6 Essential Tips for New Prop Traders

Proprietary trading isn’t an easy career choice.

But I believe you can push your odds of long-term success in your favor by following these 6 core principles.

Start Early and Work Hard

There are only so many things you can control in the prop trading business, and two of them are the time and effort you put in.

And let me tell you: nothing aggravates me more than someone strolling onto the trading floor at 9:00 a.m., sleepy and hungover, asking “what’s moving today?”

I don’t care what anyone tells you. You need a lot of screen time to get good. A lot of prop traders wash out because they never put in that time. They were done before they ever got started. 

But if you’re starting your work day at 7 a.m. instead of 9, that’s two extra hours a day. You’re building your base of experience that much faster. 

Plus, you’re going to be more relaxed and confident because you know you went that extra mile.

Develop Your Process and Routine

Too many traders, especially new ones, are desperate for a silver bullet. They want that one magic pattern or indicator that just spits out money every day. But it doesn’t exist.

The reality is that the main driver of your P&L is your overall process and routine.

I could talk to you all day about Red Dog Reversals, h sells, relative strength, trend lines, or moving averages.

Each one of these concepts is valuable to me. 

But the real secret of my success is putting them together as part of a process and routine that I actually enjoy. You need to like your routine because you have to do it every day. 

Every morning, I want you to sit down at your platform knowing exactly what you’re going to do, when you’re going to do it, and in what order.

And the word order is important, because without order, you’ll waste a lot of time and energy trying to figure out what to do next. 

I can’t tell you exactly what to do because you are a unique person. What works for me may not work for you. 

But bring some order to your trading. It can be as simple as a pre-market checklist.

Have Multiple Game Plans

I am pretty inflexible when it comes to my daily routine, and that goes down to the music I listen to, the coffee I drink, and where I park my Jeep. That helps me conserve my mental energy for actual trading.

But, I am very flexible when it comes to buying and selling stocks and options.

In a normal job, your boss doesn’t take cash out of your wallet because you had a bad day.

But if I lose money trading, it comes straight out of my pocket.

So I have to adapt to what’s in front of me — whether I like it or not.

Let me give you an example.

I love when Apple’s (AAPL) leading the market higher in a strong trend above the 8 & 21 day moving averages. That’s typically when I want to have a lot of long exposure on with 20 or more positions.

But if Apple’s lagging and the market’s going sideways, I can’t just load the boat up and buy. I switch things up to find what’s working. I clean up shaky-looking longs. And sometimes, I just have to minimize damage. 

So I enter every day with a Plan A, Plan B, and Plan C. By having multiple game plans, I’m confident I’m ready for whatever the market throws at me. Because I’m not locking myself into hoping and dreaming that the market’s going to do what I want. 

Treat Every Day Like a New Day

There’s an old saying, “don’t trade your P&L.”

That means you have to treat every day as a fresh start. 

Don’t obsess over what happened yesterday, because you can’t change the past. Simply try to do the right things every day.

Let’s say you lost $5,000 on Monday. Don’t come in Tuesday thinking you have to make up for it. 

You’ll be trading out of desperation, which means you’re in the worst possible emotional state. 

I have bad days like anyone else.

But I believe that if I follow my principles and plan, my good days will outweigh the bad.

On the flip side, if you hit it big on Tuesday, don’t get lazy on Wednesday!

Because you never know — you could have an even better day because you stayed on the straight and narrow.

You don’t want to miss opportunities because you decided to hang back and take it easy.

Don’t Live Your P&L

We talked about not trading your P&L. Now let’s talk about not living your P&L.

I had my best trading year ever in 2020.

Guess what that means? I’m at risk of having my worst year ever in 2021.

Let me explain. Many traders have a big year (or even month) and start spending.

They buy a new car or house, they start flying first class to Vegas to play poker, and guess what? They doubled or tripled their monthly nut.

So if the market slows down, or if they have a few bad days, they start thinking: I need to make $15,000 by the end of the week because I’m behind on the mortgage and car payments.”

Once you have that kind of pressure on, forget about approaching the market in a calm, rational pattern.

And even if I trade better in 2021 than I did in 2020, I can make less money if the market doesn’t give me the same types of moves.

For example, I did very well in 2020 by shorting options to collect premium. But what if volatility falls and I can’t get the same fat premiums? I’m out of luck!

Related Reading: Can You Prop Trade Options?

So I won’t live a P&L that might not be sustainable. 

That’s why I’m looking at putting in a new kitchen instead of buying a bigger house. 

Prop trading is challenging enough. Don’t let your success turn into the pressure that drags you down.

Don’t Go It Alone

One reason I love T3 Trading Group is that I’m part of a team.

Too many prop traders view the markets as a zero sum game, and they hole up in a corner, afraid to share anything.

But I’ve found that the more you give in this business, the more you get.

And I’m not just talking about ideas and strategies. 

Prop trading isn’t exactly a “normal” career.

If most of your friends and family have traditional jobs, they’ll have a hard time relating to what you go through as a trader — both the ups and the downs.

Plus, in a team environment, you can get feedback on what you might be doing right or wrong. Sometimes, a fresh set of eyes can help you spot holes in your game and move you to the next level.

Interested in Prop Trading With T3?

Click here to contact the team. They can answer all your questions about prop trading, and show you how we help traders get started. 

And tell ’em Red Dog sent you!

-Scott Redler
Chief Strategic Officer, T3 Trading Group