Proprietary trading, or prop trading, is a form of trading where traders use the capital of a prop firm to trade in various financial markets and share the profits with the firm. Prop trading can be a lucrative and rewarding career for those who have the skills, discipline, and passion for trading.
However, before becoming a funded trader, one has to pass a prop firm evaluation, which is a test that evaluates the trader’s performance, strategy, and risk management. Prop firm evaluations are not easy, and many traders fail to meet the requirements and expectations of the prop firms.
So, how can you increase your chances of passing a prop firm evaluation and getting funded? Here are some tips and tricks that can help you:
- Choose a prop firm that suits your trading style and goals
Not all prop firms are the same. They have different rules, requirements, restrictions, and benefits for their traders. Some prop firms may have time limits, daily or maximum drawdown limits, profit targets, trading hours, or instrument restrictions. Some prop firms may also offer different account sizes, leverage, profit splits, or fees.
Therefore, before signing up for a prop firm evaluation, you should do your research and compare the features and conditions of different prop firms. You should choose a prop firm that matches your trading style, goals, and preferences. For example, if you are a scalper, you may want to choose a prop firm that allows high-frequency trading and has low fees. If you are a swing trader, you may want to choose a prop firm that has no time limits and offers a higher profit split.
- Prepare and practice before taking the challenge
Prop firm evaluations are not something that you can take lightly or impulsively. You need to prepare and practice before taking the challenge, as you will be trading with real money and under real market conditions. You should have a proven trading edge, a solid trading plan, and a positive trade expectancy over a large sample size of trades.
You should also familiarize yourself with the prop firm’s platform, rules, and restrictions, and practice using a demo account or a simulator. You should test your strategy, risk management, and emotional control under different market scenarios and situations. You should also review your performance and identify your strengths and weaknesses.
- Follow a strict risk management plan
Risk management is one of the most important aspects of prop trading, as it determines how much you can lose or gain in each trade and in the long run. Prop firms have strict risk management rules that you have to follow, such as maximum drawdown limits, position size limits, or stop-loss orders. If you violate these rules, you may fail the challenge or lose your funded account.
Therefore, you should follow a strict risk management plan that aligns with the prop firm’s rules and your trading strategy. You should never risk more than a small percentage of your account per trade, and you should always use a minimum risk-reward ratio that ensures that your potential profits are larger than your potential losses. You should also adjust your position size according to the volatility and liquidity of the market, and use trailing stop-losses or take-profit orders to lock in profits and protect your capital.
- Trade consistently and objectively
One of the main goals of prop firm evaluations is to assess your consistency and objectivity as a trader. Prop firms want to see that you can trade according to your plan and strategy, and that you can handle the emotions and pressures of trading. They do not want to see that you are gambling, overtrading, revenge trading, or deviating from your rules.
Therefore, you should trade consistently and objectively during the challenge, and avoid any emotional or impulsive decisions. You should follow your trading plan and strategy, and only take trades that meet your criteria and have a high probability of success. You should also avoid trading during news events, periods of high volatility, or when you are not in the right mental state.
- Be patient and realistic
Prop firm evaluations are not a sprint, but a marathon. You should not expect to pass the challenge in a few days or weeks, or to make huge profits in a short time. You should be patient and realistic, and focus on the process rather than the outcome. You should aim for steady and consistent growth, rather than chasing unrealistic targets or returns.
You should also remember that prop firm evaluations are not the end, but the beginning of your prop trading career. Once you pass the challenge and get funded, you should continue to improve your skills, learn from your mistakes, and seek feedback and mentorship. You should also reinvest your profits and grow your account, rather than withdrawing them too soon or too often.