Common mistakes of prop traders
Prop trading is a trading method in which traders use the capital of prop-form companies to trade and earn profit in the financial markets, and the profit from these transactions is divided between the prop-form company and the trader; In this way, the trader does not need to make a large initial investment in the financial markets and can use the financial resources of prop companies to enter into transactions and earn profits.
The path to success in prop trading may be accompanied by obstacles that can ground traders and prevent them from succeeding in trading; One of the biggest obstacles in this path is the common mistakes repeated by traders. Prop traders, especially at the beginning of their career as a prop trader, may make mistakes; These mistakes can lead to financial losses, frustration and losing trading accounts and ultimately prevent traders from reaching their goals.
In this article, we will examine some common mistakes prop traders make. By being aware of these mistakes, you can avoid making them and significantly increase your chances of becoming a successful prop trader.
Trading based on emotions
Involving emotions in trading will bring nothing but loss. The reality is that you will not succeed as long as you are emotionally driven in your trading; It doesn’t matter what level of knowledge you have in market analysis and trading, emotions will get in the way of your success. As a prop trader, you must be able to control your emotions and trade based on logic and analysis.
Highly influenced by news
It is true that knowing economic news and market events is essential for making informed trading decisions, but it is wrong to rely too much on news and make decisions based on it alone. The high influence of news in the financial markets causes traders to enter into transactions that cannot be predicted and confirmed in terms of technical analysis, and this will cause a lot of losses.
Too much trading
Another common mistake made by prop traders, especially novice traders, is making too many trades. This mistake occurs when the trader trades repeatedly without any clear plan. Trading too much can cause large losses and loss of trading account.
Lack of trading discipline
Lack of trading discipline is one of the biggest mistakes prop traders make, especially at the beginning of their career. Trading discipline means sticking to a specific trading strategy; Even when the market is not moving according to your wishes, you must stick to your plan and not deviate from it. Lack of trading discipline can lead to emotional and irrational trading decisions that cause losses.
Not having a trading plan
One of the most common mistakes prop traders make is not having a trading plan . A good trading plan is a traders road map to success in the financial markets. The trading program allows you to carry out transactions with the program and not be influenced by momentary emotions and emotions in the market. The absence of a trading plan can lead to unpleasant consequences such as financial losses, an increase in failed trades, and the loss of a trading account.
Not having a clear trading strategy
Another common mistake made by prop traders is not following a specific trading strategy . Without having a specific strategy, traders enter and spend without any plan; This can cause significant losses. Also, some people, despite having a trading strategy, are affected by emotions and feelings in the financial markets and do not adhere to their trading strategy. This behavior will also cause losses and failure in trading.
Not having a trading journal
A trading journal is a vital tool for traders to succeed in the financial markets; It is a written record of traders’ trading records, analyses, and decisions. Having a trading journal brings many advantages because the most important thing a trader can learn from is his trading records in the market; This will help traders to easily identify their strengths and weaknesses and focus more on their strengths as well as eliminate their weaknesses.
Failure to comply with the principles of risk management
Risk management is the most basic part of trading, especially in prop trading; Traders in prop trading work with the capital of the company and are obliged to maintain the capital of the company and make the trading account profitable. Without following the principles of risk management, this will not be possible and the transactions will fail.
Lack of continuous learning
The financial markets are always changing and prop traders must constantly increase their knowledge and be learning in order to remain competitive in this market. Traders who are actively learning and improving their skills have a better chance of succeeding in the financial markets.
In this article, we briefly stated some of the most common mistakes that prop traders make at the beginning of their activity in the financial markets. Keep in mind that identifying these mistakes and taking action to prevent them in the future is essential for success in the financial markets; By avoiding these mistakes, you can greatly increase your chances of success in the financial markets.