How To Trade Prop Accounts the RIGHT WAY

Since the sim-funded prop firm accounts have become quite popular, I decided to share a few tips on how to trade prop accounts the RIGHT way while properly managing risk as if it were your real account with hard-earned money.

As a veteran in this field, having had the opportunity to work at one of the largest Wall Street trading firms and being mentored by the best veterans in the industry, including my good friend  the late Mark McGoldrick, a former Goldman Sachs investor known on Wall Street as “Goldfinger,” I’ve had the privilege of coaching and mentoring thousands of traders throughout my career.

While I believe the futures sim prop world offers great opportunities for traders who don’t have the capital, I am not entirely pleased with how most of them are approaching it. Many are YOLO-ing to death, lacking strategy and discipline, going full size without a proper setup or set of rules. Fortunately, this has been a bull market, and while many are succeeding, in a real, normal market environment, they would stand no chance of surviving.

Trading proprietary (prop) accounts has become an increasingly popular way for traders to access larger capital and reduce personal financial risk. Unlike traditional accounts, prop accounts allow traders to leverage the firm’s capital to trade while benefiting from performance-based payouts. However, there is a RIGHT way to trade prop accounts to maximize success and avoid common pitfalls. In this guide, we’ll explore the key strategies and considerations for mastering prop account trading.

What Is a Prop Account?

A proprietary trading account is provided by a prop firm that allows traders to trade with the firm’s capital rather than their own. In exchange, traders share a percentage of their profits with the firm. Prop accounts come with specific rules, including risk management requirements, daily drawdown limits, and profit targets that traders must meet.

Why Trade a Prop Account?

Trading a prop account offers numerous benefits, including:

• Access to Capital: Trade larger positions without risking significant personal funds.
• Performance-Based Rewards: Retain a percentage of profits, often as high as 80-90%.
• Structured Risk Management: Learn to trade within defined risk parameters.
• Opportunities to Scale: Unlock higher funding levels as you demonstrate consistent profitability.

How To Trade Prop Accounts the RIGHT WAY

1. Understand the Rules

Every prop firm has its own set of rules. Before you start trading, make sure you fully understand the firm’s:

• Profit Sharing Structure: Know the percentage of profits you retain.
• Risk Management Rules: Understand daily drawdown limits and overall loss thresholds.
• Scaling Plans: Familiarize yourself with how your account size increases based on performance.

2. Proper Mindset

Having the proper mindset and understanding that trading is a marathon, not a sprint, is absolutely crucial. The primary reason most traders fail is the “get rich quick” mentality. This mindset is the single biggest factor behind the high failure rate among traders. Many come into the market with the unrealistic expectation of making thousands, if not millions, right from the start. They overlook the fact that most hardworking Americans spend an entire day earning $150 to $200 before taxes. This stark disconnect creates a dangerous mindset, and if it isn’t addressed from the very beginning, the likelihood of failure becomes almost certain.

At the start, the focus should be on achieving consistent “base hits” rather than swinging for home runs. Learning to accept small, controlled losses, what I like to call “paper cut losses,” is equally important. Anything beyond this approach sets traders up for inevitable failure.

3. Stick to a Proven Strategy

Trading prop accounts successfully requires a proven and disciplined strategy. Avoid overleveraging or deviating from your plan. A good strategy should include:

• Clear Entry and Exit Rules: Know exactly when to enter and exit trades.
• Risk/Reward Ratios: Aim for a minimum of 1:2 risk/reward ratio on each trade.
• Position Sizing: Use appropriate position sizing to stay within risk limits.

For example, if you’re trading a live sim prop account of $50k and your max contracts allowed are 5 minis with a daily loss limit of $1100, make sure you only use 2-3 MICROS at max with a daily loss limit not exceeding $100. If you hit the $100, you’re done for the day. The fewer micro contracts you use, the more wiggle room the trade has to work. Remember that trading is a marathon and not a sprint.

4. Manage Your Emotions

Trading with a prop account can be stressful, especially with drawdown limits and profit targets. To succeed, it’s essential to:

• Stay Disciplined: Follow your strategy without reacting emotionally to market movements.
• Accept Losses: Understand that losses are part of the process and don’t chase trades.
• Maintain Focus: Take breaks and reset mentally if you experience consecutive losses.

5. Leverage Technology and Tools

Many prop firms provide access to advanced trading platforms, data feeds, and analysis tools. Utilize these resources to:

• Optimize Your Trading: Take advantage of professional-grade tools to enhance decision-making.
• Track Performance: Monitor your performance and refine your strategy based on data.
• Stay Informed: Use real-time data feeds to stay ahead of market trends.

6. Choose the Right Prop Firm

Selecting the right prop firm is critical to your success. Key factors to consider include:

• Profit Split: Look for firms that offer favorable profit-sharing arrangements.
• Funding Model: Evaluate whether the firm offers straight-to-funded accounts or requires a challenge.
• Support and Resources: Choose firms that provide mentorship, tools, and support.

Top Prop Firms:

• Topstep: Known for its structured evaluation process and strong support for futures traders.
• My Funded Futures: Offers straight-to-funded accounts for futures trading.
• TickTick Trader: Provides seamless access to funded accounts with minimal barriers.
• Tradeify: Specializes in futures trading with a straightforward path to live funding.

7. Avoid High-Impact Events

Trading during high-impact economic events like CPI releases or FOMC meetings can expose your account to unnecessary risks. To trade prop accounts the RIGHT way:

• Plan Ahead: Check the economic calendar and avoid trading during volatile news releases.
• Limit Exposure: Reduce position sizes or stay out of the market entirely during these events.
• Protect Capital: Preserve your account balance by avoiding unpredictable price swings.

A reliable resource for staying ahead of high-impact news is www.forexfactory.com.

Pros and Cons of Trading Prop Accounts

Pros:

• Access to larger capital
• Reduced personal financial risk
• Structured risk management
• Opportunities for growth and scaling

Cons:

• Strict rules and guidelines
• Consistency Rule
• Profit sharing reduces earnings
• Psychological pressure from drawdown limits
• Can be treated as the amount paid for the live sim account or eval and traded recklessly

Conclusion

In my honest opinion, trading prop accounts has many benefits if used correctly. However, the 20–35% consistency rule can sometimes hurt traders. On trending market days, if you’re on the right side of a trade, there’s no reason to exit prematurely. Making significant profits on such days can interfere with the consistency rule, which can lead to two major issues: forcing you to overtrade on subsequent days to meet consistency requirements or creating FOMO-driven trades based on setups that don’t exist. Worse, this behavior can lead to substantial losses if you disregard the rules and try to force trades to make up for perceived shortcomings.

The way I trade and teach is to pay yourself along the way while letting the remaining position run. Unless a trade stops you out, there’s no reason to exit early. To navigate this, set realistic daily goals, stick to them, and gradually increase your targets over time. Ultimately, prop trading should be used as a stepping stone to fund your own live brokerage account, where you have full control over your trades and withdrawals.

Part 2 coming soon…

Further Reading: Deepen Your Trading Knowledge

• Introduction to Options Trading
• Mastering Butterfly Spreads
• The Power of Diagonal Spreads
• The Power of Iron Condors
• The Power of Vertical Credit Spreads

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To your success,

Billy Ribeiro is a globally recognized trader celebrated for his mastery of price action analysis and his innovative trading strategies. He was personally mentored by Mark McGoldrick, famously known as “Goldfinger,” Goldman Sachs’ most successful investor in its history. McGoldrick described Ribeiro as “the future of trading,” a testament to his extraordinary talent. Ribeiro cemented his reputation by accurately predicting the Covid crash bottom, the 2022 market top, and the reversal that followed, all with remarkable precision. His groundbreaking system, “The Move Prior to the Move,” allows him to anticipate market trends with unmatched accuracy, making him a pioneer in the trading world.

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