In prop trading, your strategy isn’t your wallpaper. It’s your operating system.
If you’re feeling lost between price action, liquidity, SMC/ICT, indicators, and the classic “just have discipline,” you’re not broken—you’re missing a process.
This guide gives you that process. You’ll build a strategy you can understand, test, execute under pressure, and defend when the market gets loud—exactly what you need to pass an evaluation and stay funded.
In Brief
- Start with one simple, testable idea (not 12 concepts at once) and turn it into rules you can repeat.
- Build in layers—context → setup → trigger → exits → risk management → review—so your strategy works like a system.
- Prove your edge with data and journaling so you stop strategy-hopping and start compounding consistency.
You’ve probably seen charts with 17 labels—order blocks, fair value gaps, liquidity pools, breaker blocks—plus three indicators and a “trust me.” Then you hear the opposite: indicators are useless. Then someone says “any strategy works” and it’s all psychology.
Here’s the clean truth from the funded side of the game: you don’t fail because you didn’t find the perfect concept. You fail because your decisions aren’t defined well enough to survive real-time trading and strict prop rules.
Let’s fix that.
A Trading Strategy Isn’t a Concept—It’s a Decision System
A lot of traders call these “strategies”:
- “I trade support and resistance.”
- “I trade SMC.”
- “I trade ICT.”
- “I trade RSI divergences.”
Those are themes. A real strategy is a complete decision system.
A funded trader-level strategy answers these questions every time:
- What market am I trading? (instrument)
- When am I allowed to trade? (session + time window)
- What must be true before I care? (context)
- What exact pattern am I trading? (setup)
- What triggers my entry? (objective signal)
- Where am I wrong? (stop rule)
- Where do I get paid? (target/exit rule)
- How do I stay inside prop rules on my worst day? (daily loss limits + drawdown control)
If your “strategy” can’t answer those in plain language, it’s not ready for evaluation conditions.
Pro Tip: If you can’t backtest it, you don’t own it. You’re renting an opinion.
Prop Trading Demands Simplicity (Because Rules Punish Randomness)
Prop firms don’t punish you for being new. They punish you for being inconsistent.
Typical constraints include:
- Daily loss limits
- Max drawdown
- Consistency expectations (even without formal rules, big spikes in sizing/behavior often end badly)
That means complexity is expensive. A strategy with nine discretionary decisions eventually produces one “close enough” trade that violates your risk limits.
So your priorities as a funded trader should be:
- Clarity over complexity (explain your setup in 30 seconds)
- Repeatability over creativity (you’re not here to impress anyone)
- Capital preservation over home runs (stay in the game)
This is also why many traders stabilize faster on slightly higher timeframes (15m/30m/1H): less noise, fewer emotional misreads, cleaner invalidation points.
Build Your Strategy in Layers (So It’s Testable and Executable)
You’re going to build this like a pro: one layer at a time.
Layer 1: Choose One Market and One Timebox
Pick:
- One instrument (ES/NQ, XAUUSD, EURUSD, BTC—choose one)
- One session (London or New York is plenty)
- One primary timeframe (15m/30m/1H is a strong starting point)
Early on, your job isn’t versatility. It’s becoming dangerously familiar with one market’s behavior.
Pro Tip: Trading three markets, two sessions, and five strategies isn’t diversification. It’s confusion—especially during a prop evaluation.
Layer 2: Define Market Context (Your “Permission to Trade” Filter)
Context is what keeps you from taking A+ setups in A- conditions.
Start with three simple context tools:
- Trend filter: Is the 1H (or 4H) making higher highs/higher lows, or lower lows/lower highs?
- Key levels: Prior day high/low (PDH/PDL), obvious swing highs/lows, weekly open.
- Environment: Are we ranging (chop) or expanding (clean directional moves)?
A beginner-friendly context model that works well for prop trading:
- Mark PDH and PDL
- Mark one major swing level
- Decide your day type: continuation or reversal at key levels (pick one)
This is how you avoid the “I took six trades because price moved” problem.
Layer 3: Pick One Setup (The Pattern You’ll Specialize In)
A setup is a repeatable situation where price behavior suggests opportunity.
Solid “from scratch” setups that don’t require heavy jargon:
- Break-and-retest of a key level (PDH/PDL, major S/R)
- Rejection at a key level (wick into level, close back inside)
- Range expansion after consolidation (tight range → breakout)
If you like SMC/ICT ideas, you can absolutely incorporate them—but keep the execution simple. For example:
- “Liquidity sweep + reversal” can become: sweep PDH/PDL → reclaim → entry trigger.
- “Market structure shift” can become: break of a swing + retest.
Same intent. Cleaner rules.
Pro Tip: If the setup requires you to “feel it,” it’s not a setup yet. It’s a vibe.
Layer 4: Define One Entry Trigger (So You Stop Hesitating)
Most trading damage happens in the gap between seeing the trade and executing the trade.
Your trigger needs to be objective—something you can backtest and repeat.
Examples:
- Close-based trigger: “Enter long when a 15m candle closes above the level, and the next candle holds above.”
- Retest trigger: “Enter on retest of the broken level after a rejection candle forms.”
- Micro confirmation: “Enter when we reclaim the last minor high after a sweep.”
Pick one trigger. Get good at it.
Layer 5: Risk Management (Your Strategy Isn’t Real Until Risk Is Real)
In prop trading, risk management is the strategy.
Your edge can be decent and you can still fail if your risk rules are sloppy—especially under daily loss limits.
Lock in these rules:
- Fixed risk per trade: typically 0.25%–1% (newer traders should stay smaller)
- Max trades per day: 1–3 (this prevents revenge spirals)
- Hard daily stop: for many traders, -1R to -2R then done
And for each trade:
- Stop placement rule: stop goes beyond the structure that invalidates the idea (not where it “feels comfortable”).
- Target rule: target at the next key level or defined R-multiple.
Pro Tip: If your stop is based on what you want to risk instead of where you’re wrong, you’re not trading—you’re negotiating.
Layer 6: Trade Management (One Decision Point, Not Ten)
This is where trading psychology usually hijacks execution.
Keep management boring and consistent:
- Option A: Set-and-forget (stop + target, no interference)
- Option B: One rule (e.g., move stop to breakeven after +1R)
When you “freestyle” management mid-trade, you create random outcomes—and random outcomes are exactly what prop rules punish.
The Testing Path: Backtest → Simulate → Go Live Small
You need testing, but you need the right kind of testing.
A big trap is collecting data while your execution is inconsistent. Then you’re not testing a strategy—you’re testing your mood.
Here’s a clean ladder.
Step 1: Screenshot Backtest (20–50 Examples)
Purpose: learn what the setup actually looks like.
Rules:
- Scroll back on chart
- Mark every instance of your setup
- Log win/loss and approximate R
- Add one note: what was the context?
No optimization yet. Just pattern recognition.
Step 2: Structured Backtest (100–200 Trades)
Purpose: learn your distribution and your weak spots.
Track:
- Win rate
- Average R
- Largest losing streak
- Best/worst conditions (trend vs range, session, near PDH/PDL)
This is where you’ll discover real strategy upgrades like:
- “This works better after a sweep of PDH/PDL.”
- “This fails during mid-session chop.”
Those aren’t fancy indicators. They’re behavior-based filters that keep you inside risk limits.
Step 3: Demo/Sim for 20 Trading Days
Purpose: prove you can execute in real time.
Backtesting doesn’t test:
- hesitation
- FOMO
- moving stops
- overtrading after a loss
A prop evaluation does.
So your sim rules should match your evaluation rules:
- same hours
- same setup
- same daily stop
- same max trades
Step 4: Live Small (Micro Risk)
Purpose: bridge the emotional gap.
Even tiny real money changes your nervous system. That’s normal.
Your job is not to “make it back.” Your job is to execute the plan and protect your downside.
Pro Tip: Going live doesn’t scale your strategy. It stress-tests your habits.
The Fastest Way to Build an Edge: A 30-Day Trading Journal Sprint
A trading journal turns “I think” into “I know.” That matters when you’re trying to become a consistent funded trader.
Run this for 30 trading days. No exceptions.
Your 30-Day Journal Checklist
Log every trade with:
- Date / time / session
- Instrument
- Screenshot at entry and exit
- Setup name (limit yourself to 1–2 setups max)
- Context (trend/range + key levels nearby)
- Entry trigger used
- Stop size + risk in R
- Result in R
- Execution grade (A/B/C)
- Emotion score (1–5): calm → impulsive
- One sentence lesson
After 30 days, you’ll know:
- the time of day you bleed
- which setup is actually yours
- whether losses are “market losses” or “you losses”
Pro Tip: Many traders don’t need a new strategy. They need to stop paying a daily “impulse tax” of 1R.
Common Mistakes That Keep You Stuck (And Cost Prop Accounts)
Learning 10 Frameworks Instead of 1 Market
If you’re constantly switching between SMC/ICT, indicators, and new patterns, you’re never in one approach long enough to build execution skill.
Pick one lens. Commit long enough to get competent.
Trading All Day (No Time Filter)
If you trade every candle, you will eventually trade the worst candles.
Set a trading window. Treat it like a shift.
Quitting After 12 Trades
A short losing streak doesn’t invalidate a strategy.
That’s why you track distribution stats like losing streak size and performance by market condition.
Changing Rules After Every Loss
If you change rules, you reset the experiment.
Think like a professional:
- hypothesis
- test
- data
- adjustment
Not:
- vibe
- loss
- panic
- new indicator
Ignoring Your Trading Psychology and Temperament
Your personality affects execution.
- If you’re impatient, ultra-fast scalping will amplify mistakes.
- If you’re risk-averse, wide stops will scare you into early exits.
Build a strategy that fits your temperament and prop firm constraints.
A Simple “From Scratch” Prop Trading Strategy Template (Use This This Week)
This is not a holy grail. It’s something better: a machine you can actually run.
Market
- One instrument
- One session (example: New York AM)
- Primary timeframe: 15m (optional execution view: 5m)
Context
- Mark PDH/PDL
- Mark one major swing high/low
- Choose one:
- Trade only with 1H trend, or
- Trade only reversals at PDH/PDL
Setup (choose one)
Break-and-retest of PDH/PDL
- Price breaks PDH/PDL with a 15m close
- Wait for retest of the level
- Look for rejection in breakout direction
Entry Trigger
- 5m candle rejects the level and closes in your direction (objective candle rule)
Risk Management Rules
- Risk: 0.25R–0.5R while building consistency
- Stop: beyond the rejection candle / swing that invalidates the idea
- Max trades/day: 2
- Daily loss limit: -1R (newer) to -2R (more consistent)
Exits
- Optional partial at +1R
- Final target at next obvious key level
- No “moving the target farther” mid-trade
Review
- Screenshot + journal every trade
- Weekly stats: win rate, avg R, total R, best/worst conditions
The Funded Trader Mindset: Execution > Innovation
A lot of traders try to think their way into profitability.
Funded traders behave their way into it.
Your job is not to predict. Your job is to:
- show up on schedule
- take only your setup
- manage risk the same way every time
- stop when you hit your daily loss limit
- review honestly and adjust slowly
That’s how you pass challenges. That’s how you protect a funded account. That’s how this becomes sustainable.
Pro Tip: Your first real edge is usually one setup + strict risk management + a journal. Complexity comes later—after consistency.
Pick one market. Pick one timeframe. Pick one setup. Then commit to 30 days of testing, sim execution, and journaling.
If you want to build this the right way—with prop-trading rules, routines, and risk controls that help you stay funded—start your funded trader journey with Fondeo.xyz.
Stay sharp,
Jake Salomon
