Proprietary trading, or prop trading, is an exciting approach that allows traders to use a firm’s capital to maximize profits. By leveraging advanced algorithms, unique trading systems, and market expertise, proprietary traders aim to outperform standard investments. However, success in prop trading requires more than just access to capital — it demands tried-and-tested strategies. Below, we’ve outlined some of the top proprietary trading strategies to help you elevate your earnings.
1. Scalping for Immediate Gains
Scalping is one of the most fast-paced proprietary trading strategies. Traders focus on capturing small price movements throughout the day by executing a high volume of trades. While the profit per trade may be small, the cumulative gains can be significant. Speed and patience are critical here, as scalpers rely on market volatility and liquidity to thrive. A strong understanding of technical indicators, such as moving averages and RSI (Relative Strength Index), ensures traders can enter and exit trades at optimal times.
Statistical Insight
According to recent brokerage data, scalping can yield returns as high as 1–2% daily for skilled traders in highly liquid markets.
2. Pair Trading for Minimal Risk
A market-neutral strategy, pair trading involves simultaneously buying and selling related financial instruments to capitalize on price discrepancies. For example, a trader might go long on Stock A and short on Stock B within the same sector, assuming that the price gap will eventually close. This reduces market exposure and limits risk, making it a highly favored strategy among prop traders.
Statistical Insight
On average, pair trading shows a win rate of approximately 60–70%, benefiting from predictable price correlation across similar assets.
3. Event-Driven Trading for High Opportunities
Event-driven trading revolves around capitalizing on market-moving events, such as mergers, earnings announcements, or geopolitical news. Proprietary traders use this strategy to predict price swings resulting from major developments. Staying updated with news analytics and leveraging cutting-edge trading tools can significantly amplify success in this approach.
Statistical Insight
Bloomberg data reveals that event-driven trading strategies have outperformed traditional equity benchmarks by 13% over the past five years.
Elevate Your Prop Trading Game
Mastering the right proprietary trading strategy can mean the difference between treading water and achieving breakthrough earnings. Whether you’re scalping for small profits or strategizing around major market events, the key lies in constant learning and refinement of your approach.