What strategies do prop traders use?

Basics of prop trading

Prop trading is an investment strategy that involves a trader or a firm trading with its own capital for profit. Prop traders use their own capital to buy and sell securities while making their own decisions about what to buy and when to sell, without relying on anyone else.

Prop traders can benefit from a variety of strategies to maximize profits, such as analyzing market trends, taking advantage of arbitrage opportunities, and utilizing technical analysis. The primary goal of prop trading is to generate profits from the market movements.

There are some advantages to prop trading over traditional trading, such as reduced transaction costs, more control over trading decisions, and the potential for higher returns. However, it also carries significant risks, including the risk of losing your own capital. In addition, prop trading is more challenging than traditional trading, as it requires significant research and analysis of markets and trading strategies.

Prop trading strategies for beginners should focus on risk management, as it is essential to protect your capital and avoid large losses. Beginners should also focus on developing a good understanding of the markets, and developing trading strategies that are tailored to their own goals and risk tolerance.

Automated trading tools can also be a good option for beginners, in order to reduce the amount of time they spend analyzing the markets and making trading decisions.

Ultimately, prop trading can be a profitable venture, but it requires significant knowledge and experience to be successful.

How to trade with a proprietary trading firm

Proprietary trading firms often set risk and profit targets which must be respected in order to successfully trade. These targets are used to ensure that trading remains within the firm's risk tolerance and to maximize profits while minimizing losses. If these targets are violated, the firm may close out the position, suspend the trader, or impose disciplinary action.

It is important for traders to understand the firm's expectations and to adhere to the risk and profit targets set by the firm. Traders should also be aware of the consequences of violating these targets, as this could lead to suspension or termination of trading privileges.

Traders should also be familiar with the firm's trading tools and strategies, such as the types of orders and charts available. It is a good idea to practice and become comfortable with these tools and strategies prior to trading. This will help traders become more successful in their trading.

In addition to understanding the firm's expectations and trading tools, traders should also be aware of the market and understand its trends and movements. This will help traders identify potential opportunities as well as be aware of the risks involved in trading and have a plan in place to manage them.

To be successful in trading with a proprietary trading firm, traders must adhere to the firm's risk and profit targets, have an understanding of the firm's expectations and trading tools, and have a good understanding of the market. Following these guidelines significantly increases the likelihood of traders becoming successful in their trading.

How to choose a strategy for prop trading

When engaging in proprietary trading, selecting a strategy that is best suited to the trader's risk tolerance and market conditions is paramount. One way to reduce risk is by using short stop losses, as well as confirming signals from different timeframes.

Additionally, trading from really important levels and refraining from trading during news releases can also help to minimize risk. Other risk management techniques include avoiding lagging indicators and trading only when the market conditions are favorable.

It is also important to consider the timeframe you are trading in, as well as the type of asset you are trading. This will help to ensure that the strategy you choose will be effective.

In essence, the most important thing is to select a strategy that is suitable for your risk tolerance and trading goals, and execute it well. By taking the time to properly research and evaluate different strategies, you can ensure that you are selecting the most optimal approach.

What you need to do before you start trading with a prop firm

Before engaging in proprietary trading, thoroughly researching and understanding the various strategies available is a good practice. This will help traders to determine which strategies are the most suitable for their trading objectives.

It is also important to test the strategies in both automatic and manual modes. Automatic mode tests the strategy on past market data, while manual mode tests the strategy on a demo account. Volume analysis can be used to identify high-probability trading opportunities.

Testing a strategy in this way will provide evidence that the strategy is viable and will help to secure capital from a proprietary trading firm. It is essential to ensure that the strategy is suitable for the trading objectives and risk profile, as well as to gain an understanding of the technical aspects of trading. Beginners must remember that success in prop trading requires strict discipline, risk management, and continuous learning.

Finally, traders should ensure that they have a reliable source of market data and a fast internet connection.

Best Prop trading firms

1

9.4/10

Go to broker

Your capital is at risk.
Your capital is at risk.

Minimum deposit:

$48

Review

Hola Prime is a trading company regulated by the Financial Services Commission (FSC) of Mauritius under license GB24203729 and has offices in six countries. The company was founded in 2024 and has evolved from a private community of professional traders that has been active since 2012. Hola Prime offers 1- and 2-stage challenges with account sizes up to $300,000, as well as direct funding options up to $100,000 that do not require a trading assessment. Traders can access up to $500,000 in capital with the support of a scaling plan that allows account growth up to $4 million. Hola PrimeThe company's services are available in more than 175 countries, including the United States.

Pros/Cons

•Wide choice of account types, including non-valuation models;

•Profit sharing up to 90-95% in favor of the trader;

•Access to scaling up to $4 million if performance criteria are met;

•No commissions on some assets (cryptocurrencies and indices) and spreads from 0.1 pips.

•The use of EAs (EAs) is prohibited on direct funded accounts;

•Not all account types support trading on news or holding positions on weekends.

STUDY REVIEW

2

9.2/10

Go to broker

Your capital is at risk.
Your capital is at risk.

Minimum deposit:

Package buy - $119

Review

SabioTrade is a proprietary (prop) trading company founded in 2021 in Dublin, Ireland. After completing a evaluation, the clients of the company receive access to $20,000 - $200,000 in funded accounts, with the profit split of up to 90%. A 7-day trial period. SabioTrade clients trade CFDs on currency pairs, commodities, indices, stocks, cryptocurrencies and ETFs on the platforms of the multi-regulated broker with leverage ranging to1:30, depending on the asset. Funding programs are available in countries not included in the OFAC sanctions list.

Pros/Cons

•Funding up to $200,000 upon passing the evaluation;

•The minimum Package buy is $119;

•All strategies are allowed, including trading on news events;

•One-time fee for using the evaluation account and a refund after the trader receives funding;

•The profit split is up to 90%;

•The maximum drawdown level is dynamic, not fixed;

•Coupons are available to reduce the one-time contribution.

•Each trader has only one attempt to pass the evaluation stage;

•Strict requirements for the daily loss limit which is no more than 3% of the account balance.

STUDY REVIEW

3

9.1/10

Go to broker

Your capital is at risk.
Your capital is at risk.

Minimum deposit:

$79

Review

Instant Funding is a proprietary trading company based in the United Kingdom that has been operating since 2021. It serves traders in more than 180 countries, including the United States. Trading instruments available include major and minor currency pairs, metals, commodities, indices and cryptocurrencies. Instant Funding offers One-Phase and Two-Phase assessment programs to obtain funded accounts ranging from $10,000 to $200,000, as well as instant funding from $1,250 to $80,000. The maximum allocation per operator after scaling can reach $2.5 million for One-Phase and Two-Phase challenges and $3.84 million for instant funded accounts.

Pros/Cons

•Single and two-phase challenges, as well as an instant funding program.

•Possibility to choose between a Raw Spread account or a commission-free account.

•High profit participation rate: 80% (base) or 90% (scalable accounts).

•Leverage up to 1:100 for major currency pairs.

•Algorithmic trading is not allowed.

•Higher one-time fee of between $79 and $89, depending on the challenge, compared to competitors.

STUDY REVIEW