Making quick stock market profits with just a few clicks while using a firm’s capital–isn’t that what instant prop trading is all about? Not exactly. Instant prop trading can be rewarding, but only those who follow the rules survive. Whether you are getting funded for the first time or looking to sharpen your skills with instant prop trading, here are three rules you must follow to survive in this fast-paced environment. 

1. Adhere to Drawdown Limits

In instant prop trading, drawdown limits, particularly daily and overall limits, are one of the most critical rules. These limits restrict the amount a trader can lose daily or cumulatively. An instant prop firm sets drawdown limits to protect its funds and encourage traders to manage risks. 

In most cases, the daily drawdown limit is 5% of the account balance, whereas the overall limit might be 10%. For example, if your account has $100,000 with a 5% drawdown limit, you can only lose $5,000 in one day. Severe consequences can follow if your losses hit the predetermined drawdown limit. The instant prop firm might suspend or revoke your funding immediately. 

Luckily, there are several ways to adhere to daily drawdown limits, such as always using stop-loss orders, limit your risk per trade, and avoid revenge trading. Start performing a daily performance review to adjust your trading strategy effectively. 

2. Stick to Approved Strategies

Many instant prop traders fail to succeed because they deviate from approved strategies. Most instant prop firms evaluate and approve your trading strategy before funding your account. This strategy serves as your blueprint. Straying from it can often be a direct violation of the firm’s rules. 

Instant prop firms typically approve the following strategies:

Scalping: It involves making profits from small price movements by entering and exiting trades within seconds to minutes. 

Momentum Trading: It involves taking strong price action driven by news, volume, or volatility. Instant prop traders ride the momentum and exit before it fades. 

Successful instant prop traders are also aware of forbidden strategies, such as gambling and overleveraging, reverse trading and hedging, copy trading between unrelated accounts, and exploiting system glitches.

3. Emotional Control

The speed and intensity of instant prop trading can trigger fear, panic, frustration, and even overconfidence. This is why emotional control is a non-negotiable rule in instant prop trading.

Prop firms are looking for traders who showcase consistency and discipline without resorting to gambling when the situation becomes tough. They monitor your performance patterns, trading habits, and risk management strategies. 

Develop a pre-trading routine, where you review your strategy before every session. Avoid revenge trading and don’t abandon your strategy to chase fleeting market trends. The best traders stay calm and in control.   

Conclusion

Instant prop trading is not about luck; it’s about strategy and psychological control. To succeed, you need to stick to rules that protect both you and the firm. By adhering to drawdown limits, sticking to approved strategies, and practicing emotional control, you can master advanced skills.