If you’re just getting started with prop trading, it’s normal to feel a little overwhelmed.
But don’t worry – everyone starts somewhere, and prop trading is an exciting opportunity if approached correctly.
Your primary goal as a prop trader is generating consistent profits, benefiting both you and the firm.
To help you, I have made a complete prop trading for beginners guide with 10 tips. Let’s get started.
The Beginners Guide to Prop Trading
Here are ten clear methods that’ll help you smoothly transition from a beginner to a confident prop trader.
1. Fully Understand the Prop Trading Model
First things first: you need to fully grasp what prop trading really involves. As a prop trader, you’re trading with the firm’s money – not your own.
This setup greatly reduces your personal financial risk because your own capital isn’t on the line.
However, there’s a trade-off: You won’t keep 100% of your profits. Instead, profits are split according to a pre-agreed arrangement, typically ranging from 70% to 90% in your favor.
Besides profit splits, understanding liability for losses is equally crucial. With most reputable prop firms, losses are absorbed by the firm, not by you personally.
But conditions vary – some evaluations or challenges may require a fee upfront, and failing to meet specific trading objectives could incur additional costs or lead to disqualification.
2. Choose a Simple Trading Strategy to Master
Start with straightforward strategies that are easy to follow. Some effective beginner-friendly strategies include:
- Trend following: Trading in the direction of established market trends.
- Swing trading: Holding positions for days or weeks to capture bigger market movements.
- Breakout trading: Entering positions when prices break through key levels.
Once comfortable, gradually expand your toolkit.
3. Develop and Stick to a Clear Trading Plan
A solid trading plan provides structure. Include these key elements:
- Entry and exit criteria
- Defined risk parameters
- Daily trading routines
Pro Tip: Regularly revisit and refine your plan based on what your journal shows works best.
4. Master Risk Management Early
Effective risk management separates consistently profitable traders from those who quickly burn out or suffer significant financial setbacks.
Risk management isn’t just a precaution – it’s a foundational trading skill that ensures your long-term survival in the markets.
Without solid risk management, even the most talented traders can fail.
To protect yourself, consider adopting these essential risk management strategies right from the start:
Set strict stop-loss orders
Stop-loss orders automatically close losing positions once they reach a pre-set level, helping you avoid excessive losses when trades don’t go your way.
Limit your position sizes
Never place overly large positions relative to your trading account size.
Smaller positions mean lower risk and less emotional stress, helping you maintain a clearer perspective when trading.
Risk no more than 1-2% per trade
Experienced traders commonly recommend risking no more than 1-2% of your total trading capital per trade. This ensures you can withstand losing streaks without severely damaging your account.
Diversify your trades
Avoid placing multiple correlated trades simultaneously. If similar trades move against you all at once, your losses multiply rapidly.
Diversifying your trading setups or markets can mitigate such risks.
Understand your risk tolerance
Everyone’s tolerance for risk differs. Find your comfort zone – trades that let you sleep peacefully at night – and stick to it strictly.
Pro Tip: Maintain a risk-to-reward ratio of at least 1:2, risking $1 for a potential $2 gain.
5. Practice on Demo Accounts First
Start on a demo or simulated account to gain confidence without financial risk. This helps you:
- Test new strategies safely
- Understand platform mechanics
- Build discipline and consistency
You just need to take it seriously and treat your demo account exactly as if it were real money – developing good habits from the start pays off. Once you feel ready, you can head over to real
6. Maintain a Trading Journal
Keeping detailed records of your trades helps you analyze what’s working and what’s not.
A trading journal tracks your progress and pinpoints your strengths and weaknesses, helping you improve faster.
7. Set Clear, Realistic Goals
Clear goals keep you focused.
Set realistic daily, weekly, or monthly targets for profits, risk management, and skill improvement.
These goals provide structure and make it easier to measure your progress clearly.
8. Develop Discipline and Patience
Trading requires discipline. Resist impulsive decisions driven by emotions like fear or greed.
Be patient, stick to your plan, and don’t chase trades just because you feel pressured to make quick profits.
9. Leverage Educational Resources
Take advantage of educational content like webinars, articles, mentorship programs, and courses offered by prop firms or external sources.
Investing in education accelerates your learning curve and helps you avoid costly mistakes.
10. Stay Updated with Market News and Trends
Keeping up with financial news and market developments helps you anticipate market movements.
Regularly check news sources, follow economic calendars, and understand how global events impact the markets you trade.
Best Prop Trading Firms for Beginners
Choosing the right prop firm as a beginner is critical. Here are three excellent firms specifically suited for those starting their prop trading journey:
1. FunderPro (Top Pick)
FunderPro is highly recommended for beginners because it offers clear rules, generous profit splits, and great educational resources.
They provide user-friendly platforms such as MetaTrader 4 and 5, making it easy for new traders to learn quickly.
Pros:
- High profit splits (often 80-90%)
- Fast, reliable withdrawals
- Excellent educational resources and guidance
- Flexible trading conditions (overnight/weekend trading allowed)
Cons:
- Higher initial evaluation fees compared to some other firms
- Platform selection limited to primarily MetaTrader
Overall, FunderPro provides an ideal environment to start your prop trading career, especially due to its supportive community and beginner-friendly conditions.
2. Apex Trader Funding
Apex Trader Funding is another excellent choice, especially if you prefer clear, straightforward conditions. They emphasize transparency and offer accessible evaluations suitable for beginners.
Pros:
- Transparent and clear trading rules
- Reasonable and accessible evaluation process
- Reliable customer support
- Well-structured scaling plans
Cons:
- Slightly lower profit splits compared to FunderPro
- Withdrawal times can sometimes be slightly longer
Overall, Apex Trader Funding suits beginners who want clear expectations and steady growth opportunities, providing a balanced environment to steadily develop skills.
3. TopstepTrader
TopstepTrader stands out for its structured evaluations and extensive educational content, making it ideal for beginners who prefer extra guidance and structured pathways.
Pros:
- Excellent trader education and training programs
- Clear evaluation criteria and progression paths
- Supportive trader community
Cons:
- Profit splits may not be as high as other options
- Stricter trading rules and evaluation criteria
Common Mistakes Beginners Make
When starting out in prop trading, be aware of these frequent beginner pitfalls:
- Ignoring Risk Management Many beginners dive into trading without understanding the importance of risk management. Always set stop-losses and carefully manage your position sizes.
- Trading Without a Clear Strategy Jumping into trades without a well-thought-out strategy can lead to unpredictable results. Spend time developing and testing your strategy on a demo account first.
- Overtrading and Impulsivity Beginners often make impulsive decisions due to excitement or frustration. Set clear trading rules and stick to them, avoiding emotional trades.
- Skipping the Demo Phase Rushing into live trading before properly practicing on a demo account is risky. Always spend adequate time building consistency on a demo first.
- Focusing Too Much on Profit Many beginners obsess over profit targets without understanding market conditions. Prioritize consistency and good trading habits, and profits will follow naturally.
Frequently Asked Questions
Is Prop Trading Suitable for Absolute Beginners?
Yes, many prop firms specifically cater to beginners, offering educational resources, demo accounts, and structured evaluations. Choose a firm known for supporting new traders.
How Long Does It Usually Take to Become Profitable in Prop Trading?
Typically, becoming consistently profitable takes months to a year or more, depending on your learning pace, commitment, and chosen strategies.
Can You Lose Money in Prop Trading?
Yes, losses are possible, especially during evaluation stages. However, with funded accounts, losses usually affect firm capital, limiting your personal financial exposure.
How Much Money Can Beginners Realistically Expect to Make?
Earnings vary widely based on account size, trading skill, and market conditions. Beginners should initially focus on consistency rather than specific profit targets.
Conclusion
Mastering proprietary trading as a beginner is about building a solid foundation from day one.
By carefully understanding the trading model, choosing suitable strategies, mastering risk management early, and thoroughly practicing in demo accounts, you significantly increase your chances of success.
Remember to select a beginner-friendly firm like FunderPro or Apex Trader Funding, ensuring that you have the necessary tools, support, and resources to succeed.
Stay disciplined, patient, and focused on continuous growth – this mindset will make your prop trading journey rewarding and enjoyable.