📈 Tip to Avoid Breach & Prop Regulation Coming?

Hey Prop Traders, here’s what is buzzing in the prop trading June 1, 2024

🗞️ TODAY’S PROP TRADING INDUSTRY NEWS

1. Are Regulators Coming for Prop Firms?

2. Lux Trading Firm Launches Brokerage

3. Maven Prop Teases Big Announcement Monday

4. E8 Markets Raises One max account size to 200K

5. Goat Funded Trader Removes Time Limit on Classic Challenges

✂️ LATEST PROP FIRM DISCOUNT PROMOTIONS

• Axi Select First FREE Funded Trader Program

• Apex Trader 90% OFF ALL Sale (Extended to June 3!)

• Oanda Labs Exclusive 25% Discount on Prop Challenges

• My Funded Futures 20% OFF Expert Evals & 30% OFF Resets

• Goat Funded Trader up to 5K Challenges for $19

📌 PASS THE PROP TRADING TIP

📈 Avoid Breaches by Uses Average True Range (ATR) to Determine Proper Sizing

In prop trading, managing risk is crucial to avoid hitting loss breaches and maintaining consistent performance. One effective way to do this is by being aware of the Average True Range (ATR) and adjusting your position sizes accordingly. Here's how to incorporate ATR into your trading strategy:

1. Understand ATR 📊: The Average True Range (ATR) is a technical indicator that measures market volatility by averaging the true range of a specified number of periods. It helps traders understand how much an asset typically moves within a given time frame, providing a clearer picture of potential price swings.
   

2. Adjust Position Sizes 📏: When ATR is high, the market is more volatile, and larger price swings are expected. During such times, reduce your position sizes to minimize the risk of hitting loss limits. Conversely, when ATR is low and the market is less volatile, you can afford to increase your position sizes slightly, as price movements are generally smaller.
   

3. Avoid Loss Breaches 🚫: Improper sizing can lead to significant losses, especially in volatile markets. By using ATR to adjust your position sizes, you can better manage your risk and avoid breaching the loss limits set by prop firms. This ensures you stay within the acceptable drawdown thresholds and maintain your trading status.
   

4. Calculate ATR-Based Position Size 🧮: To determine the appropriate position size, consider the following steps:
   

   • Calculate the ATR for your trading asset over a relevant period (e.g., 14 days).

   • Decide on the maximum dollar amount you are willing to risk per trade.

   • Use the ATR value to adjust your position size. For example, if the ATR indicates a potential move of $1 and you are willing to risk $100, your position size should be 100 units (shares, contracts, etc.).
     

5. Stay Consistent 🔄: Regularly monitor the ATR and adjust your position sizes as needed. Market conditions can change rapidly, and staying aware of current volatility levels will help you maintain consistent risk management.
   

6. Combine with Other Risk Management Tools 🛠️: ATR should be part of a broader risk management strategy. Combine it with other tools such as stop-loss orders, take-profit levels, and diversification to enhance your overall trading approach.

By incorporating the Average True Range (ATR) into your position sizing strategy, you can effectively manage risk, avoid loss breaches, and maintain a more stable trading performance. This approach helps ensure that your trades are appropriately scaled to market conditions, reducing the likelihood of significant drawdowns and supporting consistent profitability.

📋 TOP PROP FIRMS BY TRUSTPILOT SCORE

1. Axi Select (Global Broker Prop Offering)

2. The5ers (4.8 ❇️ Trustpilot)

3. FTMO (4.8 ❇️ Trustpilot)

4. Funded Trading Plus (4.8 ❇️ Trustpilot)

5. Apex Trader Funding ATF (4.8 ❇️ Trustpilot)

🔥 TRADING TIPS

🎓 PROP TRADING LINGO

📈 Prop Trading Tip: Understanding and Using Scaling (and When It's Not Allowed)

Scaling is a trading strategy that involves adjusting your position size in response to market conditions or performance metrics. In the context of prop trading, scaling can be a powerful tool to manage risk and maximize profits. However, it's important to be aware that some prop firms have restrictions on scaling. Here’s an overview of how scaling works, some practical examples, and considerations regarding prop firm policies.

What is Scaling?

Scaling involves:

1. Scaling In: Gradually increasing your position size as the trade moves in your favor.

Why Use Scaling?

1. Risk Management 🛡️: By scaling in, you can start with a smaller position and add to it as the market confirms your trade idea, reducing initial risk.

2. Profit Maximization 💰: Scaling in allows you to increase your position as the trade moves in your favor, potentially maximizing profits.

3. Flexibility and Control 🎛️: Scaling provides a flexible approach to managing trades, allowing you to adjust based on evolving market conditions.

Examples of Scaling in Prop Trading

1. Scaling In Example:

   • Initial Entry: You enter a trade with 1 contract of a stock priced at $50.

   • Market Confirmation: The stock price moves to $52, confirming your trade idea.

   • Add to Position: You add another contract at $52.

   • Further Confirmation: The price continues to rise to $54.

   • Final Add: You add a third contract at $54.

   • Result: You now hold 3 contracts, but your average entry price is $52, which is lower than if you had entered all 3 contracts at $54 initially.

Scaling in Prop Trading Context

1. Using a Trade Copier 📋: When managing multiple prop accounts, you can use a trade copier to apply scaling strategies across all accounts simultaneously. For example, if you scale into a position in one account, the trade copier can replicate this in all your accounts, amplifying the impact of your strategy.

2. Drawdown Management 📉: By scaling into positions gradually, you can better manage drawdown. Starting with a smaller position reduces your initial risk, and you can increase your position size as the trade moves in your favor.

3. Enhanced Risk-Reward Ratio ⚖️: Scaling helps maintain a favorable risk-reward ratio by adjusting exposure based on market conditions. If a trade shows potential, you can increase your position size to maximize gains.

Considerations for Prop Firm Policies

1. Prop Firm Restrictions 🚫: Some prop firms have rules that restrict or ban scaling. These firms may require traders to enter positions with a fixed size, prohibiting adjustments based on market movements. The reasons for these restrictions include:

   • Consistency in Evaluation: Prop firms may want to evaluate a trader's performance based on a consistent position size to ensure fairness and comparability.

   • Risk Management: Fixed position sizes help prop firms manage risk more effectively across all traders.

   • Simplicity: Enforcing fixed position sizes simplifies the monitoring and evaluation process for prop firms.

2. Compliance with Rules 📜: Before implementing a scaling strategy, ensure you fully understand and comply with your prop firm's rules and guidelines. Violating these rules can lead to penalties or disqualification from the program.

By understanding and implementing scaling strategies where allowed, you can improve risk management, enhance profitability, and maintain greater control over your trading positions. Always be aware of your prop firm's policies to ensure your strategies align with their requirements.

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📈 TRADER PSYCHOLOGY

Behavioral psychologists have proven beyond a shadow of a doubt that we have a finite mental budget for decisions. When we are overwhelmed with choices we tend to simply freeze and perform poorly.

This is the reason why you can be up 100 pips by noon only to give up all the profits by the end of the day. 

If all of this sounds familiar, it's because it is inevitable given how our minds are built. Most traders, when faced with such disappointment, will usually blame their strategy but almost always this is the  wrong diagnosis.  How many times have you abandoned your strategy only to realize many months later that it would have performed great had you stayed with it? 

Strategy failure can certainly happen, but most of the time in day trading the root of all your troubles lies in decision fatigue. 

One solution is to simply put a limit on the number of trades you will make. Set a goal of 20 pips - and if you achieve it with the first two trades of the day, shut down your screen and walk away. Or set a goal of 10 trades maximum per day and once you reach it close your platform and walk away regardless of whether you are up or down.

Behaviorally this is the best approach. But it is a lot easier said than done. The siren song of the markets 📈 is very seductive making it very hard to pull away from the screen especially during times of high volatility. There is always one more set up. There is always one more opportunity to trade. 🤑

Setting hard targets whether it be in pips or trades or hours of trading is ideal, but often we need something more to combat decision fatigue - and here is one trick you could use.

Accept the fact that day trading is the art of making 1% over one hundred trades.  This may be a  bit of an exaggeration, but not much, and it is a very useful mental model to have because it turns every trade into a micro decision so light, so immaterial that it almost doesn’t exist. Think of each trade as a piece of gum that you have sitting in a box on your table.

You may go through twenty pieces of gum in a day without giving it a second thought. You don’t care how much they cost, you don’t care how long you’ve chewed them, you don’t care how many you’ve chewed. They are pieces of gum. In the grander scheme of things they are meaningless and therefore the decision never taxes your brain.  

If we look at each trade as essentially a Chicklet - a meaningless little burst of flavor rather than a source of all our happiness and misery - we would be a lot better off. 

When you listen to interviews of the greatest traders in the world, what you often discover is that their strategy is just a tiny part of their success.   Instead, it’s their ability to sidestep decision fatigue, to treat each trade as a meaningless piece of gum, that is in sync with the current market environment.

⚡ PROP FIRM FEATURE

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8 REASONS TO TRADE PROP WITH AXI SELECT

✅ Real Funds, All Live Accounts - No Demo or Virtual Funds
✅ Created by Global Broker
✅ First 100% Free Funded Trader Program
✅ No Registration or Monthly Fees
✅ Earn Up to 90% of Profits
✅ Trade up to USD $1 Million
✅ You Can Trade the $500 Broker Account Deposit & Withdraw
✅ EAs, News & Weekend-Hold Trading Welcome

 TRADE PROP WITH REAL FUNDS AXI SELECT

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