How To Deal With Trading Large Prop Firm Funded Accounts

  • July 17, 2023

If you’re a veteran of the forex industry, or any trading sector for that matter, you’ll know that trading is very mentally draining. There is a huge number of emotions involved and split second decisions need to be made by traders, day in, day out. These emotions are typically easy for traders to manage on accounts of just a few thousand pounds, but when you’re trading 6 figures, or even 7 figure accounts, things start getting tougher to manage.

In this article, we are going to look at the psychological effects some traders experience when trading large prop firm funded accounts and how you can mitigate these to ensure your trading does not suffer. So, let’s get into it…

Dealing With Trading Large Prop Firm Funded Accounts

 Trading with prop firms is, in our opinion, somewhat easier than trading your own capital. Having a firm to ‘answer to’ in regard to risk management often keeps traders on the right path to success and allows traders to keep their heads screwed on. This is much harder when you’re the only person dictating your maximum drawdown and daily loss limits. However, it cannot be overlooked that some traders struggle trading prop firm funded accounts. This is primarily due to the amount of capital they have under management and the large numbers on the screen in floating PnL. For example, some of our Elite Funded Traders have over £1,000,000 in real funded capital – this can be a challenge if you don’t know how to mitigate these issues!

So, let’s look at the psychological effect trading large amounts of capital can have and a few strategies our traders use to reduce the effects.

The Psychological Effect

The emotions felt by traders can present themselves in several ways. Most commonly, traders experience both fear and greed in the markets, to various degrees. The fear comes from being afraid to lose trades and losing large sums of money. This even rings true with funded trading accounts. Just because it’s our money on the line, not the traders, they’re still responsible for the capital drawdown limits and wouldn’t want to violate this. The greed often comes from traders that have experienced winning streaks in the markets. When these traders are ‘hot’, they look to increase risk and take more and more trades, hoping to achieve even larger profits. These rings true on funded trading accounts, as one winning trade could be a gigantic sum of money.

How To Mitigate The Psychological Effect Of Trading Large Funded Accounts

Now we have identified some of the various emotions traders will feel when dealing with large accounts, let’s look at the strategies our prop firm funded traders use, to avoid the negative effects…

Thinking In Percentages, Not Money

You may have heard this before, but when investing or trading in any market, it’s crucial to think in terms of percentage, rather than in terms of money. When you’re trading large sums of money, seeing £30,000 drawdown will take a toll on you, especially if you’re new to managing large capital. Losing streaks of 5-6 figures will certainly increase your fear in the markets and you’ll be less inclined to take trades.

However, thinking in terms of percentages of account balance is a great way to avoid these feelings, and it’s widely known to be the best technique in the industry. For example, looking at £30,000 in drawdown will be stressful. Looking at -1% doesn’t seem so bad! Obviously, they’re the same thing in the grand scheme of it, but it’s all about how the losses are perceived. This makes drawdown much easier to manage.

This also rings true with wins. Don’t think about netting yourself 6 figures over the course of a quarter. Think about the 8% gain you have made. This will keep your greed at bay. 

Risk Management

Risk management should be simple, very simple. Let’s look at a Lux Trading Firm funded account, for example.

You have a maximum loss of 5%. We need to ensure that whatever trades you’re taking and for whatever reason, we never get below 5% of your starting capital balance. 

The first step in knowing what risk you should be using per trade is back testing. By conducting a thorough back test, you will know your strike rate, maximum loss streak and total drawdown over a period of years within the markets. Now, work backwards from those numbers. Let’s say that your maximum loss streak from a 5-year objective back test was 10 losses in a row. Great. To stay as safe as possible, we’d want our risk per trade to sit below 0.5% per trade to not violate the maximum threshold. A risk of 0.5% per trade could sit us close to the edge, though, so let’s allow for some wiggle room and maybe think about a 0.3% risk per trade.

Of course, this isn’t an exact science. Whether you follow your trading plan religiously or not, it’s possible to have a new largest winning streak.

However, having real tangible numbers in your hands is the only sure fire way to remove a lot of the anxiety and guess work that plagues newbie traders in the markets.  

It’s worth noting that you must undertake an objective back test. Any bias or human error in the back test will lead to it being worthless.

Trade Copiers

Trade copiers can be a very useful tool for traders, and there are a few excellent product options on the markets. Trade copiers do exactly what they say on the tin. You have a ‘master account’ which you trade on your local platform. This account can have an account balance of anything you like, but preferably a low amount of capital, so you aren’t worrying about the numbers you’re seeing on the screen. You link your funded account, for example, as a ‘subaccount’. All of your trades will be mirrored and executed with an exact percentage ratio on the funded trading account, without you needing to look at it and see the large numbers.

The trades are usually executed within 1 second and provided you’ve set it up correctly, the lot size should be perfect for the amount of risk you’re looking to use. Stop losses, take profits and trailing stops will also be copied. It’s useful to set up your copy system on a VPS, meaning you don’t need to leave your computer running 24/7 to keep the trades being copied.

This is hugely beneficial from a psychological perspective.

However, the risks of using a trade copier is simply the fact trades may fail to be copied if you lose connection within the VPS, or lot sizes may be inaccurate if set up poorly. This can lead to violating drawdown rules on funded accounts – so it’s worth stress testing first.

However, it’s worth noting that many prop firms, including Lux Trading Firm, do not allow copying-in. So carefully check the rules first

In Summary – How Can You Mitigate The Stresses Of Trading Large Prop Firm Accounts?

In conclusion, trading large capital can be stressful, but there is a range of tools and techniques at your disposal to make it no more challenging than trading a £100 account!

 Are you looking to become a funded trader? Work with Lux Trading Firm now!