Successful trading is a continual process. But at TopstepTrader, we are in a fortunate position of backing more than 1,500 traders with live capital in a Funded Account™ — some of whom have become successful and some of whom have not.
Over this time, the traders that have been consistently profitable have done similar things. At a high level, they obsessively manage risk. They also ensure during the drawdowns that they are able to trade when the market starts fitting their trading strategy.
From a more practical level, they do these five things.
Prove you can trade, and we'll give you as much as $150,000 of our capital.
1. Don't Feel Pressured to Trade Constantly
Markets are available five days a week, 23 hours a day, but that doesn't mean you need to be. Some of the most successful TopStep funded traders trade every other day or even just every other week. One trader enters the market maybe just once or twice a month.
Whether or not you trade on a given day can be the result of a number of factors, like your mental state or your works schedule. But the most important is probably the market itself. Some days the markets do not present an opportunity for you, and those are the days you want to sit it out.
The takeaway: Your job as a trader isn’t to make trades; it’s to manage risk. Take days off when the market isn’t aligned with your strategy.
2. Don't Max Out on Every Trade
Many of our top funded traders could trade between 15-20 lots, but most choose to stay at fewer than five. Why? Because it lets them:
- Make better decisions. Stress usually has a negative impact on decision making. Reducing your risk lowers the pressure which may ultimately help you stick to your trading plan.
- Be more flexible. When you have less on the line, you can wait out a bad trade a little longer. The trade might still go south, but you may be able to find a better time to bail.
- Make more trades. Maxing out your leverage may put you at your loss limit just when a new opportunity presents itself. Minimize your exposure and you can stay in the game longer.
This doesn’t mean you shouldn’t add leverage as you build your account. Increasing leverage responsibly is one of the ways you can achieve financial freedom. However, the key is to add it slowly so you can maintain your decision-making process and become consistent and profitable.
The takeaway: Your goal is to live to trade another day, and you can’t do that if you max out your leverage early. Be smart about how much you’re willing to risk.
3. Remember, You're Trading Real Money
It happens all the time. A trader leaves the combine only to make a big trade and lose a few $1000. Unfortunately, their account isn’t the only thing to take a hit. Their morale does, too. Now they find it even harder to maintain the confidence they need to make smart trades.
Part of the problem is they are suddenly trading with real money. The change impacts their decision-making process. From there, it’s a downward spiral making bad choices leading to losing trades and even lower morale.
The moral of the story? Pull back when you leave the combine. Successful funded traders may leave the combine trading fives and tens, but they usually start with just one or two lots. When they want to add, they do it slowly. This allows them to build their confidence along with their account.
The takeaway: Money changes everything. Take it slow so you can adjust your mindset.
4. Stick to Your Trading Plan
Hopefully, you’ve created a trading plan, and rigorously backtestedit. If that’s the case, and you’re seeing some success, then there’s really just one thing to do: keep following your plan. It’s what got you this far, so why change it?
But let’s say you have a couple of losing days in row. That may be a sign that the market environment has changed, and your strategy could use some modifications. Whatever you do, don’t ignore it. You want to accept what the market is telling you, even if it contradicts your expectations.
The takeaway: Your trading plan should be flexible. Stick with it as long as you see success, but be ready to adjust if the market changes.
5. Think of Your P&L as Part of Your Cushion
While your goal is to make money, you also need to protect it. One way to do this is to think of your losses as a percentage of your overall cushion. In general, you don’t want to risk a large percentage of your account on a single day. That kind of loss is difficult to recover from.
What your cushion looks like for you depends on your:
- Risk tolerance.
- Trading plan.
However, many of our more successful traders could significantly increase their loss limit, but choose to keep it near the original mark. That cushion protects their account.
The takeaway: You will only be successful trading if you can capitalize on the next opportunity. Don't let today's losses handicap your future.
Get more insights from successful traders in our funded trader blog series.