Becoming a profitable trader is a hard task for many. In this article, I’m going to provide 10 tips to make this journey a bit easier.
There is already heaps of content to improve your trading so I’m going to provide some tips more focused on capitalizing on the benefits prop firms can provide.
10. Take Many Small Withdrawals rather than Fewer Large Withdrawals
When your funded account is in profit, you are no longer risking the prop firm’s capital; you are risking your own profits. Counter this by withdrawing more often and holding off trading until you receive your profit split and the account is brought back down the the starting balance.
This is easier if you follow point 9.
9. Diversify your Trading Capital Across Multiple Firms and Accounts.
Try to split your prop accounts between 2-3 different respected prop firms. This brings a multitude of benefits including:
- If you breach one account, you have others to fall back on.
- You will have payout dates spread across the month, reducing stress and uncertainty.
- It avoids losing all your trading capital if one firm goes under, which unfortunately seems to be becoming more common.
8. Make Sure to Receive your Fee Refund as soon as Possible.
After passing your challenge, don’t let your hard work go to waste. For your first withdrawal, aim to make the minimum amount required to receive the fee refund. This is usually the lowest withdrawable amount but may sometimes require 2-10% profit.
After receiving the refund, you are now trading completely risk free! You can now repeat the process with another challenge or retain the funds incase you breach the funded account.
7. Reduce Risk at the Funded Stage
You should pay extra attention to protect your newly funded account. It is usually wise to reduce the risk per trade at this point. Depending on your strategy a good starting point is to risk no more than 0.5% of the account balance per trade.
For example, if you have a $100k funded account. Make sure to risk less than $500 per trade.
This should prolong the time you hold onto the funded account and subsequently, the number of withdrawals you can receive.
Just note, some firms do not allow major changes to your trading strategy when moving from the challenge phase to the funded phase. You shouldn’t run into many issues by reducing risk alone, but just keep this in mind.
6. Don’t Cheat or Try to “Game the System”
Theoretically, it is relatively easy to game the prop firm system. With firms competing fiercely and prices at an all time low, the math of prop trading is firmly on the traders side.
You may be tempted to try opposite account hedging (going all in long on one account and all in short on another) but this is now quite easy for firms to catch, and is only going to get easier with the release of a universal/shared blacklist which is currently in the works.
This, along with any other forms of cheating or breaching the terms of the prop firm, usually results in the loss of the account and difficulty receiving future funding.
5. Understand the Types of Funding Models Available (and the pros and cons of each)
There are a variety of funding models available in the prop industry and each come with their owns pros and cons. Here’s a quick overview of the most common models:
Two-Phase Challenges
This is the most common funding model and was made popular by an early prop firm, FTMO. It requires passing an evaluation phase, usually between 8-10% profit and then a verification phase, usually set at 5%.
- Pro: After passing the challenge, you have a large static drawdown allowance and plenty room for your trades.
- Con: The challenge is relatively difficult to pass with only 3-7% of traders reaching the funded stage.
Single-Phase Challenges
This is a simpler funding model which requires just one profit target to be hit to become funded, usually around 10%. It’s important to note that drawdowns tend to work differently on most single-phase challenges and usually trial as the account goes into profit.
- Pro: This challenge is much easier to pass and become funded. Around 10-14% of traders reach the funded stage with this model.
- Con: The trialing drawdown is usually quite restrictive and requires a buffer to be left the account, preventing the withdrawal of all your profits.
Instant Funding Accounts
These accounts skip the challenge phases and provide the trader with direct access to trading capital. Some firms may require a % profit to be achieved before a withdrawal can be made.
- Pro: These accounts have a higher percentage of traders receiving a payout, although they are typically for smaller amounts.
- Con: The price:capital ratio is substantially higher than the challenge model. Expect to pay around 10x more for comparable funding vs a challenge account.
Three-Phase Challenges
This is a relatively new model which is the most difficult to pass but also costs the least to start. This model was created for those looking to get into trading without having to pay large upfront fees.
- Pro: Lowest cost to start and can be great for beginners to get a feel for prop trading.
- Con: This model has the lowest pass rate.
We recommend the 5%ers Bootcamp model which is a three-phase challenge but with the majority of the fee only due after passing.
4. Use a Discount Code or Promotions Wherever Possible
Nearly all prop firms offer a discount or promotion to reduce the cost of the initial fee or provide other perks such as an increased profit split or extra fee refund. These discounts can be substantial and in some cases may reduce the cost by up to 50%.
Utilizing the promotions, you can dramatically increase your over return on investment.
You can find a list of active promotions (many exclusive) on our Prop Firm Explorer Tool. Promotions are updated every Monday.
3. Find the Best Asset Class for You
Many traders new to the industry often steer towards trading gold or other high volatility instruments. It’s no surprise that gold is among the most common instrument that breaches prop accounts.
Those who focus on trading indices or specific future markets, have a much greater success rate.
If you find yourself constantly losing, consider learning to trade another instrument.
2. Build Multiple Trading Related Income Streams
You will often see many traders selling courses, signals or providing other content. This is usually done to provide an extra revenue stream to supplement their trading. This reduces the stress that trading can bring when it is your sole income. You don’t need to be an expert trader to build other income streams, here’s a few ideas anyone can start:
- Affiliate Programs: Many firms offer a commission for each trader you refer to the prop firm. The average rate is around 15% of the traders challenge fee. Stay ethical when referring firms and only join affiliate programs of firms you would trade with yourself.
- YouTube/TikTok: Document your trading journey on YT/TikTok and earn a revenue share of ads. CPM rates are among the highest in the trading industry and you can achieve up to $10 per 1000 views on YouTube upon reaching monetization.
- Write a Blog: Writing a blog is another great way to build a revenue stream. Write about your experience with prop firms, how your trading is going, interviews with other traders etc. You can monetize this with affiliate programs, ads and sponsorship deals.
1. Only Trade with Reputable Firms
This is the most important tip on the list. Don’t waste your time and money on scam prop firms. Today, anyone with a few thousand dollars can launch a prop firm and not everyone has the traders interests at heart.
Here’s a few pointers to think about when choosing a prop firm:
- Do they have a track record?
- When were they established?
- Do they share their leadership team on the site?
- Make sure to check their TrustPilot rating (filtering for verified only reviews)
- Check their discord server to see what other traders are saying.
- Do they have hidden rules?
- Is it too good to be true?
We currently recommend FunderPro as our top choice which is one of the only few firms to provide live capital to their traders. They also have the fasted payouts in the industry which can be requested on demand. Read more about FunderPro below:
You can also explorer a full list of firms we recommend here.
