The goal of each prop trader is to get a funded account. A fair number of traders have managed to go through a two-phase Evaluation Challenge and got access to funded accounts, but are unable to make profits in the long run. More often than not, they break risk management rules right from the start and end up losing their account.
How to prevent this worst-case scenario from happening? Let’s see.
Not everyone has enough exposure
Passing the Evaluation Process and continuing to develop trading skills is quite a task. Prop trading firms prefer to sign up traders with field experience and good knowledge of processes in financial markets. Although it’s not that easy to gain them, there are always the lucky ones that succeed.
Some of them can even repeat their success just a few times in a row. However, the majority of novice traders can’t do so after obtaining a Forex funded account and meeting all the requirements. Why so?
Here’s a disclaimer: there are no risk management techniques that guarantee you won’t blow up. But there are some practices on how to avoid unnecessary risks.
The first rule you should remember. When stressed, you should cut your position size right away. Can’t calm down? Then walk away from the screens. It’s normal to feel tension and excitement when taking on a trade. But you should stop when the stress is abnormal. It can lead to irrational decisions.
As a matter of fact, the Forex market doesn’t tolerate mistakes. After a successful period when a trader has met the conditions of the Evaluation Process and obtained a funded account in Forex, they may face a period of failure. This is a common thing that happens to every trader with no exception. But not everyone can withstand such a phase.
What to do? Honor your losses! Setting a stop-loss is nothing without it. Unless conditions have changed, stop losses must be always taken. Don’t try to avoid taking them. Even if you should take a stop loss and start trading with a new stop-loss, honor your losses.
If you have problems with honoring “mental” stops, just use hard stops.
The age-old idiom ‘haste makes waste’ is relevant for prop trading
When it comes to funded account trading, you should keep in mind that it’s not a sprint but a quite long haul. Professional traders are never eager to make above-average profits at all costs. Quite the opposite, they rather focus on following the rules and the strategy. When such a trader gets into a period of losing trades, it’s worth understanding that these scenarios are common.
Paradoxically, when you strive to make money, you’re just losing more. When you don’t need them, money is pouring like rarely before. And have no doubts, for many traders this phenomenon is very real.
Stick to a valid strategy
The next funded account challenge is to follow valid rules and strategies. What worked in the Evaluation Process should also work on a funded account. The risk management rules often teach traders to focus on the strategy.
Sometimes the market itself doesn’t conform well. The key to longevity as a trader is the knowledge of when to trade and when to stop. It’s the whole essence of zero risk. Moreover, that’s the outcome of proper risk management – eliminating risk whatsoever.
There is no need to increase positions, no need to change anything on a funded account. On the contrary, if there is a need to make adjustments, a trader can safely reduce the position sizes. That provides psychological comfort during a period of loss. You see, the losses are smaller and it helps to create some cushion for longer periods of losses. It also might come in handy to make such an approach consistent. That will help a trader to go through longer periods of losses with no worries.
Changing a strategy is not a panacea
Sometimes a long period of losses can make a trader think about changing the strategy. But who said the rules must work indefinitely? Market conditions are volatile, whether you like it or not. Therefore, a complete change of strategy is not recommended. If a trader has to make any adjustments to his trading approach, they should not do it directly on a prop account. Not only may it lead to further losses, but even result in the rollback of the initial strategy. So, it would be better to test any adjustment on a Free Trial account if possible, as they are designed for such experiments. In any case, it makes sense to be cautious when changing a strategy. Changes that have been made in the rush lead to extra losses in a vast majority of cases.
Don’t chase losses, rather manage them
A seasoned trader knows that losses are an inevitable part of prop trading. The sooner you accept it, the better your chances for success are. We want to emphasize again, if a trader sticks to a valid strategy that has been tested on a large number of trades, most likely the situation will change for the better, and profits will eventually come to the prop firm account.
Avoid revenge trading
Let us assure you that the worst way to deal with losses is to consider revenge trading. This is a road to nowhere. In other words, this road doesn’t lead to stable profits in the long run. Nevertheless, there are still some traders who, during a long period of losses, solve their problems by increasing their position sizes. When placing irrational trades with maximum leverage, they either want to get profit in short order or they simply expect to blow their funded accounts and buy new ones to start over.
However, the chances of success are low, regardless of the case. Overleveraging may only cause extra stress. Obviously, it will result in mistakes and further losses.
Do what you know
When it comes to prop trading, generating profit consistently on it is your aim. But during your journey as a trader, you will try to do so on certain types of stocks. You will make progress with some set-ups that fit your style of trading. So, don’t give it a second thought, stick to what leads you to success! Don’t think it’s too boring for you.
Funding companies like FXCI are the best bets for traders. Not only do they help stay the course, but also provide exceptional knowledge and tools. But you should stick to the valid strategy and don’t go off the rails. If you get into a long period of losses and don’t want to lose your FXCI account, the best thing to do is try to reduce the size of your positions and don’t neglect risk management. Most likely, it will be the experience of coming back from deep losses to profits. Eventually, you can become an even better trader than you used to be at the time you completed the conditions of the Evaluation Process. And that’s the primary goal of all of us!