Home Beginners Forex Education Forex Basics Top Four Questions For a Professional Prop Trader

Top Four Questions For a Professional Prop Trader


Becoming a professional prop trader is not easy. The positive results of trading and effort come after a few years. Whatsmore, they may not even come at all. Investors commonly have a crafted mindest when it comes to decision making. They will put all the possible outcomes of an investment or action on one side, and the negatives on the other. When we want to decide if Forex trading is a good venture, it may be hard to measure that investors balance. The final question we have to ask, the question that covers all the others, is can we dedicate ourselves to Forex, can we persist and endure the challenges this market will throw at us? If you have doubts when you fully understand what you are facing, turn away, find some other options, only financial or psychological frustration will await you. Every trader feels these challenges.

Proprietary traders mastered these emotions, persisted, and have built trading systems that put them on the top, consistently squeezing the profits out of forex. They are rewarded for their years of endurance. Traders that are just starting can greatly shorten their path to becoming consistently profitable for the first time by learning from these masters. Yet, few of proprietary traders share their knowledge as a goal, creating valuable and rare resources for the starter traders who have decided to walk this path. This article contains their opinions and answer to the top 4 questions asked by traders, some of which are already experienced.

US citizens seem to be the ones that ask the most although even more surprising is the fact Forex is not that popular in the US. The US is the most economically developed country and since the stock market is the first place to go for investors. Whatsmore, the media has a great contribution to this, shadowing what other markets are there. Still, such is the habit in the US, where the rest of the world seems far, unrelated, not important to the lives of US citizens. This creates ignorance and therefore makes some of the questions funny and uninteresting for experienced traders.

A good analogy to this is comparing the NFL to the UEFA Champions League, in addition to the football and soccer being completely different sports for the US citizen, while abroad it is the same for most. Soccer is Forex for the rest of the world and the NFL is a stock market for US citizens. Most of the proprietary traders are trend following strategy traders in many variations. These strategies are scientifically proven to be, according to their sources, the most successful ways to trade. As such, the questions asked do not primarily come from traders who are trend followers.

So, starting from the number 4 top frequent question:

Where do you think the EUR/USD is going to go?

The EUR/USD is the most popular currency pair to trade (which prop traders avoid) and the pair could easily be substituted with any asset on the forex market. Prop traders are masters of analysis, psychology, and systematic approach to trading. But they cannot see the future. The shortest answer to this question would be – I do not know. The question is also not very well defined for them. They need more information, they need precision. Prop traders would ask you back about the timeframe, then how far into the future, what risk tolerance, and so on. Still, the answer is the same. They will also say that it is a good thing they do not. If you can know the future, there would not be any profit to be made in a perfectly balanced market (since everyone knows what is about to happen). And it would ruin all the fun. This answer is shocking to people, who have probably just entered into forex. The answer also turns them away, discredit the prop trader, making prop traders question if the effort of sharing the knowledge is worth the trouble. However, this is the extension of the answer – prop traders use technical analysis (not all of them).

Charts, indicators, and tools show them using math where are the points a trade can be entered. These signals are not extended into the future, they are in real-time, what is going on right now. Prop traders have a daily routine, they wake up, eliminate any distractions, and have precise time when it is time for trading analysis and operations. There are three options the charts or tools can tell them, trade long, short, manage already open trade (partially close, exit, scale in, move Stop Loss, etc), or do not trade at all. Then, they move on to the next asset and repeat. Sounds simple right? They have worked hard for the system to work, once it is all set and they are ready, it becomes one of the best “jobs” in the world. Yet again, this is not the answer most will be satisfied with. Another reason why people fail is that they seek something to consume right away, something to use, a takeaway that will make them pips. It will not work.

Forex will filter these attempts, you may try again, differently, fail again. Those that remain have a great chance of becoming good at extracting profits from forex. There is another group who like to get informed this way just to sound smart in front of other people, and have no idea how to trade. One more thing prop traders want to add, making forecasts is a bad way to trade. Weird as it may sound, predictions will be met with a bust account, sooner or later. Forecasting is extremely popular. Just turn on the TV and enjoy all the smart speeches by renowned financial figures. They are terrible traders. They are good analysts, say smart things about the market conditions.

In practical trading, they are not good. Guess that is why being on TV is a better business option for them. Similarly can be said for certain brokers account managers or recruiters. This may be hard to believe. If you need some proof, we can quote Ray Dalio, one of the best hedge investors in the world estimating over 17 billion in net worth. In reference to his book, “Principles”, aside from being the classic on investments, on page 42, he says:

“Truth be known, forecasts aren’t worth very much, and most who make them do not make money in the markets.”

It is not uncommon to find professional traders that have aligned their trading methods with the Ray Dalio ideas. A certain group even dares to say fundamental analysis and forecasting is a waste of time! So prop traders do not care to please the masses with this answer, they do not trade Forex to impress people, they do it for financial freedom, effective use of their time and this should also be a genuine reason for future traders too. Moving on to the next question, which is:

Based on _____(some elections, economic news, reports, etc) happening in the world, where do you think _____(some forex asset, EUR, USD) will go?

Now, thins question is very similar to the first one, just a bit expanded to new aspects. The answer by a prop trader is not the same. Let’s fill in the blanks with Trump elections and the USD moving as a consequence because the question was posed soon after the US elections. There is an answer to this but it is somewhat complicated. Trump elections can be regarded as surprising. Trump was never “supposed to” win. When he did, investors are on the rampage to find good opportunities. The market was already expecting Hilary Clinton’s victory and went in the corresponding price direction. Hilary did not win, investors looked for the surprise piggyback. This move can be predicted by prop traders because they know how forex works and how the big banks work.

If you are not familiar, the Big Banks article explains how the price is set by these big players on forex. The Big Banks and institutions decide how the price is going to move. Any serious trader must know this. In the case of the USD prospect when Trump won, the long term is bearish. But the exact time when this trend is going to take fold is on the big players of forex to decide. Basic logic says weaker USD opens up the economic expansion and Trump is a businessman first, money-making mindset. At no point is he going to allow equity markets plummet during his mandate.

The result until now in 2020 is exactly this, Indexes rise even quickly after the trade war and COVID-19 pandemic. The move when the USD is going to start trending down was not expected to start right away. Banks know that this logic is evident to many, even to the inexperienced investors. The EUR/USD move up was not to be seen, on the contrary, the big banks pulled it down, sharp. There were just too many long positions big banks could not let go by, investors who went in too soon were met with a surprise they could not handle. Even the ones with a deeper Stop Loss tolerance were not spared.

A slight correction took place to give out a slight hope of the logical bull (USD weakening) move they have expected. Well, this hope was chocked along with the investors’ positions until the bing banks ran out of long positions to flush. This answer is also not for the common people. Even more, the answer will not change much, the same will repeat. Other events, like the Brexit and its consequences, are not this easy to predict. Most prop traders would not even try, they will focus on the present. The final point to all this is to know that massive directional trades because of a major event are transparent to you, other investors but to the big banks too, and their word is final.

The second question is: Do you trade cryptocurrencies?

Crypto assets are new to the scene and they come with several risks. Therefore, prop traders still need to adapt to this risk so they can trade it as they would forex. The idea of cryptocurrencies is great, it is the new age of money. Traders who entered early deserve their share of the fortune, although this market has a different kind of rule(s). It is an alien with many unknowns and it is not adapted to the world yet. Prop trader likes the environment with proven track records, movements, actors, and information resources. This is how they can have an edge – when all rules are known. This knowledge is trader specific, you should not invest with a market you are not familiar with. Of course, some games are designed players only can lose in the long run. Casinos have many of them.

Luckily for prop traders and others who know how to play, forex is not one of these games. Forex can also be thrilling as the casino games but you are probably reading this article for the money-making reasons too. The Crypto market simply does not come into play with careful traders yet. This does not mean you should not test it or build the trading system for the crypto world, you would be limiting yourself an opportunity.

The number one question for a prop trader is (and the most ridiculous one):

I have some Iraqi dinars here, a lot of them. Do you think they will go up in value sometimes?

Prop traders would smile awkwardly, they get this question a lot. This question is posed mostly by US citizens that served in Iraq or have this currency from a relative. This could be a souvenir they would like to be valuable, carrying the mystic feeling of a secret-treasure they never knew about sitting in the attic. Or, they bought the currency notes off a scamming seller claiming its worth in the future, building up this treasure in the attic feel. You can check the USD/IQD chart and analyze if this is going to happen. To prop traders, this idea could stay just as an idea for a very long time. The country like Iraq has a very different history, culture, government, economy, and everything in between to consider rebounding the value of the IQD soon. Unfortunately, forex brokers and other actors around this market are not always honest, similarly to the seller of IQD with a story to back it up. Keeping your reason open will identify this. Forex scams are present and not hard to fall into one, but this is a subject for a separate article.

*Source: No-nonsense Forex Channel


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