It’s not a mystery that most traders who embark on a prop challenge struggle to pass through even the first step. And even those who reach the funding phase usually struggle to maintain their account. Only a tiny chunk truly makes it, and that’s a shame because being funded by a Prop firm like Savius is an excellent risk management tool, limiting the trader’s direct exposure to the markets and an opportunity to be noticed.
So you may ask yourself what traits distinguish the ones who make it through the first steps and then manage to hold their funded account through the test of time from those who don’t make it. This article will try to answer your question.
The scratch card effect
The main mistake to avoid during your prop challenge is to face it too lightly, like if you were buying a scratch card.
“At worst, I lost what I paid for the challenge, but if lady luck kisses me this time, I’ll have more money to put on my bets.”
Most newbie traders struggle with risk management when their money is involved. When the responsibility of managing your own money is detached even more by providing a demo account for testing purposes, there is a tendency to underestimate the consequences of your trading decisions.
This psychological state can quickly bring to a perpetual cycle of attempts, with the hope at a certain point to receive a funded account without being sustained by a solid statistical edge.
Markets are competitive battlegrounds where for every buyer, there is a seller. There is no trade without a counterpart.
As with every competitive context -think about sports- a lucky strike can win a set but cannot build a successful career.
The pro trader’s routine
One of the essential points which distinguish the majority of traders who manage to get a funded account -and to maintain it through time- is their focus on a systematic process built upon the following factors:
Nobody can see the future. Those who take their trades upon precise, pre-defined setups validated by a statistical edge have greater chances of getting funded.
However, there is no jack of all trades in this game. An unbalanced market in the middle of a trending phase is a radically different trading context compared to a ranging, balanced market.
Usually, a trading setup with a good yield in trending contexts won’t perform as well in balanced markets and vice-versa.
Know your trading instrument
You can’t just think to take a random trading setup from someone else, blindly trading it in a vast range of assets, always expecting more or less the same outcome. It’s just unrealistic because it doesn’t consider the fundamentals related to what drives the different market participants’ activities between other markets.
Each market has its characteristics: CFDs, FX; Currency Futures; Commodity Futures; Treasury Futures; Spot Crypto; Crypto derivatives. Each market presents different tick sizes, commissions, reactions to other kinds of news, and peak hour activity.
Successful traders carefully select and study their trading instruments. They collect statistics related to their trading setups, and they know when it’s the case to hold back.
“He who fails to plan is planning to fail.” – Winston Churchill.
Opening a position by gut feeling, maybe supported just by a vague discretional technical analysis, is not the same as having a straightforward trading setup with mechanical rules tied to its execution.
Most successful traders -even discretional ones- systematically execute their trades while supported by a rigid ruleset. They know immediately if and where to place their Stop Loss and Take Profit because everything is tied to their ruleset.
Calculating the position size in advance; pre-planning a maximum daily drawdown coherent with the trading strategy statistics; knowing the minimum Risk to Reward ratio that it makes sense to bet on concerning the specific trading strategy. All of these are critical points that constitute a successful trader.
Consistently profitable traders who do not trade with a hard stop loss or bracket orders exist. However, usually, they still have a rigid ruleset that they follow with strict discipline.
Aiming for a steady progression
In a few more words, the trader’s awareness that a statistical edge backs their trading setups, and therefore, the profitability of their trading system derives from the cumulative work over time, step by step.
Pro traders don’t build their bankroll and a whole career thanks to a couple of big trades. Therefore, this kind of awareness is probably a pro trader’s most crucial distinctive trait.
Being a trader is a challenging and competitive job with a shallow barrier of entry.
Almost anyone can open an account on a CFD broker or a Crypto exchange, attracted by “easy money”. Gamblers do not realise that the market’s context can abruptly shift. A trading strategy can suddenly stop working; a “black swan” event can happen anytime.
Even the most seasoned traders, backed by a systematic process, can be hurt by the backlashes that derive from these events.
What differentiates a pro trader from a gambler is that the first is equipped with the right tools for surviving the harsh times while making bank when the market context is mature. Instead, the other one always has the opportunity to liquidate their self-funded account or fail a prop challenge after prop challenge.