Video Transcript:
Hey guys, it’s Sterling here from
Trader Dale, back for another video about prop firms. In this video, we’ll
discuss how to succeed in the prop firm environment. A lot of people pass a
prop firm challenge without much trouble. There’s much less stress in that
environment, and people tend to trade more freely. Some traders blow up a few
accounts before eventually passing a challenge—that happens too. Either way,
getting a funded account is something that happens regularly. But how do you
hold on to that account? Getting funded isn’t necessarily the hardest part. The
real challenge is trading consistently over weeks and months, being able to
generate steady profits rather than just getting a few wins here and there.
Profitable trading can look good on
paper, but the stress involved—like position sizing, flipping, and reversing
trades—can be overwhelming. Some forms of trading may be profitable for a short
period but unsustainable over the long term. You need to perform consistent
actions in a structured way. That’s what we’re going to discuss.
A lot of this insight comes from a
study of 177,000 forex traders. While some of the stats may differ slightly
from what applies to many of you trading ES and NQ, this
information is still extremely valuable. Prop firms analyzed 177,000 traders
and identified who was getting payouts and, more importantly, what they were
doing differently. That’s what we’re going to cover.
The first thing to discuss is average
win versus max loss. This is closely related to the reward-to-risk ratio
and is an essential metric. It helps determine whether you allow losses to get
out of control or actively manage downside risk. Ideally, max loss should be
half of your average win—that’s a lofty goal, but a good one. If your max loss
and average win are at a 1:1 ratio or better, you’re in a strong position. Most
prop firms provide a statistical breakdown that allows you to evaluate this
metric.
Another key factor is profit
factor or reward-to-risk ratio. The study found that 60% of payouts went to
traders with a reward-to-risk ratio between 2:1 and 2.5:1. That seems to be the
sweet spot. If you’re at 1:1 on your closed trades, it’s worth analyzing
further. Some traders, like Dale, may enter trades with an initial 1:1 ratio
but adjust their stops, resulting in a different reward-to-risk ratio on closed
trades. Understanding your actual reward-to-risk ratio, not just your initial
one, is crucial.
Win/loss duration is another closely related concept.
Typically, if profits are double the size of losses, the holding time will be
about twice as long as well. The study found that 60% of payouts went to
traders who held winning trades at least twice as long as losing trades. This
is an easy statistic to check in your trading records. If you frequently hold
trades for very short periods, it might indicate impulsive trading rather than
following a structured plan. A well-defined strategy is crucial—otherwise, you
might find yourself constantly flipping positions, chasing the market, and
ultimately losing money.
Now, let’s talk about quality over
quantity. While the study suggests that 60% of payouts went to traders who
took 10 or fewer trades per month, I think this is somewhat overstated. Forex
traders tend to be more trend-biased, holding trades for extended periods.
However, for day traders in futures markets like ES and NQ, the
key takeaway is not necessarily to limit yourself to 10 trades per month but to
avoid excessive trading.
Working with the Funded Trader Academy,
I see traders’ performance records all the time. A typical pattern is three to
seven trades in a day, which is fine. But then I’ll see traders take 60, 80, or
even 300 trades in a single day. That’s gambling, not trading. Even if you turn
a profit on such a day, that kind of trading can quickly spiral out of control.
My recommendation? Set a max of three trades per day—especially if
you’re struggling to be profitable. This forces you to act like a sniper,
waiting patiently for only the best setups. Over a 21-day trading month, that
puts you at about 60 trades per month—a reasonable number.
Another critical point is following
the trend. The study found that 56% of payouts went to traders who placed
90% or more of their trades in one direction. If you frequently alternate
between buying and selling within the same session, you’re likely chasing
momentum and trying to recover losses rather than following a structured
approach. Profitable traders define market direction before they start
trading. Do you have a pre-market routine? Do you determine the market bias in
advance? If not, that’s something to work on.
Limiting the number of markets you
trade is another key
factor. The study found that 43% of payouts went to traders who traded just
one market, and 76% went to those trading three or fewer markets. If you’re
trading more than three markets, you may be spreading yourself too thin. Most
successful traders specialize. While there are always exceptions, the best
approach is to become consistently profitable in one market before expanding to
others.
Now, let’s discuss win/loss ratio.
The study found that 80% of payouts went to traders winning 60% or more of
their trades. Many new traders fixate on win rate, thinking a high win rate
is the key to success. But profitable traders balance win rate with reward-to-risk
ratio. You don’t need a 90% win rate. Many top traders operate within the 60-65%
win rate range with a 2.5:1 reward-to-risk ratio. If your win rate
is low but your reward-to-risk is high, you may need to adjust your strategy.
Next, let’s talk about losers per
day. The best traders typically take no more than three losing trades
per day. If you hit three losses in a day, consider stopping and coming
back the next day. After multiple losses, emotions take over. It’s easy to go
on tilt, chasing the market and making irrational decisions. Losses trigger
deep-seated emotions, often rooted in past experiences, making it difficult to
remain objective. Implementing a three-loss limit helps prevent
emotional spirals that can destroy accounts.
Ultimately, trading is about discipline
and execution. You can know all the right strategies, but if you don’t have
the discipline to follow them, they won’t matter. Go back through your trades
and analyze them:
- Are
you consistently following your plan?
- How
does your win/loss ratio compare to profitable traders?
- Is
your reward-to-risk ratio sustainable?
- Are
you overtrading?
- Are
you cutting losses quickly and letting winners run?
By identifying and fixing weaknesses,
you’ll see significant improvements over time. Start by fixing the biggest
issues first, then refine the details. Trading success comes from logical
adjustments and disciplined execution.
That’s it for this video. Hope it was helpful! More content coming soon—see you in the next one. Until then, happy trading!
