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.

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.

Minimum deposit:

$1

Review

Topstep is an international proprietary trading company registered in the USA. The company has been providing financial services since 2012 and offers exclusive trading terms for clients from different countries. Topstep provides financing of real trading accounts of its clients if they prove the skill to make trades and manage risks on a simulation account. Traders can trade CME Group futures. Trading on real accounts is carried out through the ECN broker Equiti Capital.

Pros/Cons

•Real trading accounts are financed by a broker, there is no need to invest your funds in trading.

•The company provides a wide range of free training materials, including free group coaching.

•You can contact the support team using several convenient methods.

•The broker offers a referral program for extra income.

•The company doesn’t offer bonuses, automated trading, or other passive income options.

•The support service works only on weekdays during set hours.

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2

9.2/10

Go to broker

Your capital is at risk.

Minimum deposit:

€155

Review

FTMO is an international proprietary trading company created in the Czech Republic in 2014. The platform brings traders into its fold and after traders successfully pass a two-step testing regime, FTMO transfers 400 thousand dollars to the trader’s account. Transactions are monitored by FTMO to grow the deposit. There is a payment of 80% at the first stage of real trading. The 90% Profit Split is available only to those FTMO Traders that have reached Scaling Plan. The company works in full accordance with European financial legislation and is under the local regulator.

Pros/Cons

•Quite low testing cost is €155.

•Classic platforms such as MT4, MT5, and Ctrader are familiar to many traders. For these platforms, hundreds of indicators, scripts, and advisers have been developed.

•The starting reward is 80%.

•Diversification of tariff plans. Candidates can choose a demo deposit from 10 thousand to 200 thousand US dollars. There are tariff plans that span from standard to aggressive trading.

•Leverage is up to 1:100.

•Strict requirements for the test period. The allowable maximum loss is 10% of the deposit amount. The target profit is 10%, for which 1 month is provided.

•There is no information about how the company is funded.

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3

9.1/10

Go to broker

Your capital is at risk.

Minimum deposit:

$119

Review

Funded Trading Plus clients trade CFDs on currency pairs, indices, precious metals, energies, and cryptocurrencies. There are 18 programs with one- and two-phase challenges, or without evaluation. These programs also differ in initial fees, profit targets, maximum total drawdown, and other criteria. Traders can receive from $5,000 to $200,000 under management upon successfully passing the challenge or immediately if they choose the program without evaluation. Scaling up to $2,500,000 is available. The profit split is 80%/20% at the start and 90%/10% or even 100%/0% later. Traders work on MetaTrader 4 and MetaTrader 5. Leverage is up to 1:30.

Pros/Cons

•Wide choice of programs with universal parameters and acceptable requirements;

•One-time initial fee, refundable for programs with one- and two-phase challenges. No monthly subscription;

•Simple and understandable conditions, no hidden obligations, and profitable trading split;

•The prop firm partners with Eightcap and ThinkMarkets. It offers spreads from 0 pips and low trading fees;

•A demo account with $100,000 in virtual funds is available for exploring the trading process and instruments;

•24/7 technical support is provided via four communication channels;

•Deposits and withdrawals are made with Visa, Mastercard, bank transfers, and crypto wallets without fees.

•The Master program without evaluation is very expensive — a non-refundable initial fee of $4,500 is required for the balance of $100,000;

•Funded Trading Plus offers only CFDs without real assets or futures;

•The firm’s website contains much information, but some important nuances, like the reset fee, are not provided.

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