If you’re new to the world of trading or about to embark on your first prop firm challenge, then at some point you’ll have to choose one of the many trading styles out there, and stick to it.
The reason? Successful traders understand that having access to capital via a prop firm is not enough alone… They need a trading plan that aligns with the firm’s risk parameters and market conditions. Making money trading doesn’t come down to luck, instead it requires a disciplined, measured, and practiced approach.
Unlike independent day traders, traders trading with a prop firm must navigate risk tolerance levels, trading positions, and overnight market volatility while following structured investment strategies within the platform. Basically, prop firm traders have to jump through multiple hoops to trade—and that means choosing trading strategies wisely.
In this guide, Falcon explores different trading strategies, their applications in financial markets, and how trend traders, swing traders, and day traders can use them to identify overbought conditions, execute trading opportunities, and improve their trading success. You’ll want to come back to this page again as you progress through your prop firm challenge, so make sure to bookmark it.
Prop Firm Trading Strategies: An Overview
To help Falcon traders navigate the complexities of the different trading strategies, the table below gives a high-level overview.
| Strategy | Timeframe | Best Market Conditions | Key Challenge |
| Scalping | Minutes | High liquidity, low spreads | High transaction costs |
| Day Trading | Intraday | Volatile sessions, momentum-driven | Requires quick decisions |
| Swing Trading | Days to weeks | Trending markets, technical setups | Holding trades overnight |
| Breakout Trading | Hours to days | Volatility spikes, key price levels | False breakouts |
| Trend Trading Strategy | Days to months | Strong directional trends | Trend reversals |
| News Trading | Minutes to hours | High volatility during major economic releases, earnings reports, and geopolitical events | Unpredictable |
| Mean Reversion | Hours to days | Range-bound markets | Trades may not revert |
Best Trading Strategies for Prop Firm Traders
Now, let’s get into the nitty-gritty of trading strategies… In this section, we give an overview of each of the trading strategies Falcon Funded traders should know.
Scalping
Scalping is a high-frequency trading strategy where traders capitalize on small price swings within short timeframes, often holding positions for only a few minutes.
This method relies on technical indicators such as on balance volume (OBV), moving averages, and the average directional index (ADX) to predict minor price movements.
Best used in: Highly liquid financial markets such as forex, stocks, and indices with low spreads and tight bid-ask prices.
Why it works for prop firms: Quick trades reduce exposure, making it easier to stay within daily drawdown limits.
Challenges: Requires ultra-fast execution and high trading volume, which can increase transaction costs.
Day Trading
Day traders are exactly what it sounds like — they enter and exit trades within the same trading day, avoiding the risk of overnight market volatility. This strategy depends on technical analysis and fundamental analysis, using chart patterns and price action to execute trades effectively.
Best used in: Markets with strong intraday momentum and news events that create great entry and exit opportunities.
Why it works for prop firms: No overnight exposure, allowing traders to remain within strict risk limits and is a potentially profitable strategy for many Falcon Funded traders.
Challenges: Requires fast decision-making, market sentiment analysis, and strong discipline to exit trades before the trading day ends. Also, not all financial markets are suitable for day trading strategies.
Swing Trading
Swing traders hold positions for multiple days to capture medium-term price movements. This strategy is based on technical indicators like the relative strength index (RSI), moving averages, and volume trends to analyse markets and identify trade setups.
Best used in: Trending markets with clear price swings, where traders can follow price trends and technical signals.
Why it works for prop firms: Allows traders to aim for larger profits with fewer trades, reducing transaction costs.
Challenges: Some prop firms restrict trades from being held overnight or over weekends, limiting flexibility. You might have to stick to this strategy in your personal portfolio.
News Trading
News traders focus on market reactions to economic reports, corporate earnings, and geopolitical events, looking to trade and capitalize on short-term price movements driven by breaking news.
This strategy relies on fundamental analysis, economic calendars, and real-time market sentiment to execute trades based on how financial instruments react to major announcements.
Best used in: High-volatility markets during major news releases, such as central bank decisions, employment reports, and earnings announcements, where price action reacts sharply to new information.
Why it works for prop firms: News trading gives quick, high-impact trades that can generate significant profits in a short period.
Challenges: News events are unpredictable, and might not go the way you imagine! As a result, some prop firms may restrict trading during major announcements to prevent excessive risk exposure.
Trend Trading
Trend traders focus on identifying and following prevailing trends in the market, aiming to profit from sustained price movements in one direction.
This strategy relies on technical indicators such as moving averages, the average directional index (ADX), and price action analysis to confirm the strength of a trend before entering a trade.
Best used in: Markets with strong directional momentum, where traders can capitalize on extended price trends, such as forex majors, commodities, and indices.
Why it works for prop firms: Trend trading allows for structured, lower-risk entries with high reward potential, making it easier to meet prop firm profit targets while staying within risk parameters.
Challenges: Trend reversals can lead to losses if traders fail to exit trades at the right time. A well-defined risk management plan is essential to protect against sudden market shifts.
Breakout Trading
Breakout traders look for key support and resistance levels and enter trades when the price breaks through these barriers with high momentum.
This strategy relies on technical indicators like volume analysis, Bollinger Bands, and the on balance volume (OBV) to confirm whether a breakout is likely to sustain.
Best used in: Markets experiencing high volatility and strong price movements.
Why it works for prop firms: Breakout trading provides clearly defined entry and exit points, making it easier to manage risk and comply with prop firm drawdown limits while aiming for significant profits.
Challenges: False breakouts can occur, leading to losses if stop-losses are not placed strategically.
Final Thoughts
The key to trading success in a prop firm environment is consistency, discipline, and risk management (certainly not luck!)
Of course, no single trading strategy guarantees success, but it is proven that consistency in a trading strategy, combined with deep experience in navigating trading tools and using technical indicators, will increase your chances of success.
Think you’ve got what it takes to master the trading strategies and take on a funded prop firm challenge? Sign up today and start your trading journey with Falcon Funded.
