How Much Do Prop Firm Traders Make - Prop Firm Hero (2024)

Proprietary, or “prop,” trading firms are unique entities in the finance world. They allow traders access to significant pools of capital and sophisticated trading tools.

If you choose to become a prop firm trader, you operate within the firm’s infrastructure. You also take advantage of the leverage it offers to potentially increase the scale of your profits.

Your earnings as a prop firm trader will vary widely based on your ability to manage risk, make informed trading decisions, and the profit-sharing terms outlined by your firm.

The income of a prop firm trader isn’t fixed or salary-based; it is predominantly performance-driven. Traders profit from the financial markets by leveraging their skills in trading stocks, Forex, options, futures, and other financial instruments.

How much you can earn is directly related to the firm’s profit-sharing ratio, which commonly ranges from 75/100 to 90/100. For instance, if you make $10,000 in profit and the firm operates on a 75/100 split, you’ll take home $7,500.

Experienced traders with a strong track record may earn significantly from $100,000 to $500,000 annually. Some firms even report total payouts in the millions over several months.

The level of experience you bring can indeed play a crucial role in your earnings. Starting as a prop firm trader, the learning curve might be steep. But with experience and consistent performance, it’s possible to earn a comfortable income, although as with any trading, there are no guarantees of profit.

Average Earnings for Proprietary Traders

When you explore the realm of proprietary trading, understanding the potential earnings is essential.

Your income as a proprietary trader can fluctuate significantly due to a variety of factors, including market conditions, your trading strategy’s performance, and your experience level.

  • Average Base Salary: According to Glassdoor, the average base salary for a proprietary trader is situated at various levels. This figure can serve as a starting point, but your actual earnings may diverge depending on the firm’s compensation structure and your success rate.

  • Profit-Sharing Arrangements: Many prop firms employ a profit-sharing model, where you, as a trader, receive a percentage of the profits made from trading. Typically, this ratio may range between 75% to 90% in your favor, creating substantial earning potential if your trades are profitable.

  • Median Wage: Data suggests that the median wage for proprietary traders stands at $203,679. This median value offers a more representative overview of earnings, minimizing skew from extreme values.

Remember, these estimations can only provide a general framework. Your specific earnings will be closely tied to the prop firm’s performance and wider economic factors.

It’s important to assess the prop firm’s payout reports and revenue generation. These reflect the overall success of their traders and, by extension, your potential earnings.

Factors Influencing Prop Firm Trader Salaries

Proprietary, or prop, firm traders’ salaries vary considerably due to multiple factors. As you navigate the prop trading industry, understanding these components can help you gauge potential earnings.

Experience and Skill Level

Your experience and proficiency play pivotal roles in your earning capacity. Newcomers to the field typically start with lower earnings, while veteran traders who demonstrate consistent profitability can secure much higher payouts.

It’s not uncommon for adept traders with a solid track record to negotiate better terms and higher percentages of the profits they generate.

Firm’s Capital and Risk Parameters

The size of the firm and the capital at your disposal significantly affect your salary potential. Firms with larger capital allow for bigger trades and potentially greater profits.

Moreover, each firm has its own set of risk parameters, which can limit or enhance your ability to earn based on how aggressively you can trade.

Market Conditions

Current market conditions have a direct impact on your income. Volatile markets may present more opportunities for profit, but they also come with higher risks.

In contrast, a stagnant market might limit your trading activities and consequently, your earnings.

Geographical Location

Your physical location or the economic conditions of the region in which the firm operates can influence your salary.

Traders in major financial centers like New York or London may have access to more resources and opportunities. This can potentially lead to higher earnings than those in smaller or less economically developed areas.

Comparison With Traditional Traders

When exploring the earning potential of prop firm traders, it’s instructive to compare with their counterparts in traditional trading.

As a traditional trader, you manage your own capital and make independent trading decisions. This contrasts with a prop firm trader’s reliance on a firm’s capital and its risk parameters.

AspectProp Firm TraderTraditional Trader
CapitalUse firm’s capitalUse personal capital
RiskFirm absorbs lossesYou absorb losses
Profit SharingShare profits with firmKeep 100% of profits
IndependenceFollow firm’s strategiesFull trading autonomy
SupportAccess to training/supportSelf-reliant

Prop traders usually share profits with their firm. It is common for a prop trader to maintain only a portion of the profits, contingent on the agreement with their prop firm.

You might see high earners in prop trading due to access to substantial firm-provided capital and normally wouldn’t have to worry about losing personal assets.

In contrast, as a traditional trader, you have the freedom to choose any trading strategy and are not tied down by a firm’s policies. Moreover, all the returns on your investments remain with you.

However, you are directly exposed to financial risks and must possess the capital necessary to trade effectively.

Potential Bonuses and Additional Compensation

In prop trading, bonuses and additional compensation are common. However, they are greatly influenced by your performance, the firm’s policies, and market conditions.

Here is a structured breakdown:

  • Profit Sharing: You typically retain a significant percentage of the profits. Common splits range from 60-80%.
  • Performance Bonuses: High-performing traders receive additional bonuses. These bonuses vary among firms and depend on profitability.

Annual Salary Variations
Your performance can significantly boost your total compensation. For example:

Performance LevelEstimated Compensation Range
Average$100,000 – $200,000
Top Performers$200,000 – $500,000+

Keep in mind that the high end often includes profit sharing. In some cases, top performers may even earn over $1 million.

  • Partnership or Equity Stake: Exceptional traders may be offered a partnership or equity in the firm.

Your compensation package might also include additional benefits. These benefits can contribute to your overall financial success as a trader. They include access to advanced trading tools, educational programs, and networking opportunities.

Remember, these are potential figures and can differ based on numerous factors. These factors include the firm’s success and market volatility.

How Much Do Prop Firm Traders Make - Prop Firm Hero (2024)

FAQs

How much do traders make at prop firms? ›

The salary of a prop trader can vary greatly depending on several factors such as experience, performance, and the size of the firm. On average, a junior prop trader can expect to earn anywhere between $50,000 to $100,000 per year, while a senior trader can make upwards of $500,000 annually.

Can you make a living as a prop trader? ›

As a result, anyone can be profitable as a prop trader because profitability is linked to their experience and skills, strategy, and ability to generate gains by trading in the market with the firm's capital.

How many prop firm traders are successful? ›

At its core, the prop firm challenge can be a way for prop firms to make money from failed challenges. This is because some sources have the failure rate of prop trading challenges at 90%. So for every 10 traders that buy a challenge, 9 will fail.

Are prop traders profitable? ›

Proprietary traders have access to sophisticated software and pools of information to help them make critical decisions. Although commonly viewed as risky, proprietary trading is often one of the most profitable operations of a commercial or investment bank.

How many traders fail prop firms? ›

They're given harsh targets, limited time, no support, and huge leverage – a perfect storm! It's not surprising that 95% of traders fail their challenges!

How stressful is prop trading? ›

Prop trading can be highly stressful due to the fast-paced nature of markets and the pressure to make split-second decisions. Working in the financial markets as a prop trader comes with a series of demanding hurdles. Such traders face an environment filled with: Intense rivalry.

How many hours do prop traders work? ›

The hours in prop trading could be described as “normal-ish, but very intense and stressful.” The average is probably 50 hours per week, though this varies by group, firm, and seniority. The nice thing about trading is that if you produce, your hours don't matter.

Is prop trading risky? ›

Since proprietary trading uses the firm's own money rather than funds belonging to its clients, prop traders can take on greater levels of risk without having to answer to clients.

What if a prop trader loses money? ›

Profits from trades are generally divided between the firm and the prop trader; however, the risk distribution is asymmetric. This means that in the event of a loss, the trader bears 100% of the losses, while they don't receive 100% of the profits.

What is the failure rate for FTMO? ›

According to FTMO statistics, only about 10% of traders are able to pass the funded account challenge at any account level. This means approximately 90% of aspiring funded traders fail the evaluation and are unable to gain access to the firm's capital.

Can you live off day trading? ›

In summary, if you want to make a living from day trading, your odds are probably around 4% with adequate capital and investing multiple hours every day honing your method over six months or more (once you have a method to even work on).

Which is the most trusted prop firm? ›

The most popular prop trading firms and funded programmes
  • Axi Select.
  • FTMO.
  • The Forex Funder.
  • E8 Markets.
  • True Forex Funds.
  • The 5%ers.
  • Funded Next.

What is the starting salary for prop trading? ›

What are Top 5 Best Paying Related Entry Level Proprietary Trader Jobs in the U.S.
Job TitleAnnual SalaryHourly Wage
Proprietary Futures Trader$101,533$48.81
Entry Level Trader$96,774$46.53
Proprietary Trading Firms$76,005$36.54
Independent Contractor Proprietary Trader$56,645$27.23
1 more row

How much capital is needed to start a prop firm? ›

How much money do you need to open a prop firm? Starting an online prop firm can cost as little as $10,000, while starting a traditional prop firm can cost up to $1 million.

How are prop traders taxed? ›

Schedule C net income is subject to federal and state income taxes… That net income is deemed “earned income” subject to the self-employment (SE) tax. They can deduct health insurance and retirement plan deductions.

How do prop traders get paid? ›

Under the profit split model, the prop firm provides traders with a funded trading account in exchange for a share of their profits. The profit split typically ranges from 20-50%, and the trader is responsible for managing the trades and making profitable decisions.

Is trading for a prop firm worth it? ›

Prop firms are an excellent source of accessing further capital to increase profit potential. Passing a prop firm's evaluation means reaching a profit target while staying within its risk management rules. Prop firms require traders to use their brokers, which can be positive or negative depending on the broker.

Do prop firms give real money to trade with? ›

Sure, the firm may replicate successful trades of the funded traders on the firm's real account. But, again, those are trades made by the firm itself with its own capital. And in general, prop firms insist that they are not financial institutions and do not provide financial services.

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