Become a Funded Trader by Showing Prop Firms These Traits

How to become a funded trader

Becoming a funded trader at a prop firm is something every retail trader aspires to.

The reason is obvious, it provides an opportunity to jumpstart a lucrative trading career for high performing traders. 

With lots of funding providers out there, this appears to be a straightforward goal to achieve.

But it isn’t that straightforward for traders to become a funded trader that prop firms take seriously.

That means getting funded by more than just yourself, showing another institution is willing to take a chance on your trading skills especially after they have done their own checks to see if you have the attributes they want from a funded trader.

If you are successfully trading with one prop firm, then it will become significantly easier to obtain funding from another prop firm, or obtain investment from providers, especially if your prop firm is a reputable firm.

Naturally, these companies and investors will still want to carry out their own due diligence and verify for themselves if you have the traits they want.

However, the more companies and funding provides you have providing you with funding it becomes significantly easier.

Even more so, the more capital you are managing successfully, consistently, and with good practice, the easier it will become.

But why do these factors make it significantly easier?

That is because reputable prop firms look for common traits when they are looking to select their funded traders — that is why you will see evaluation programs using live funds where the trader can prove themselves, so to speak.

Regarding the traits, it absolutely essential that a trader ensures they have all the prerequisite requirements before they seek funding from a prop firm or embark on any serious funded trader journey.

In other words, ensure they are ready to become a prop trader at the prop firm.

Become A Funded Trader

This includes:

  • Ensuring your trading education is up to scratch and you have learnt all you can (and are continuing to learn and develop your skills):
    • How you choose to learn is up to you(free, books, or even through the prop firm itself) but make sure you understand how the market works and demonstrate it through success with your current strategy
    • With that in mind, research the prop firm and the rules they expect funded traders to abide by because this can make or break your trading success
  • Ensuring your trade plan has a set of defined rules:
    • Every professional trader does. So retail traders wanting to cross to the professional realm need to have a militaristic style of discipline in your plans
    • Elaborating on the above, the trade plan must have clearly defined rules about how you will trade under each scenario.
      • It shouldn’t be a vague set of rules. A funded trader needs this plan to be so detailed yet easy to follow so if they came back to the plan at a significantly later date, they could reference the plan to refresh themselves
      • Traders should update this as and when they encounter unfamiliar situations
      • Also, when they review their records and believe there is a better solution
  • Create a trading strategy and thoroughly test it before you put a prop firm’s capital into it:
    • Once you create a strategy, it is time to test it
    • Ensure the strategy is backtested by checking it against old price patterns to see if it would work in the markets you plan to trade.
      • If you do not code, then you need to do this manually
      • If you have some coding skills, then you will have the luxury of doing this significantly faster
    • Then comes the forward testing, seeing how it performs in live markets:
      • Test it on a demo account. If it passes a demo, then test it on your personal account.
    • If the strategy passes both forms of testing, it is ready for a prop firm.
    • However, ensure you pick a prop firm whose rules won’t encourage bad trading practices e.g., you will have to scale down so much to compromise your trading psychology.
  • Good risk management
    • Make sure that the risk management within your trade plan is airtight. Ensure you respect your risk-reward limits outlined in your trade plan and never deviate from it
    • If you find that a prop firm’s rules would encourage you not to stick to proper risk management practices, then this is not the prop firm for you and you should find another funded trader scheme

An unorthodox tip to find out what common traits prop firms want from funded traders (traders they are willing to fund) is understanding why most traders fail so you can work towards avoiding the same mistakes that keep prop firms away from these traders.

  • Having Unrealistic Expectations
    • This is the top killer for aspiring traders and why many never end up being funded traders at all, let alone by prop firms
    • It is probable they fall for trading scams guaranteeing they will make an income, and that losses almost never happen, good strategies have a 100% win rate etc — that is all false
    • Having realistic expectations is the biggest favour you can do for your trading psychology
  • Trading Without a Plan
    • Many traders jump in without any trading plan, or a complete plan thinking they can read price action like a pro only for the market to humble them very quickly
    • The bizarre thing is, they do it over and over again!
    • It is recommended to take some serious time constructing your trade plan, perhaps even educating yourself while you create it so you know exactly how you will approach the market
    • Slow and steady wins the race here
  • Poor Risk and Money Management
    • Goes back to the point about common traits prop firms want from their funded traders
    • Otherwise, the whole account could be blown in a day!
    • The best way to tackle this is really to manage your expectations and also look at what your risk tolerance is
      • With that in mind, also look at what prop firms in general expect from their traders and decide if your plan is compatible with this or can scale with this without compromising your risk and money management practices
  • Not Maintaining Trading Discipline
    • Similar to the above, if you find your trading strategy and risk management fall apart because you are breaking all your rules to try to fit a prop firm’s rules
    • Or you haven’t worked on your trading psychology and experienced serious FOMO
    • You’re going to lose your account, personal or funded trader account
    • Your trading psychology is arguably the main thing you should have mastered before you even touch a prop firm’s capital or anyone’s capital
  • Failing To Adapt To The Market
    • The market ebbs and flows so if you fail to acknowledge the market narrative and trends in favour of your own market thesis
    • You’re going to lose your account and this likely loops into the same issues as trading psychology
    • A clever way around this is working into your plan what signs to look for when the market is changing
  • Analysis paralysis
    • Limit your trade plan to meaningful analysis, not lots of different sources
    • Otherwise, you will get conflicting sources and can, and will, contradict each other and you won’t know what to do
      • If you insist on having lots of different things, then rank which takes priority e.g., if you have the RSI and ADX and they contradict each other, decide which takes priority.
  • No Planning on Existing Losing Trades
    • Traders that don’t do this get attached hoping it will turn around
    • This is bad practice and ties into bad risk/money management and is the easiest way to tell prop firms you aren’t serious
    • The easiest way to approach it is as you enter the trade decide on your stop loss
      • A suggestion could be if the market hits a certain level, you are wrong.
  • Inexperienced Traders Jump in Too Soon and Lose
    • Similarly, you didn’t time the market well enough because you were so keen not to miss out which results in that painfully frustrating “I got stopped out then the market went my way” scenario
    • This is why you test your strategies.

Conclusion

Going through the list of things an aspiring funded trader should have and common reasons aspiring prop traders fail you can easily work out why what prop firms want.

That is, traders that have strong trading psychology, risk and money management skills, a well thought the trading strategy they can defend when asked about (be able to defend your trades with conviction when asked about them) and generally understand how the markets work, alongside a desire to grow that interest and skill.

Prop firms do not want traders who think of the firm as a casino.

A good reference guide for good retail trader practices, which helps you understand how to become the funded trader prop firms want can be in the Market Wizards series, notably, the Unknown Market Wizards goes through various successful retail traders. 

You will see the successful traits we outlined consistently and how they overcome the hindering traits.


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