Prop trading is a popular method for expert traders to receive funding for trading from a firm that is known as a prop firm ea. In this manner, a prop firm is rather similar to a hedge fund, where they receive investments from third parties and then further invest that money into bonds and securities and then share the dividends with their clients, considering the hedge fund’s share as well.
Now in the case of a prop firm, the difference is that they directly engage their money into financial markets for the purpose of trading. For this reason, they attempt to attract highly skilled and expert traders who then they would give funds to so that they can trade on the behalf of the firm.
But prop firms are not just giving out their funds to any trader who wishes to become a prop trader. In order to get into prop trading, a trader first needs to pass the challenges that are put forth by the prop firm, simply called prop challenges.
Prop challenges are a series of trading challenges that a trader ought to pass first. Depending on the firm, the challenges can vary in terms of the amount or margins of profits that they want the trader to make. Each stage of the prop challenge will also come with a certain level or threshold or tolerance for loss.
Naturally, it is rather difficult to become a prop trader. For this reason, a smart way to pass the prop challenges is through the use of expert advisors, or other methods of algorithmic or automated trading solutions.
In this article we are going to discuss everything about the use of expert advisors for passing prop firm challenges and the different aspects that are involved in this matter.
What is a Prop Firm EA?
Since the prop challenges that are imposed on traders by prop firms can be quite difficult and challenging to pass, especially for those traders who might not have a lot of experience and expertise in the domain of trading, traders can turn to automated trading solutions for passing such prop challenges.
There are expert advisors that might be quite suitable for passing prop challenges. So a prop firm expert advisor or EA is one that can optimally help traders pass prop firm challenges and become a prop trader by providing them with sustainable and profitable trading results.
Purpose and Benefits:
The main purpose behind using an expert advisor for passing prop challenges is that certain traders do not have the expertise to pass these challenges. And even if you are a seasoned trader, why bother with all the difficulties? You can instead use a much smarter method and that is applying an expert advisor to this issue.
In most cases with prop firm challenges we see that they want to see sustainable results. So it is not merely the matter of making money on one position or a handful. The main point is to be able to sustain profitable trading across multiple positions and across a span of time that is the requirement of the challenge. And this is exactly what you can get through a prop firm EA; i.e. consistent results.
Target Audience (Prop Traders, Prop Firms):
So who can benefit from these prop firm EAs? Virtually any trader who wants to get into prop trading but does not want to pass the prop challenges themselves can hugely benefit from the use of an expert advisor for prop challenges.
And as we discussed in the previous section, these can be traders who do not have the expertise or traders who have the expertise but do not want to pass the challenges themselves.
Furthermore, even prop firms themselves can apply such expert advisors and directly use their funds with these automation trading solutions. In this way, such firms can be assured to have a sustainable and consistent streak of trading in any market such as the foreign exchange market or forex.
Key Features:
To see exactly how an expert advisor can help you become a prop trader, we will use the example of the our automated trading solution and expert advisor. In this section we are going to discuss the many different aspects of using EAs for prop trading.
Also keep in mind that not all expert advisors are suitable for prop trading. Expert advisors, and in general automated trading solutions, are developed for many different reasons and many different purposes. So make sure to pick an expert advisor that is able to pass the challenges associated with prop trading and that is consistent enough to be suitable for prop trading.
As you know, prop trading, rather similar to leveraged trading, comes with thresholds for loss that must not be surpassed in order for the prop trader to be able to keep trading with the funds provided by the prop firm. So you ought to pick an expert advisor that is able to keep losses in check and make sure that the drawdown from the trading process is well under control.
Risk Management:
An important aspect of using an expert advisor by prop traders or prop firms is risk management. Obviously, prop trading is only profitable if it can be done over an extended period of time. Remember that a prop firm is quite similar to a hedge fund, and has funds at its disposal that yield considerable and sustainable dividends.
So in order to make sure that prop trading can be consistent, risk management is a hugely important part of the operation. Traders who wish to pass prop challenges and become prop traders need to pick those expert advisors that are so-to-speak “expert” at handling risks of trading.
The example expert advisor we have picked, is XAUBOT PRO, is definitely an expert at risk management. There are countless parameters and features that help traders manage the risks associated with trading. These includes various parameters that are directly related to risk management and managing drawdown, including stop losses. Our EA allows traders to set hourly and daily stop losses. There are other parameters such as maximum drawdown. The maximum drawdown will ensure that the total drawdown of the trading account will never surpass the threshold set the user under any circumstance.
Profit Maximization:
Aside from managing the risks associated with trading, a prop expert advisor that can be regarded as a prop firm EA must be able to maximize profits. This is also significantly important as prop traders do not receive all the profits from the trading process, which is naturally to be expected.
Again, similar to a hedge fund where the dividends from bonds and securities are divided up between the investors and also the hedge fund itself, in the case of a prop firm, the profits that are yielded through the process of trading are divided among the trader or traders and of course the prop firm itself. So it is very important to make sure that the most amount of profits possible are obtained from the trading process.
XAUBOT PRO offers the fundamental automated trading solutions of this platform, you have access to the AI-based tools such as money management. Features such as money management will help traders manage their account’s capital in the best way possible and be able to manage their trading asset, which in this case is provided by the prop firm, in the most intelligent way with the help of artificial intelligence.
There are many other features that are integrated into the XAUBOT that will ensure your trading experience is able to yield maximum profitability. These parameters include those related to position sizing where the EA is able to manage the size of positions and the lot size, which are directly related to the potential profitability of positions.
Compatibility with Prop Firm Platforms:
The compatibility of expert advisors with prop firms is directly related to the compatibility of the expert advisor with any certain trading platform and on the other hand the compatibility requirements of the prop firm with trading platforms.
Most expert advisors are developed for the popular trading platform MetaTrader, such as MetaTrader 4 which is the case for the XAUBOT. And the case is that most prop firms do indeed work with the trading platform MetaTrader. So you can also use the expert advisor with that prop firm.
There are, however, those prop firms that have their own proprietary trading platform. Ergo, it might not be possible to install the expert advisor on it.
Performance Metrics:
When we want to evaluate the performance of an expert advisor to specifically apply it to prop trading, there are certain performance metrics that are more important than others. We shall divide them into two categories:
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Profitability
The first group of metrics are related to profitability. These performance criteria include metrics such as the overall profitability of the expert advisor. This would be a number that can be regarded as the safe zone of profit margins that can be obtained by the expert advisor. For instance, in the case of the XAUBOT expert advisor, the expected monthly profit rate is 3% to 10%.
- Risk management
Equally as important as profitability is the risk management aspect of an expert advisor. For the reasons we have already discussed further above, it is highly important for an expert advisor to be able to manage the risks and drawdowns related to trading in the forex market.
Backtesting and Optimization:
One huge upside of using expert advisors for prop trading is the possibility of backtesting. When you use automated trading solutions for trading in the forex market, you have the ability to backtest the expert advisor before applying it to real assets. A backtest is a process by which the expert advisor is exposed to historical market data to see how it would have performed under those conditions. Furthermore, with automated trading there is the chance to optimize and adjust the settings of the tool to make it more optimal and more aligned with your specific goals of trading in the market.
Customization Options:
In order for any trading solution to be optimal, it has to be customized. In this regard, those trading solutions and expert advisors which allow more space and room for customization would naturally stand out. Going back to our earlier example of the XAUBOT EA, one huge upside of this EA is that it allows for a lot of customization through its numerous parameters that it offers to its users. In this way, any trader is able to adjust and customize this expert advisor to meet their specific needs in the market.
Prop Firm Challenges and Solutions
Specific challenges faced by prop firms:
Prop firms handle a lot of money and capital for trading, as such they are faced with different challenges as well. challenges that can be addressed through automated trading. But before we see how these challenges are addressed with expert advisors, let’s take a quick look at them.
The most important challenges that are faced by prop firms are related to risk management. The loss of money either by the firm directly or through the prop traders that they have in their employ is a serious risk that threatens the capital of the prop firm. For this reason, they employ various techniques and methods to make sure that they keep losses under control. But of course any technique and method can easily get out of hand and so will losses.
How the EA addresses these challenges:
To address the common challenges that are faced by prop firms, expert advisors are able to provide elegant and smart solutions that will help such firms to manage risks, drawdown, and at the same time achieve consistent and sustainable trading results.
So these two areas are perhaps the most important ways in which EAs are able to address the challenges of prop firms:
- Though various means and techniques, expert advisors are able to manage the risks associated with trading in the forex market
- This, on the other hand, leads to consistent and sustainable results, which is exactly what a prop firm needs
Case Studies and Results
Real-world examples of EA performance:
While there are certain expert advisors that can be used for prop trading, perhaps none other can compete with the XAUBOT. To find out the real-world performance of our EA, you can turn to third party audit websites, such as MyFxBook, where the performance of this expert advisor has been tracked for some time. Overall, it can be seen that XAUBOT is able to provide users with an average win rate of 80%, which is extremely high and indicates that about 8 out of 10 positions end in profit. On the other hand, XAUBOT is also able to maintain an average drawdown of only 20%.
Success stories and testimonials:
There are various platforms that allow you to read on the real world experience of users, but perhaps one of the best platforms is TrustPilot where you are able to read real testimonials of the experience of users. In the case of XAUBOT, you can go and read the testimonials on this platform and other similar platforms. Here are a handful of testimonials:
- Only had the bot for a few days but the service has been topnotch. The handful of trades have all been good except the last one which went west because of (I think) a news report. The bot responded by placing a trade to minimize the loss. It still hasn’t played out but I am impressed by the bot’s response to the bad trade.
- Impeccable customer service! XAUBOT team helped with resolving issues, did a follow up and provided A1 service that you normally don’t receive. Thank You Team and Happy 1st anniversary looking forward to celebrating many more anniversaries with the XAUBOT!
Conclusion
Recap of key benefits:
Prop trading is a method of trading in which a prop firm will provide capital to professional traders to trade. So in this method you get to trade even if you do not have any capital. So trading with a considerable amount of capital, if successful, the profit margins can be quite significant.
But there are challenges related to prop trading. In order to sustain your process in this approach to trading, you need to have excellent risk management and perfectly consistent results. The most obvious method to achieve this is through automated trading. You can get help from expert advisors and obtain both of these matters in prop trading.
The most important and key benefits of using prop firm EAs is that (1) you will be able to control and manage risks which allow you to continue to receive funds from the prop firms, and (2) you will be able to enjoy consistent results and profit margins.
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If you are at all on the fence about whether or not you should purchase XAUBOT, you can try this expert advisor for 15 days free of charge and test out our expert advisor.
