Mastering the Art of Trading: Prop Trading Firms Guide

This article assumes the reader already knows what prop trading is, but the reader still has much to learn. Thus, the following will outline the fundamental steps for those eager to embark on their exciting journey into self-employment, financial independence and the excitement that living the life of a successful prop trader can provide.

Becoming a Prop Trader

Anyone reading this almost certainly has the essential element of “desire” to master the art of prop trading. Desire is the fundamental fuel that will underpin success in this demanding field.

However, never forget that prop trading involves a learning curve and a willingness to educate oneself in the basics and more complex details of how successful prop trades are made. Homework is required! That part can’t be skipped!

Balancing out the accumulation of knowledge is gaining experience. The latter takes some time and mental discipline to maintain a mindset that can handle setbacks and disappointments while holding fast to a refusal to give up.

Four Steps to Mastering Prop Trading

This article follows the key steps that lead to prop trading mastery.

1. Education

Focus on a Market- Prop trading is pursued in various markets, each with its kind of financial instrument. That means the stock market, Forex (foreign exchange currencies), cryptocurrency, futures, commodities, bonds, algos (computer trading with proprietary algorithms) and more. 

Indeed, many prop traders dabble in more than one market, but becoming an expert in a single market and understanding it thoroughly is an excellent idea for beginners. One can always branch out later.

2. Choosing a Strategy

Experienced prop traders say that sticking with a strategy chosen is more important than which strategy you choose. With that in mind, consider these factors in terms of strategy:

Time- There are three kinds of strategies “times”:

a. Short-term

b. Medium-term

c. Long-term

Short-term traders focus on scoring fast profits by leveraging market changes that happen over minutes or hours.

Medium-term traders are called swing traders. They monitor trends over a few days or weeks and rely on technical and fundamental analysis to predict where specific financial instruments will go, up or down.

Long-term traders are positional traders who look at undervalued or overvalued instruments over months or years. Again, deep data analysis is required to predict buying and selling actions.

3. Trading Platform

The platform can make a measurable difference in a trader’s success rate. Choosing the platform that’s right for the skill and mindset of each trader is not an insignificant decision. Not all trading platforms are created equal. Some prefer “robots,” while others favor systems that leverage algorithmic trading methods.

A trader must be comfortable with the interface they select. Choosing the right platform is yet another element of a trader’s education and the experience they must gain.

4. Choosing a Prop Firm

Many prop outfits are eager to take on new blood, that is, new traders.

New traders can decide by identifying those who specialize in the market in which the trader will work. Once a list of firms in the proper field is identified, it’s important to dig as deeply into their reputations as possible.

Factors to consider include payout structure, trading capital types, fees or other costs associated with selecting the firm and more. One of the best ways to get a good read on a prop firm is to interview someone you know and trust who already has experience with that prop firm. There’s no substitute for direct experience.

Mentor Up

Suppose you want to know the secret of leapfrogging past the numerous pitfalls and mistakes that inexperienced prop traders inevitably make. In that case, find an experienced, successful trader willing to take you under their wing and guide you into the practice.

Note this does not necessarily have to be a personal, one-on-one relationship. Instead, research the names of proven prop trader success stories, study their every move and follow what they are doing now. Study their trades, the platforms they use, and the markets they favor –it’s a goldmine of information that can lead you to your success faster.

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