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Direct investing in the financial markets can result in financial loss. Historical results are no guarantee of future returns. No representation is being made that any account or person will or is likely to achieve profits or losses similar to any examples shown. Trading tips or buy or sell recommendations are not provided in this guide. The information contained within this guide is for information purposes only and does not constitute real advice. This educational information contained within this guide is not designed to replace your Licensed Financial Consultant or your Broker. It has been prepared without regard to any particular person's investment objectives, financial situation and particular needs. This information is of a general nature only so you should seek advice from your broker or other investment advisors as appropriate before taking any action. The decision to trade and the method of trading is for the reader alone to decide. International Capital Markets (IC Markets) AFSL335692, and Trade View Investments Pty Ltd (Trade View), as Authorised Representative of IC Markets, disclaims all liability of IC Markets, Trade View and its Associates for any loss or damage suffered by any person by reason of the use by that person of, or their reliance on any information contained herein, whether arising from the negligence of IC Markets, Trade View or its Associates or otherwise. Refer also to the full Disclaimer at our website and our Terms of Use.

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Table Of Contents
1. Introduction 2. Understanding Trading Strategies and SystemDevelopment 3. Devising a Trading Plan That Meets Your Goals 4. Risk Management, Capital Allocation, and Position Sizing 5. Traders Mindsets and Psychological Advantages 6. How To Get Involved In Proprietary Trading

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Introduction Why this trading guide?

It has been a great privilege over the years to mingle with some of the most successful traders from numerous areas of the industry. From Senior Brokers, to multi-million dollar private traders; leading Hedge Fund Managers, through to some of the most successful talent at private Proprietary Trading firms. If there was a distinct observation to take away from all of these incredibly talented individuals, it would be that they have all put their entire focus into trading and have showed relentless determination in achieving their goals. This is what separates successful traders from unsuccessful ones. Many traders start out in the industry with the aspiration to be in a similar position, but the fact remains; many of them will not make it. Why? Novice traders delude themselves with an image of a high-flying, glamorous lifestyle, with profits all too easily obtained in very short periods of time. Many of these people become easily frustrated with their attempts to make money, and soon become doubtful as to what their future holds as a trader. Unfortunately for these people, trading is like any other professional business it requires a great deal of patience, an investment of time and resources, anda lot of trial and error. Each person has a unique set of learning circumstances. Whether it be a novice trader wanting to start out and become educated in the world of trading; to intermediate and experienced traders looking for that extra edge to their trading. This trading guide has been prepared by professional Prop Traders who trade full time for a living. We wanted to provide an insight into the world of Prop Trading and share some of our strategies with those who are interested in this profession.

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You dont need to be a highly experienced and successful trader to gain an understanding of what we discus in this guide, but we do assume a certain minimum level knowledge of trading and the markets to fully benefit. If you are a newcomer to trading, and would like to learn more, then you will be interested in many of the concepts we discus in our Online Beginner Program. We trust that you will enjoy the guide.

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Understanding Trading Strategies And System Development

The most common mistake that we see inexperienced traders make is that they have not fully devised a complete trading strategy, and very rarely do they fully understand their trading system and know how to adapt it to different trade scenarios. Using one system for every single trading scenario rarely works. It is imperative that traders develop a system that uses different trading strategies for different scenarios. The first important step is to have a clear understanding of what type of trader you are. You will need to assess if your trading style will be better suited to short-term day trading or longer-term position trading. Once you have done this you can move on to understanding trading strategies and systems that are specific to each. This task alone can be a very challenging one. For the purposes of this guide we will be focusing on short-term day trading.

Day Trading

When using short-term day trading systems traders need to know one simple fact; you are looking to make profits within short periods of time which typically can be anywhere from 5, 15, to 30 minute intervals. Within these time intervals, traders look for opportunities to profit from small price movements in fast moving markets such as Forex or Index Futures. These are the most favoured markets and it is not uncommon for day traders to make more than 20 trades per day in these markets.

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Individual stocks are also popular with day traders, but usually traders will try sticking to stocks that have ample liquidity so that they can easily get in and out of their trades in larger volumes.

Trade Ratio

It is inevitable that traders will have losing trades. But what is most important is to understand how to limit the amount of money that is lost on those losing trades. This is where risk and money management can make the difference between success and failure as a trader. Trades that are profitable are generated by ensuring that the number and/or value of the winning trades are significantly more than the losing trades. This is something we discuss in detail in our Intermediate Workshops.

Leverage

Most day traders use leverage as a tool to help them succeed in making larger trading profits. However not everyone has an appetite for these potentially riskier financial instruments, and trading with leverage must be carefully understood before getting involved. Leveraged instruments allow traders to take larger positions with fewer of their funds outlaid. The most commonly traded leveraged instruments with day traders are Forex, Futures and Contracts For Difference (CFDs). Any sensible trader will only ever allocate a maximum of 10% of their trading capital to leveraged products. So if a trader had $10,000 in funds available, only $1,000 should be used towards leveraged trading.

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Forex Margin Table

INSTRUMENT AUD.USD AUD.USD AUD.USD NOTIONAL VALUE $10,000 $100,000 $1,000,000 MARGIN IN % 1% 1% 1% MARGIN IN $ $100 $1,000 $10,000 $ PER PIP $1 $10 $100

The above table should give you an idea of what you are risking when you place a Forex trade. If you buy $10,000 of a Forex currency pair and the market moves against you and goes down by 100 pips you will lose: Pips X $ Per Pip = Profit/Loss -100 Pips X $1 = -$100 Traders who get themselves into difficult situations are those that dont fully understand how leverage works. Unfortunately, this can often result in losing more money than expected. It is crucial to cover such trading fundamentals like position sizing, stop loss placement, and entry and exit points.

Trading Fundamentals

Professional day traders understand that entry and exit points are two of the most important trading fundamentals. In establishing these two points, traders will use a combination of the following tools: Intraday Charts Many traders tend to use candlestick or bar charts in their analysis of price action. Support and Resistance These levels are commonly used for identifying price breakouts. Traders will often take advantage of this by making a quick profit of small price movements.

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Level 2 Data This is a common style of day trading where traders look for volume support at key levels. These levels are often backed up by the other methods mentioned above. Real Time News Another useful tool for day traders is news feeds, as this allows traders to have multiple information sources to help them make quick entry and exits once a piece of price sensitive news comes out.

Trade Ratio

Combining the abovementioned Trading Fundamentals, lets now put it all into perspective with a practical day trade example. For the purposes of this example we will assume that a daily chart has been used first to identify the overall trend of that financial instrument. After assessing the daily chart, we move on to a 5 minute intraday chart to break down further trading possibilities. Steps: 1.Check the chart for any points of interest and identify support andresistance levels; 2.Once the above has been identified, look at the patterns forming in the candlestick chart; 3.After identifying chart patterns, we now look for volume spikes withinthese patterns. Lets assume we have identified a break out on a 5 minute chart. If we have a volume spike at our resistance level, and we also have a significant candle breakthrough at this level, then it is a clear indication that the market would like this level to be broken. Although this may be the case, it is important to be aware that such indications could be fake breakouts. An important thing to look for in a fake breakout is when the breakout candle lows are broken. Typically this will be done in the first few candles.

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The above chart shows the breakout in the green area.

Stop Losses

Whether you are a day trader or a longer term trader, the use of stop losses can make the world of difference. It is extremely important to understand where to place your stop loss, and what amount of risk you are willing to take before a trade moves against you. Continuing with this trade example, we identified breakout above a resistance point. Now we need to look at what level are we willing to get this trade wrong - our stop loss level. We do this by looking at the resistance point on the chart which should then become the new support point if there is enough strength in the market. We then look at the previous low before the resistance point, as this gives us the potential range of the move. One formula you can use is 2 * PR (Previous Range) and place your stop loss at this level.

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Profit Taking
When deciding on where to set a take profit level, there are two things that should be considered: 1. 2. How much money you want to make from the trade; Continuation of the move.

How much money to make? Many traders sacrifice profits on their trades due to greed. Greed prompts traders to behave irrationally, and will often mean holding onto a trade for too long in the temptation that they will make even more profits from it. A more disciplined approach is to set profit targets based on pre-determined targets which should be realistic and in line with the markets and charts (price action). For example, this could mean setting a profit target of 10 points on the trade. Another efficient method is to calculate the Average Daily Range (ADR) for the product. Assume the Australia 200 Index has an ADR of 47 points over 10 years. This means that on average the Australian 200 Index will move 47 points each day. The take profit target could therefore be set somewhere realistically in line with this Average Daily Range. Continuation of the move Continuation of the move is where the price continues to move in the same direction as it was moving to start with. A continuation pattern is a price pattern where the price is expected to continue in the same direction. Looking at the above chart where the breakout pattern has occurred, it doesnt seem like there is any major resistance level at this point, so a continuation of the price move seems a very likely outcome.

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Devising a Trading Plan that Meets Your Goals

Successful traders will talk about the importance of having a good trading plan, and more importantly knowing how to stick with it, and when to refine it. Having a good trading plan keeps traders focused in the right direction of their overall goals, and it allows them to measure their success. Below are some useful questions to ask yourself before any part of your trading plan is started out: 1.How much money can I devote to trading? 2.What times of the day/night can I trade? 3.What markets are open and most liquid at those times? 4.Do I understand these markets well enough? 5.Which broker do I use and why? 6.Do I use leverage? Once you have decided on the above you need to set some rules: 1.Market preparation 2.Set realistic goals and targets 3.Set risk levels 4.Set entry / exit rules 5.Be prepared for the unexpected

Paper Trading & Back Testing

Many inexperienced traders believe that a good trading system built on back testing or paper trading alone will equip them well enough to trade in real life. Unfortunately, paper trading and back testing are no guarantees of being a successful trader and making money.
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What they will do, is give you a realistic idea of what could be possible from a profit or loss point of view. There are many real life trading variables that will come into play, and inevitably, they will have an impact on your trading results. A big factor that paper trading and back testing overlooks is the psychological element of trading real funds. Traders think differently when their own funds are at stake. Sometimes it is important for traders to incur losses for them to become better, as it allows them to learn from their mistakes. Trading is all about learning from those mistakes, and trying not to repeat them. This is where real progress is made. We discuss these factors in more detail in our Intermediate Workshops.

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Risk Management, Capital Allocation, and Position Sizing

Developing a profitable trading system must include risk and money management. This is often the difference between success and failure. This involves utilising a systematic approach to trading that promotes optimal capital usage, capital preservation, and the discipline to follow through on that approach. Some of the important issues that need to be addressed in risk and money management are: * Capital preservation versus capital appreciation * Profit / loss expectancy * Capital allocation per trade * Risk tolerance

Trading Risk / Risk Management

What is trading risk? - Risk in trading is the possibility of losing some or all of your trading capital. Trading risk is: * External risk, also called methodological risk; affects risks of the chosenstrategy not being profitable in certain market conditions; * Internal risk, which is human risk or any risk that is related to the behaviour of the trader not following carefully laid out trading plan. Although trading risk is unavoidable to a degree, there are several factors that can influence the outcome of a trade which can be managed pro-actively.

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Capital Allocation
A good money management strategy will help in determining how much capital to allocate to any given trade. This means deciding on a dollar amount or percentage of the total trading capital that will be the maximum amount risked for any one trade. Many successful traders use 1%-2% of total available capital as a maximum per trade. However, this is a personal decision as every trader's circumstances are different. Some professionals use Maximum Notional Value in their capital allocation: Max Notional Value = Account Capital X 3
Account Capital
$10,000 $100,000 $500,000

Max Notional Value

$30,000 $300,000 $1,500,000

This means that when using leverage you only place trades to the Max Notional Value of the product you are trading. Or to put it differently - if you only had $10,000 trading capital in your account, then you should not take a leveraged position that exceeds $30,000 in total face value.

Position Sizing

Position Sizing is one of the most important aspects of your trading system as it will guide you on how big/small of a position you can take. Some position sizing strategies are value-based, where others work on fixeddollar based. Value-based Say a million dollar account intends to trade twenty different instruments, and that the trader is willing to risk 5% of the account per trade.
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Value-based position sizing divides the account into twenty equal sub-accounts of $50,000 each, one for each position taken. Fixed-Dollar This sizing method is based on a fixed dollar amount for the trades that you place. This method is typically used when you are placing many trades over multiple instruments in a short time frame. The following should serve as a useful guideline for fixed-dollar based position sizing: Traders tend to look at the possible entry level and possible exit level and say to themselves: * How much money to risk on each trade; * How much do I make/lose if the product goes up by 100 points.

Product
Forex Stock Indices

Move
100 pips 100 cents 100 points

$ Value Per Point

$10 $10 $10

Profit/Loss
$1,000 $1,000 $1,000

Looking at the profit or loss in $ value terms will hopefully provide a better understanding of what the actual risk is.

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Traders Mindsets and Psychological Advantages

Most inexperienced traders enter the market with the mindset and expectations of high returns, and the belief that their chosen trading strategy or system will enable them to succeed with ease. However, these people quickly realise that it takes a lot of effort over a long time to develop the necessary skills and experience to become successful. It is only a small number of traders who are able to consistently generate positive returns that allow them to trade for a living. These traders are the successful ones that have developed a mindset that sets them apart. So what is it that gives them this edge? The reason why some traders are able to consistently make money is because they follow a common path of being; disciplined, focused, and understanding themselves. Without a better understanding of these three things, then it is more probable that success as a trader will not be reached.

Discipline

Discipline comes in many forms and not all people have what it takes to be successful traders. In short, being a disciplined trader means setting rules that need to be followed. As mentioned at the start of this guide, this begins with devising a good trading strategy and developing an effective trading system to use. It is important, then, to set the rules and write out an articulated trading plan, and through continuous practice of the trading plan you will gain confidence in your ability to execute the plan flawlessly.

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Such intense practice of the trading plan will produce consistent patterns of behaviour that successful traders possess. This is called trading in the zone, or trading with the right mindset.

Know Yourself

Another crucial step to becoming successful in trading is; knowing yourself. This means taking time to self-reflect and acquiring a good understand of your trader profile, or who you are as a trader. For example, are you a trader that can only bear to take a position for a very short amount of time, or are you more comfortable with holding positions for a longer period of time? When you know who you are as a trader, it will become easier for you to determine which trading strategies to use, and the systems and methodologies that will best suit your personality best. Your personality or trader profile needs to be in synchronisation with your trading methodology, otherwise you will not be able to follow the rules of your trading plan. And in many ways, the only trading plan that you should have - is a plan to know yourself and to follow what works best for you.

Patience
The saying that patience is a virtue is even more applicable in the world of trading. It is also a key trait of many successful traders. It doesnt matter if you are a professional Prop Trader, day trader, or longer term trader, it is still a virtue that is applicable to all. So, what does this mean in the context of trading? Well, as many of our Prop Traders would agree If you allow prices to come to you rather than chasing after them, you will see a vast improvement in your trading.
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In fact, a lot of break throughs will be experienced when you adopt this approach - as patience goes hand-in-hand with discipline. Waiting for the right trade requires patience and discipline. As so does entering and exiting the trade at the right moment. Simply put, there are trades that should not be entered, markets that should be left alone, and points of support or resistance that should not be challenged. Having patience is having the right mindset. Learning the right mindset to become a consistent and profitable trader is a long, expensive, and often difficult road. Fortunately, this is something we cover in extensive detail at our Intermediate Workshops.

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How To Get Involved In Proprietary Trading

Becoming a professional trader is a challenging endeavour and there are certainly many steps to take before reaching success in this profession. A lot of traders start out by reading trading books and educating themselves, then entering the markets, only to discover too soon that there are many losses they will encounter over the years before they start to develop a trading system that is profitable. This journey is a tough one to take, make no doubt about that. And even still, there are no guarantees of reaching success. These self-taught traders learn by trial and error, and keep persevering and riding the ups and downs until they become successful. It is at this point that, they usually go on to trade solo and full time for a living, or they become interested in working as Prop Traders for a private firm. Only the best traders shine, and the most successful traders are hired and selected by Proprietary Trading firms where they usually trade with the firms funds. Many successful traders prefer this path of working as Prop Trader, because it means they get access to greater capital and are surrounded by other like-minded traders in a professional trading environment. If you have made the decision to pursue a career as a Prop Trader, there are a number of things that will make that transition more of a reality: * Start researching trading for a living * Get involved in trading groups (online or meetups) * Keep up to date with the markets * Start developing a track record of trades (3 years is a good number) * Perfect your trading strategy as much as possible * Find your trading edge * Speak with traders or firms that are making money from trading
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* Approach those firms and try to get an interview * Once you have an interview make sure you explain why they shouldconsider you, remembering there are many others they talk to * Providing evidence of your successful trading history will increase yourchances * Identify with the firm by understanding what they are looking for * Some questions the firm might ask you: - How you see yourself fitting in with a Prop Trading firms culture - Your risk management strategy - Your trading strategy and methodology * Also If asked, make sure you ask some of your own questions At Trade View Investments, our Advanced Workshops provide more details on how to take the next step of your professional trading career. We are also interested in hearing from successful traders who are looking to enter the professional Prop Trading environment. If you feel you have got what it takes, please contact us. Good luck in your trading journey.

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