Prop trading has emerged to be one of the attractive career paths for Canadians now, given the current economic crisis and a projected recession in days to come. Although these scenarios could be avoided with the perfect use of online trading markets like forex, stocks, and crypto, where the blessing could be easy access to prop firm in Canada. Prop firms in Canada provide traders with access to unique opportunities to get significant funds to trade, advanced tools, and attractive deals of profit share, like 95% for traders.
Canadians with the best use of these prop firms can turn around any financial crisis, sometimes even in shorter periods of time, as the prop firms in Canada offer funds to traders of all types, from beginners to professionals. However, it may sound like an easy task to make continuous profit in forex, but it’s actually not that easy either. The trader must make wise and thoughtful decisions while they trade and must not be swayed by emotional judgments. While choosing funds, it’s also essential to choose the right one, having a risk management plan upfront and making sure that it aligns with the forex prop firm the trader chooses.
In this blog I’m going to guide you with the 5 common mistakes traders make when joining a prop firm in Canada. I’m confident enough that if you can steer away from these mistakes, you can set yourself up for a more profitable and fulfilling trading experience.
5 Mistakes Joining a Prop Firm in Canada
Now that we uncover the mistakes in detail, it is also important to take corrective actions when identifying these mistakes to enhance and magnify your trading career.
Mistake 1: Not Researching the Firm’s Reputation and Regulations
When you’re choosing your prop firm in Canada, the very first thing is to find the perfect match, the right prop firm for you. However, there are many traders out there makes the grave mistake of skipping their due diligence, leading to dire consequences.
Prop firm which is not regulated opens the scope of fraudulent with your dedication towards trading and obvious loss of your investment as you buy the challenge or instant funding. Additionally, lack of compliance with Canadian regulatory bodies like Ontario Securities Commission (OSC) or the Investment Industry Regulatory Organization of Canada (IIROC) could expose you to legal challenges and put your trading career at risk.
How to avoid this mistake?
This mistake can be avoided in two ways. As you may already understand, you must verify that the prop firm is registered with Canadian regulators like the OSC or IIROC to ensure it is operating within the legal framework. Look out for reviews and expert opinions before you join a firm. As you already may be aware, Forex Trading Journals team members share their own experiences of each firm in as much detail as their experiences get. You may trust each of these traders who trade real money invested; besides, you also have the option of searching the reputation and legitimacy of a prop firm in Canada by browsing different trusted forums like BabyPips and EarnForex.
Mistake 2: Ignoring the Evaluation Process Rules
The next big mistake you might make with a prop firm in Canada is ignoring the evaluation process and the rules associated with it. Prop firm rules, such as violating drawdown limits, missing profit targets, or failing to meet time restrictions, may result in the termination of your funded prop firm account. Prop firms in Canada typically have strict evaluation standards, so it is very likely that your account could be dissolved even before you fully begin your prop firm trading journey. There are numerous cases we have encountered or that have been shared with us where even promising traders fail to progress simply because they rushed or underestimated these rules.
How to avoid this mistake?
To avoid such prop firm rule mistakes, first, you must acknowledge the fact that each prop firm in Canada has its own unique evaluation process and metrics. You should take the time to thoroughly review their rules and requirements, such as daily loss limits, profit targets, or specific timelines.
Secondly, try to be conservative when building strategies. How? Well, avoid taking high risks during the evaluation phase. This advice also applies if you’re trading an instant funding prop firm account for the first time. You should focus on strategies that prioritize capital preservation while also making profits within the rules set by the prop firm.
Lastly, seek expert opinions if you are unsure about your prop trading journey in Canada. Engage with forums, Facebook, or LinkedIn groups of professional traders and gain guidance from their experiences.
Mistake 3: Overtrading to Meet Profit Targets
In prop trading, one of the most common scenarios is overtrading, which stems from the pressure traders place on themselves to achieve quick profits. On the other hand, many aspiring traders often fall into overtrading when attempting to meet the profit targets set by a prop firm in Canada. In reality, overtrading exposes traders to unnecessary risks and can lead to emotional burnout. Instead, traders should focus on building a solid foundation of trading skills and strategies to counter the emotional and impulsive decisions they might make in an effort to recover losses in prop trading.
How to avoid this mistake?
The suggestion lies within avoiding the mistake itself, but let’s recap the actions to take. First, set realistic trading limits when you start trading with a prop firm in Canada. You must cap yourself within reasonable and practical achievements on a daily, weekly, or even monthly basis.
Next, focus on consistency and take one step at a time. Trading is not about making quick money or sudden massive gains; rather, a slow and steady approach can undoubtedly lead to consistent profitability. Be disciplined in your approach, and the results will naturally follow.
Another way to address this is to take a break. Yes, constant trading can trigger impulsive decisions, which might lead to overtrading and ultimately result in blowing your funded prop firm account. Taking a break allows you to maintain clarity and prevents you from making emotionally driven decisions.
Mistake 4: Neglecting Risk Management Strategies
If you want to fail as a forex trader at trading prop firm in Canada, the fastest way to do is to neglect risk management strategies. If you’re not serious enough about setting strong risk management strategies, the losses can spiral out of control, leading to disqualification or a significant drain on the investment made by a prop firm, as well as the account fees you pay to them. However, market volatility magnify these risks, making it crucial for traders to approach every trade with sound plan.
How to Avoid It:
The first step towards risk management when trading with a prop firm in Canada is to set a stop-loss in place to minimize potential losses. Although a stop-loss order may sound simple, it is an important tool that can prevent you from being wiped out of the market; it’s the real difference maker.
The next risk management strategy is position sizing. By this, I mean you should allocate only a partial or small percentage of your account to any single trade. If you think about it carefully, this approach can ultimately protect you from potential losses in volatile markets.
Diversification is another major factor you must acknowledge to enhance your risk management in trading. Try trading different instruments or strategies; a well-thought-out diversification of trades significantly reduces the chances of losses.
The most impactful of all risk management strategies is 1% rule. Risk no more than 1 to 2% of your account on a single trade; this will ensure that you remain undamaged even after a series of losses and keep trading confidently.
Mistake 5: Overlooking Fees and Profit Split Structures
It’s important to carefully review the fine print about fees and profit sharing when joining a prop firm in Canada. Platform fees, withdrawal fees, and unexpected subscription renewals are typical hidden expenses that may erode your hard-earned earnings. Similarly, your bottom line might be significantly impacted if you ignore a prop firm’s profit sharing structure (e.g., 70/30 vs. 80/20). For traders looking to maximize profitability, ignoring these details can turn a promising opportunity into a financial disappointment.
How to Avoid It:
The very first way of avoiding this mistake is to acknowledge the fact that not all the Canadian prop trading firms offer the same payout split percentage. You should always look for the one that offers you the most; it could be something between 80/20 to 90/10.
Now, the next mistake to address is the payout structure, so before you buy an instant-funded account or challenge, you must check the offered profit split ratio and their structure for the payouts. There are prop firms that clear the payouts within a week or two, some clear it each month, and some delay clearing payouts. So it is very important for you to clear this while you trade with a prop firm in Canada.
Conclusion
Prop firm in Canada possess a huge potential for interested prop traders who wish to escalate their trading portfolio and earn good profits. Meanwhile, they must identify themselves as not doing the mistakes most prop firm traders in Canada do. They must identify the common mistakes, starting from not adequately researching the firm’s reputation and regulations to overlooking fees and profit split structures. By addressing these common mistakes before considering prop trading, a Canadian trader can easily march on a profitable trading journey.
