As described in previous articles in this series about how to win as a prop trader, managing your forex business like a prop trading shop increases your chances of winning. Successful prop traders use maximum leverage with limited account size, and they pull profits regularly to limit risk in case of a trading system “blow up” resulting in a steep account drawdown.
Monday-morning quarterback wins the game
According to many traders, a trading system’s performance never stays the same: either it improves, or it becomes worse, perhaps even “blowing up.” Although Monday-morning quarterback is often derided for criticizing or suggesting alternative courses of action in hindsight after an event, performance review is critically important for trading success going forward.
Critical review of previous trades and system performance means the difference between success and failure for prop traders, especially for those who are responsible for leveraging other investors’ capital.
Independent traders must evolve by ruthlessly facing and correcting their shortcomings, or become extinct by losing their trading capital.
And, beyond remedying the causes of losing trades, Monday-morning quarterbacking also works to examine and highlight the winning characteristics of particular trades. Shaun and other successful prop traders look beyond the emotion of the trading moment to make sure that subsequent trades are even better.
System review and human review
If you’re trading manually with discretion, think about what you could do differently in order to help you focus and perform better, with less stress and more discipline in your decision-making protocols.
If you’re trading with a mechanical system, think about whether the performance of your live account matches the expected results from your back-tests during the same time frames. If not, find out the reasons for the discrepancies, and you’ll earn more money as a trader.
Ask the difficult questions early, avoid the errors later
As a mechanical trader, you should also plan ahead to avoid or quickly adapt to any negative situation or market scenario that might cause your system to fail, even temporarily.
By thinking carefully about previous trading glitches and losses in search of valuable lessons, you’ll be able to minimize the impact of those events if they occur in the future.
Prop traders thrive with the right tools
Prop traders can thrive with the right performance-enhancing tools, especially when using trading systems built and managed by experts. The first step toward successful prop trading is to ask the difficult questions about current performance, and then fully address all issues that are discovered during the critical review.