## Prop Trading in Live Trading: What Beginner Traders Need to Prepare

**Prop Trading** has become an attractive career path for those interested in making profits from the financial markets. But before entering this industry, there are many things you should understand.

## What is Proprietary Trading?

**Prop Trading** comes from the term Proprietary Trading, which means a company provides capital to traders to trade in various markets such as stocks, commodities, or currencies. When traders generate profits, the company shares the benefits according to an agreement, which could be 50/50 or 25-30%, depending on each company's skills and contracts.

Unlike traditional trading, Prop Trading is not a demo account but involves officially hiring traders with funding for real trading. However, you may need to pay an initial fee to cover expenses such as software, office space, and personnel.

## What is Forex Prop Trading?

**Forex Prop Trading** is a branch of Prop Trading specifically focused on currency trading. There are two types:

**Traditional**: Companies hire traders as employees with salaries, bonuses, and growth opportunities.

**Online**: Traders register online, pay a fee, and after passing evaluation, gain access to capital. Since 2020, the number of online Forex Prop companies has increased significantly.

## How Prop Trading Works

Companies provide large amounts of capital to traders in exchange for a share of the profits. But it's not as easy as it sounds. You must pass a rigorous evaluation process called the "Challenge," which requires paying a fee upfront because the company bears the risk from your trading with its own funds.

### Steps to Join Prop Trading

1. **Find a company**: Choose a suitable company by considering reputation, platform, and profit-sharing conditions.
2. **Check qualifications**: Review requirements such as minimum age, experience level.
3. **Apply**: Fill out an online form and specify your experience.
4. **Interview**: Explain your skills, the chosen market, and your strategies.
5. **Receive funding**: After passing evaluation, you can trade with an funded account.

## Advantages of Prop Trading

**Freedom and Flexibility**: You set your own working hours without needing to go to an office.

**High Profit Opportunities**: If successful, profits can change your life.

**Reduced Risk**: The company bears most of the risk; your only risk is the entry fee.

**Sufficient Capital**: No need to bear all the risk yourself; the company provides substantial funding.

**Trader Community**: Support from fellow traders and support teams.

## Disadvantages to Consider

**High Discipline Required**: Strict adherence to rules is essential.

**Trading Psychology**: You must control emotions and avoid revenge trading that leads to impulsive decisions.

**Relatively High Fees**: Some may not have access to higher levels of capital.

**Unsteady Income**: No fixed salary, bonuses, or social security.

## How Hedge Funds Differ from Prop Trading

**Hedge Fund**: A fund that pools money from multiple investors using advanced investment strategies.

**Prop Trading**: Uses the company's own funds to trade for profit from price volatility.

Hedge Fund managers do not earn all profits but from management fees and performance fees. Prop Trading profits directly from trading.

## Who is Suitable to be a Prop Trader

Currently, Prop Trading is conducted online, making it easier for traders from anywhere to participate. You need to apply for a program, fill out background and experience forms, and possibly undergo an interview.

The evaluation period typically lasts 30-60 days. You must demonstrate your ability to generate profits and follow the company's rules to advance to the next level.

## Key Strategies in Prop Trading

### 1. Strict Risk Management

Risk should be proportionate to your account size. Use Stop Loss to protect your capital.

### 2. Control Emotions

Markets are volatile, but your emotions should not be. Avoid trying to recover losses with overly risky trades.

### 3. Stick to Your Expertise

If your strategy works well, there's no need to change it. Focus on continuous learning if necessary.

### 4. Use Support and Resistance Levels

Support levels are points where prices tend to have difficulty rising above. Resistance levels are points where prices tend to bounce back. Trading around these levels helps manage risk effectively.

### 5. Use RSI Indicator

RSI (Relative Strength Index) measures the speed of price changes. An RSI above 70 indicates overbought conditions; below 30 suggests a buying opportunity.

## Risk Management in Prop Trading

### Continuous Education

Understand different types of trading, risks, and tools.

### Develop and Stick to Your Strategy

Your trading plan should include strategies, risk management rules, and exit methods. Stick to it even during losing streaks.

### Test Before Live Trading

Test strategies on demo accounts or through backtesting to identify risks and improve before trading live.

### Only Risk Money You Can Afford to Lose

Never risk more than you can financially afford to lose or use leverage beyond your capacity.

## Summary

**Prop Trading** offers challenging opportunities for traders with substantial capital and potentially life-changing rewards. But it requires hard work, dedication, and high-level risk management skills. Study and choose reputable Prop Trading firms that align with your goals and trading style.

With the right mindset, appropriate strategies, and determination, becoming a Prop Trader can be a highly rewarding career.