Top 7 Secrets About Prop Trading You Wish You Knew Sooner

Did you know there is a way to start financial trading without your own capital? Welcome to the world of proprietary or prop trading, where you can trade without personal financial risks and become financially independent. Prop trading has been on the rise lately, as it allows traders to access the firm’s capital and speculate on various financial markets. Prop firms allow traders to keep sometimes 90% of profits made in funded accounts, making it wildly popular among retail traders worldwide. Let’s uncover the top 7 secrets of profitable prop trading to fast-track your journey to becoming a professional prop trader.

Secret #1 — You don’t need a fortune to start

Proprietary trading allows you to access significant trading capital without requiring a hefty personal investment. There are small fees charged for funded challenges where traders must prove their trading skills by hitting a predefined profit target. After this, the trader gets access to the funded account and can start trading for profits. Spoiler Alert: You are not liable for losses incurred in a prop trading account, allowing you to eliminate personal financial risks, unlike traditional Forex trading. In traditional financial trading, traders can lose more than their trading account balance as a result of leverage, which is completely eliminated in prop trading. However, it is tricky to select a reliable prop firm as there are many firms created daily. As the sector is growing fast, traders should only opt for reliable firms that have proven their worth and trustworthiness. Reliable prop firm review platforms that do unbiased reviews are a great help in this regard.

Secret #2 — Profit sharing works in your favor

Prop trading firms offer profit splits, meaning traders can keep a significant portion of their profits. This profit sharing is often around 80%, and some reliable firms even offer up to 90%, meaning you can keep 90% of your profits, which were made on a funded account. This structure is especially attractive for traders who can not allocate large amounts of capital on their own and still want to receive a decent share of profits made in prop trading. With prop trading, you can retain most of your profits, making it an excellent choice for ambitious traders.

Secret #3 — Prop trading is not just for Forex traders

Forex prop trading firms are among the most popular types of trading firms. These firms typically offer access to Forex pairs, indexes, commodities, and even cryptos. However, there are different types of firms that offer access to futures asset classes with a multitude of instruments. Some firms also allow stock trading, which can be incredibly attractive, as stocks typically require more capital to start financial trading. Diversification is key to enhancing opportunities and reducing risks, and having the ability to access diverse markets is crucial in online financial trading.

Secret #4 — The right firm makes all the difference

Selecting the right firm does not always mean selecting a safe firm. The basic tips for selecting a reliable firm include:

• Transparent rules
• Excellent customer support
• Competitive profit-sharing
• Reputable platforms (e.g., MT4/MT5)
• Stay focused on the conditions, not the name. Even if the firm is called Funded Firm, it is still important to read review before signing up with the firm.

However, there are many prop firms, and you should always opt for the one that suits your needs. Ensure that the firm offers assets you want to trade, low spreads, and rules you can comply with.

Secret #5 — Your strategy matters the most

Prop firms have rules including daily risk limits and overall drawdown. To stay compliant, you require a strategy to hit the profit target without hitting these limits. Since many firms have around a 10% profit target, your strategy needs to have an edge. Only trading strategies that have higher win rates are compatible with this kind of trading.

Secret #6 — Risk management is key

To avoid breaching risk limits, superior risk management is mandatory. Successful prop traders always use stop loss orders and position sizing to ensure 2-3 bad trades won’t breach daily risk limits. This requires calculating position sizing and stop loss so that not a single bad trade will ever violate the daily risk limit. It is recommended to stop trading for the day after 2-3 consecutive losses and continue the next day. Here again, you need to use strict risk management not to hit the maximum loss limit and daily risk limits. If the daily risk limit is 5% then you should not risk more than 1% on any single trade. This way you create a room where you can operate and be profitable even after a consecutive losing streak

Secret #7 — Rules can be your best friend (or worst enemy)

Understanding and following prop firm rules is critical to stay compliant. Common pitfalls of trading include exceeding drawdown limits and over-leveraging. As we have mentioned, it is mandatory not to lose more than the daily risk limit percentage. Therefore, a trader should do their homework on firms with transparent rules. To avoid hidden rules and scams, traders should always choose prop firms that have positive reviews and good trader feedback.