🚨How to Size Your Prop Trades

Hey Prop Traders, here’s are some valuable tips, terms explained and prop firm news for Feb 13, 2025

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🚨 Avoid Account Blowups! How to Size Trades in Prop Trading

Proper trade sizing and risk management are the keys to getting funded in prop trading. Understanding how to size trades appropriately within the constraints of a prop firm's risk limits is essential to avoid blown-out accounts.

Prop firms advertise large account sizes—such as 💰 $100,000—but in reality traders only have access to the daily drawdown limit. This means for practical purposes traders must treat their drawdown as their actual account size and trade accordingly.

· For a $100,000 account with a 5% maximum daily drawdown, the amount you really have at risk is $5,000 per day before the account is terminated.

· For a $50,000 account with the same 5% maximum daily drawdown the amount you have at risk is $2,500 per day before the account is terminated.

🚀 Determining the Right Trade Size

Trade sizing should be based on the daily and maximum loss limits ❌ not the advertised account balance. Here are some practical guidelines:

Each tick on ES is worth $12.50.

With a $2,500 maximum daily drawdown, if a trader experiences three consecutive losing trades using a 10-tick stop loss (which many would consider a tight stop), the risk per trade could be as high as 15% of the available drawdown. 😱

Funded traders with consistent payouts never risk 15% of their account in a single day. The most common risk per trade is 1-2%.

🛑 Choosing the Right Stop Loss

Stop losses should be placed in a way that allows the trade to develop while staying within proper risk limits. Key considerations include:

1️⃣ How many losses can you afford before reaching the drawdown limit? 

2️⃣ What stop-loss level allows the trade to work without frequent premature exits? 

3️⃣ Does your strategy's win rate and risk-reward ratio support your stop-loss placement?

⚠️ The Reality of Trading Full ES Contracts

Many traders mistakenly attempt to trade full ES contracts on a prop account. However, with a $2,500 drawdown, even one contract is too risky. A 10-point stop loss, which is 4 ticks on ES equals a $500 risk per trade, meaning just five consecutive losses could wipe out the account.

A smarter approach would be to

✅ Trade micros (/MES) for better flexibility.
✅ Keep risk per trade low enough to allow a minimum 10-20 trades before hitting the drawdown limit.
✅ Ignore the deceptive "$100K" figure and manage risk based on the actual drawdown available.

🏆 Final Thoughts: Surviving and Thriving in Prop Trading

Prop firm trading success hinges on appropriate risk management and trade sizing. Traders who size their trades based on the real drawdown, rather than the advertised account size, significantly improve their odds of long-term survival. 💡

By treating a funded account as a small-cap account with strict risk controls and focusing on high-probability setups, traders can avoid common pitfalls and build sustainable profitability. 🚀

💡 Alternative to Traditional Prop Firms: Axi Select

While many traders pursue prop firm funding, another option is opening an account with a broker that offers a prop-like structure, such as Axi Select.

Axi Select provides a unique advantage. With a max loss of 10% of the capital allocated to you, they provide more leeway that most other prop firms. They also give traders three chances before the capital allocated is withdrawn and most importantly, throughout this time you can continue to trade your own funds which is the deposit on the account. Learn more about Axi Select.

For traders looking for an alternative to prop firm evaluations and restrictions, Axi Select offers a compelling option that allows for professional-level trading without the stress of a rigid profit target or daily drawdown rules. 🎯

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