Key Proprietary Trading Risks for Traders

1. Leverage Risk: 

Prop firms give traders access to significant leverage, meaning you can control large positions with relatively small capital. That’s exciting because it boosts your profit potential, but it also amplifies losses.

For example, trading gold with 1:100 leverage means a 1% move against you could wipe out your allowed daily loss in minutes. One misjudged trade or sudden market move can force your account into a breach of rules, leading to termination. Always remember, leverage is a double-edged sword – handle it with care.

2. Rule Violation Risk: 

All prop trading firms have their own set of rules which as a trader you have to follow. There are rules such as daily drawdown, max drawdown, and other consistency rules. If you break or don’t meet any of the rules, you may end up violating the account conditions, and your account may be terminated.

To avoid such a situation, it is best to read the rules of the prop firm before starting the challenge.

3. Market Volatility & Liquidity Risk: 

Markets do not move in linear fashion. Sudden volatility is triggered by high-impact news, surprise economic announcements, or geopolitics. For instance, an unexpected OPEC declaration can send oil up by $5 in a matter of minutes, or a surprise interest rate announcement can rock forex pairs considerably.

4. Emotional Trading: 

Prop trading can test your emotions like nothing else. When you have profit targets to meet, there are chances that you may derail from your trading strategy and end up taking emotional decisions. 

For instance, after a losing streak, you might have the urge to make up for those losses instantly, and in order to cover the losses, you might make trades based on emotions. Or after a big win, overconfidence may creep in, making you ignore proper risk management. Mastering emotional control is as important as mastering your trading strategy.

5. Lack of Discipline: 

Though there is an option to buy a direct account with firms like Hola Prime but usually, to get a simulated funded account with a prop firm, you have to pass a challenge. And passing a challenge may take a few weeks, during this time, there remains the risk that a trader loses their discipline and commits mistakes like overtrading or emotional trading. 

6. Technology & Execution Risk: 

There also remains the risk of technology failures or connection disruptions. For instance, you are trading and carefully placing your positions, and all of a sudden, your internet connection starts having issues; in such a case, you may end up opening the wrong positions or may not be able to execute your trades at all. 

7. Misaligned Expectations: 

There are times when the expectations of the traders are not clear or are not in alignment with the prop firm. You can take an example of reward split or payout processing time. You might be expecting to get a payout in 4 hours, but the prop firm you are trading with has an average processing time of 48 business hours. Thus, this poses a risk to the traders as they cannot get their profits when needed. 

However, did you know Hola Prime processes payouts in 1 hour, every single time? This is not all. When you trade with Hola Prime, you get up to 95% rewards on multiple trading platforms and 1-on-1 coaching from top trading coaches.