Besides a solid trading strategy, a positive mindset is important in prop trading. This article discusses the types of mentality to avoid. Regardless of your degree of experience, take these essential self-checks to ensure your success in a prop firm environment.
We all know that a solid trading strategy is the foundation of prop trading success. If you would like to learn how to combine these key elements into your prop trading, you may read our previous article “How to build a profitable prop trading plan”.
While you may have the right trading strategies, maintaining a positive mindset is also paramount in your prop trading journey. Today, we’ll discuss a few pitfalls where you can do a self-check so as to help you develop further in your prop trading career.
1. Over-pursuing perfection.
Stop trying to be flawless in your prop trading. It’s a common misconception that in order to profit over the long term, you must have the ideal strategy, entry, and exit points. However, striving for constant perfection often backfires, simply because perfection does not exist.
The perfect trading strategy, market timing, and trading conditions simply may not exist. Life and the markets are always changing dynamically, and the best part is that you don’t have the superpower of prediction.
Self-check: By all means, do your planning and strategising, but drop the perfection mantra.
2. Over-optimising
Some prop traders are so fixated on maximising their profits from their transactions, to the point that they over-optimise their strategies. Why is this a bad thing? Sometimes your strategies can be so over-optimised that they don’t give you adequate signals to enter the market, to put it simply. Prop traders who restrict their trading activities frequently may risk being too inactive to the extent of losing the account, as many prop firms have an account inactivity rule.
Self-check: If you find yourself drastically reducing your trading activities due to optimisation, stop and think if the extra optimisation is really needed; or could you have gone ahead with the trades and made small profits?
3. Over-analysing
When a prop trader has a method that has previously worked for him but is beginning to lead into a run of losing trades, that presents another problem if he is not careful. The prop trader may start doubting himself and analysing it over and over again. As the saying goes, “over-analysis leads to paralysis”. Although we don’t encourage overtrading, stopping trading is also not a good idea because you are paralysed in your own analysis.
Self-check: Over-thinking can often lead to indecision, which is a killer for any prop trader. The cost of indecision can make the difference between losing a trade or losing an account; you choose.
4. The winning mentality
Trading is a zero-sum game, and every trade (or non-trade) counts in prop trading. Moderation is the key to staying in the game; you don’t want to over-trade or under-trade.
It may surprise you, but sometimes mediocrity may be the key to winning in the long run. You are okay if you win five out of ten trades; you don’t have to nail all ten. You are all right if your reward-to-risk ratio is slightly more than 1:1. A few trades each week is all right if you are prepared to hold your positions overnight.
The bottom line is to do well enough to stay in the game for as long as you can.
5. The beauty of prop trading
So, the next time you catch yourself feeling overwhelmed by the stress of prop trading, ask yourself: Do you take every failed trade as a personal setback because you want to be perfect?
The answer should be no. A successful prop trader can only benefit from failure by seeing it as a learning opportunity. Failure may seem daunting, but only for now. If you learn from your mistake, you will ultimately trade with greater clarity, confidence, and success.
This is where prop trading can help traders in their learning journey. A prop account is one of the fastest and safest ways to level up if you want to become a skilled trader. It lets you practise, learn, and improve within strict trading conditions with a lower risk of losing your own funds. You typically start off with a challenge (and only need to pay for the challenge fee). The trades are done not using your own capital but when you pass the challenge and make a profit, you get to keep a share of the profit.
6. Closing thoughts
Besides having a winning mindset, having access to powerful trading tools is also important for prop traders. From advanced charts to our economic overlay, OANDA Prop Trader provides a range of powerful and easy-to-use tools to help you find potential opportunities and hone your trading strategies to make the most of them. Head over to the tools section in our blog to learn more.
Having the motivation to maintain a winning mindset becomes easier when a supportive community surrounds you. The OANDA Prop Trader Community is the hub for like-minded prop traders of all levels to connect, learn, and succeed together. Whether you want to improve your trading strategies, share insights, or earn rewards, this community is designed for you.
Register for an account with us today, and you’ll automatically get access to our fabulous community.
