If you’re new to prop trading, you’ve probably realised that skill alone won’t cut it. It takes discipline, strategy, and the right mindset to succeed at prop trading.
Many traders fail not because they lack talent but because they ignore the fundamentals of risk management, emotional control, and consistency.
In this guide, we’ll break down the best practices for new prop traders to help you stay ahead of the game.
1. Master Your Trading Plan
Jumping into the markets without a clear trading plan is like driving without a map- you might get somewhere, but it won’t be where you want to be.
Your trading plan should include:
- Your preferred trading strategy (scalping, swing trading, trend following, etc.)
- Risk management rules (max drawdown, stop-loss placement)
- Position sizing and leverage guidelines
- The markets and timeframes you focus on
- Entry and exit criteria
A solid trading plan eliminates guesswork and emotional trading, keeping you consistent even in volatile conditions.
2. Follow Strict Risk Management
Risk management is what separates successful prop traders from those who blow their accounts. It is best practice to never risk more than 1-2% per trade.
Here’s how to keep your risk in check:
- Use stop-loss orders on every trade. Never trade without one.
- Manage drawdown limits. Prop firms have strict rules, and exceeding them means losing your funded account.
- Stick to a risk-reward ratio (aim for at least 1:2 or better).
If you focus on preserving capital, profits will follow.
3. Treat Your Prop Trading Challenge Like a Business
If you're still trying to pass a prop trading challenge, treat it like a real trading account from day one. Many traders fail because they take reckless risks, hoping to hit the profit target quickly. That’s a recipe for disaster.
Instead, trade as if you are risking real money. That means taking time to conduct careful analysis, following a clear plan and using risk management tools wisely.
Pass the challenge by trading smart, not fast.
4. Keep Emotions in Check
The fastest way to ruin a good trade? Letting fear or greed take control. Prop traders must master emotional discipline to survive in the markets.
Mastering emotional discipline comes down to understanding trading psychology. This means recognising the common psychological patterns that often cause traders to make emotionally driven decisions.
Some good ways to avoid this common pitfall include:
- Stick to your trading plan: Don’t let FOMO (fear of missing out) push you into bad trades.
- Take breaks after losses: If you're frustrated, walk away before making impulsive decisions.
- Detach from money: Think in probabilities, not dollar amounts.
Emotional control is what keeps great traders in the game while others burn out.
5. Trade During the Best Market Sessions
Not all trading hours are equal. As a prop trader, you need to focus on high-liquidity periods where price movements are clean and predictable.
Some of the best trading sessions include:
- London Session (8 AM - 12 PM UTC): Highly liquid, great for forex and indices.
- New York Session (1 PM - 5 PM UTC): Best for stocks, forex, and commodities.
- London-New York Overlap (1 PM - 4 PM UTC): The most volatile and profitable time for trading.
Avoid low-liquidity periods, such as late Asian session hours, when price action is choppy and unreliable.
6. Keep a Trading Log
You can't improve what you don't measure. A trading journal or logbook helps you track what works and what doesn’t.
Keep track of:
- Entry & exit points
- The reason for the trade
- Market conditions at the time
- How you felt before, during, and after the trade
- Profit/loss and lessons learned
Review your trades weekly to spot patterns in your strengths and weaknesses.
7. Keep Learning & Adapting
Markets change. Strategies that work today might not work tomorrow. The best prop traders are constantly improving their strategy and skills.
You should treat prop trading like a job that requires constant training and learning. This might look like investing in trading courses, reading daily market updates, attending trading events or even investing in coaching.
Prop trading is a skill-based business. Invest in yourself, and your trading will improve.
Prop trading isn’t just about knowing how to trade- it’s about trading smart. By following these best practices, you’ll improve your skills, minimize risks, and increase your chances of long-term success.
Prop trading rewards those who stay consistent and disciplined. If you apply these prop trading tips, you’ll be well on your way to becoming a successful funded trader.
