, and profit-sharing agreements. Although some prop firms operate in similar ways, you mustn't assume.
Read the rules and understand them. You can decide to take a step further by reaching out to their support to understand any part of the rules you have read. Familiarizing yourself with how it works is critical, violating these rules can lead to losing funding or failing an evaluation.
The common rules for most prop firms include
Drawdown Limits: These rules function to protect the prop firm’s capital by setting a limit to the amount of loss you can incur on a prop account. These limits are mostly calculated by percentages. As a trader, you need to confirm if the drawdown rules are calculated based on balance, equity or both.
Take, for example, the best prop firm in the world FT9ja. FT9ja spells out its drawdown rule on its homepage, calculated based on both equity and balance. As with all prop firms, breaching the drawdown limits can result in immediate disqualification. So do well to check the drawdown rules and plan your trades accordingly.
Profit Targets: Meeting a profit target can tell the prop firm that you’ve got what it takes to make a profit. These are targets set by the prop firm. It could either be 8%, 10% or even more depending on the prop firm. Ensure you know the profit target of your prop account and have a strategy to meet it realistically.
Trading Period: Some firms have a minimum trading period to prevent excessive risks in a short timeframe and to encourage consistency in trading. Always take note of what these periods are and adhere to them.
2. Create a Solid Trading Plan
According to Benjamin Franklin, “If you fail to plan, you are planning to fail!”. It is that simple. When trading a prop account you must have a well-thought-out trading plan.
A trading plan can be a series of set instructions you decide to follow before, during and after a trade.
For example, a trading plan can look like this — “I will only risk 1% of my capital on 2 trades. If both trades go against me in a day, then I will not trade till the next day”.
Also, you can create a trading plan and ensure it does not violate any of the rules of your prop account. Remember, the first tip is to understand the rules.
3. Manage Your Risks
Trading has always been a trade of probability. According to Morgan Housel's Psychology of Money, you are to increase your ability to stay in the trade. Risk management can never be overemphasized.
This is one of the major reasons traders do not pass their prop account. They always want to make 3000% in 2 days. You can learn to manage your risk through the following;
Position Sizing: Adjust your lot size or position size to risk around 0.5 - 1% of your trading capital. For example, if you trade a $10,000 account, you risk 1% per trade.
It will take 10 losing trades in a row before losing 10% of your account. Now ask yourself “Can I take 10 trades in a row without making a profit?’’ If not, then you are one step away from passing a prop account.
Stop-Loss Orders: You can use stop-loss on your trades to eliminate your emotions from closing a trade. Learn to cut your losses and move on. Remember, you do not control the market.
Risk-Reward Ratios: Always ensure your reward is at least twice as much as your risk. If you risk $200 on a trade, then the returns should be at least $400. That way you can recover your losses faster.
4. Leverage the Use of EAs or Bots
This is the use of Expert Advisors or trading bots to help execute your trades on predefined criteria. Some of the benefits of the use of EAs or bots are
Eliminate human emotions in trading that could have led to a loss
Automatically execute trades in your absence. Some EAs or bots can go as far as managing your portfolio.
Whatever EA or bot you have, ensure that it is configured to follow the rules of your prop accounts. Lastly, confirm whether the prop firm allows using EAs because not all prop firms allow this.
5. Discipline to Follow Your Plan
There is no better way to put this. Follow your plan whether you “feel” like following it or not. As long as your plan has proven to show you results, stick to it and “force” yourself to follow your plan.
Conclusion
Trading can be tedious but the results are far more rewarding compared to the stress that comes with it. With these tips you have now, you are one step away from passing your current or next prop account.
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