11 Simple Steps to Become a Prop Trader
From doing your research to accessing education, here are a few simple steps to become a prop trader. Let’s get started!
1. Know the pros and cons
To become a prop trader, the most important trait is to remain realistic. This includes looking at the pros and cons of the industry.
- Access to bigger capital: A bigger account allows you to make more money, handle bigger trades, and allow space for volatility.
- Practically no risk: Prop firms take all the risk. Should you hit your max-daily drawdown, you are safe.
- Trade anywhere, anytime: The freedom of being able to work your own hours, be your own boss and make money at the click of a button is everyone’s dream!
- A large variety of pairs to trade: Many prop firms allow you to trade the 28 major pairs and the majority allow you to trade indices, commodities, and oil.
- Biweekly/monthly payouts: The majority of prop firms work on a monthly payout schedule, given the fact that you’ve reached your target and requested a withdrawal. However, we are starting to see the rise in bi-weekly payouts.
- Trials: So, you have signed up with a firm, but chances are you have to pass an evaluation or challenge phase before receiving a funded account. It’s no problem for some, but if you are not one for being trialed and tested, there are prop firms that offer instant funding (for example, like BluFX)
- Demo accounts: This is one of the business models used in newer prop firms. What happens is they work on the known statistic of “90% of traders lose 90% of their capital within 90 days.” So, with this in mind, they take a chance at creating demo accounts and handing them over, hoping traders do not succeed. If traders fail, the firm keeps the subscription fee; if the trader passes, they have to pay out from their pool of subscription fees. This is a hazard to you, the trader – you may be very profitable and will be limited to how much you can withdraw.
- Psychology behind trading large capital: Receiving a funded account is great! But are you ready? Have you any experience in trading such large lot sizes, making such large profits and losses? Are you mentally ready to take on this task and risk your fee just to pass the challenges or reach any targets? Basically, the stresses that come along with this are enormous. Make sure you’re ready and keep calm.
2. Blood, sweat, and tears
This is one of the most daunting industries to be in and getting funded adds to that. You are no longer trading a small account, dealing with small trades, flexibility, no targets, and small profits and losses. Trading a funded account through a prop firm requires you to be laser-focused at all times. You have targets to reach, and you will be using larger lot sizes – which will give you a sense of adrenaline as you watch your trades fluctuate. But that is the beauty of it all: you know yourself as a trader and you know the possibilities are endless. It takes years to become a success.
3. Back to school
Just like any exam or pop quiz, you are expected to revise everything to get the best outcome. This is no different to being a prop trader. Do your research on your prop firms of interest and see what it entails to succeed under them. What are their challenges? Targets? Fees? Customer support?
4. Join the prop firm community
Facebook, Discord, Telegram, YouTube, Twitter, LinkedIn, WhatsApp… the list goes on. Each prop firm has its own groups available to its traders. These groups are of massive help: so, to become a prop trader, make sure you find them and be sure to join them. You will gather plenty of information on trading as well as the prop firm itself. You will be able to network with the firm’s traders and learn from the best of the best. All free of charge.
5. Paper trade the same amount
If you have any doubt whatsoever, I suggest you spend a minimum of 4-6 weeks trading a demo account of the same amount. Simply find a broker and set up a demo account and get started immediately. It is imperative that you treat this as you would your funded account, by trading this demo account you will be able to see key areas to improve on or slightly adjust. Your trading style needs to follow a set of rules and criteria for the best consistent profitable outcome. Once you feel comfortable and believe 100% that you can do it, go sign up and make some money – you owe it to yourself.
6. There’s always room for improvement
Assuming you pass your challenges and evaluation phases – unless you signed up with a prop firm that offers instant funding – you will receive your funded account. The learning, however, does not stop there. You will quickly see that this is a ripple effect: each trade you take or do not take will have an effect on the next one after that. It is up to you to ensure you remain calm, not allowing yourself to be influenced by anyone else’s views or your past mistakes. You must always stick to your system, and constantly evolve them to make sure they are keeping up with your growth. Everything in life needs balance.
7. Start early and work hard
There are only so many things you can control in the prop trading business. Two of them are the time and effort you put in. To become a prop trader, you need to be up early and start working the charts. Time waits for no one. The early bird catches the worm (in this case, the trade).
8. Develop your process and routine
Too many traders want that lavish overnight success lifestyle without actually following the routine and process it takes. As with anything in life, in order for something to stand strong, it needs a solid foundation. So without actually analyzing charts, back-testing, testing your system, following your rules, and leaving the trades alone, you won’t get very far in your journey.
9. Have a plan A, B, and C
The easiest way to set yourself up for failure is by pressuring yourself. Many first time prop traders sign up and expect to pass the first time. They give themselves reasons as to why they HAVE to pass – they need to pay bills, they want to spend – but the issue is they do not even have the capital to pay for a new account should they fail. The best advice would be to ensure that you have saved up enough capital to try the challenge two or three more times. By doing this you are now allowing yourself to trade in a pressure-free environment. You have no worries or reasons as to why you have to pass. You are simply taking it one trade at a time. This way, if you still do not manage to pass, you know that you tried your best and you are more confident to try again.
10. Reset daily
Don’t obsess over what happened yesterday because you can’t change the past. Simply try to do the right things every day. For instance, let’s say you lost $500 on Monday, don’t come in on Tuesday thinking you have to make up for it. Let it go because immediately you will be trading out of desperation, which means you’re in the worst possible emotional state to trade in, and chances are, you will lose a further $1,000. Being a forex trader means that you have to accept your losses, and have the same feeling towards them as you do with your profits. A trade is a trade. We all have bad days, some more than others.
11. Spoil yourself
Let’s assume you have reached your first withdrawal. Well done to you! No matter the amount you withdraw, make sure you buy yourself something small as a treat. This will subconsciously reward your brain and you will be more motivated to go at it even harder next time. If you believe it, you will achieve it!