How to Create a Trading Strategy for Prop Trading

Creating a trading strategy for prop trading is a fundamental step for those who want to not only pass the selection process at a prop firm, but also make steady money on the market. A successful strategy must meet both the individual characteristics of the trader and the company's strict requirements for risk management and profitability.

The first step is to determine your trading style. Prop trading allows you to work both at a fast pace (scalping) and in a medium or long-term format (day trading, swing trading). Choose a style that organically fits your daily rhythm, psychology and experience.

Next, you should choose a market and instruments. Often, beginners try to cover many assets at once, but experience shows that specializing in a few understandable stocks, currencies or indices gives better results. Deep knowledge of the instrument allows you to better understand its “behavior” and respond more quickly to changes in market dynamics.

The next stage is to prescribe clear rules for entering and exiting positions. Here it is important to clearly determine under what conditions you open a deal (indicator signals, graphic models, volume or news) and under what circumstances you record a profit or loss. In prop trading, the levels of stop loss and take profit are strictly controlled - this is the key to preserving capital in the conditions of a company challenge.

A mandatory part of any strategy is risk management. Most companies set strict limits on drawdown, so one risky trade can end the challenge ahead of schedule. Therefore, you should risk no more than 1-2% of your deposit on each individual deal. Also make sure that there is sufficient “distance to the limit” of drawdown.

Before launching into real trading, the strategy needs to be tested on historical or demo data. This allows you to see the strengths and weaknesses, assess the level of expected profit and possible risks. It is no less important to keep a log of transactions after the start: this allows you to analyze and adjust your behavior and useful or dangerous market habits.

Thus, an effective strategy for prop trading is formed on the basis of discipline, testing and willingness to constantly improve. In this case, it becomes not only a tool for income, but also a way to develop professionalism in the field of trading.