Prop Firms vs. Going Solo: The Inner Battle of a Trader (2024)

Partner CenterFind a Broker

Let’s be real, trading is already a wild mind game. There’s a whole rollercoaster of emotions involved – the thrill of a winning streak, the gut-punch of a big loss, and an unhealthy obsession with squiggly lines on a screen and .

But if that isn’t enough, traders have another choice that can seriously mess with their heads: prop firm or risking your own precious cash?

Let’s take a quick look a both to see the potential psychological factors you may want to consider.

Trading With the Backing of a Prop Firm

Prop firms: the sugar daddies of the trading world. Pay a fee to tryout and if you pass the challenge, they hand you a big wad of cash (or a big virtual account) and say, “Go forth, young grasshopper, and try not to blow it.” Sounds like a dream, right? Maybe…maybe not. Here’s some of the pros and cons:

Pro #1: Less Risk, Baby! Using someone else’s money is oftentimes a heck of a lot less stressful. Instead of that sinking feeling in your stomach when a trade goes south, it’s their problem… mostly. It’s a good way to ease into bigger trades and test out strategies & your psychology without risking the mortgage payment.Prop Firms vs. Going Solo: The Inner Battle of a Trader (1)

Pro #2: Access to capital. Unless you’ve got $50K – $100K laying around to get started, achieving a long-term consistently profitable outcome without taking huge risk is extremely difficult on small accounts.

Prop firms give you that access to lessen that constraint, all for a profit share that is still likely attractive to most, relative to actual returns on a small self-owned account.

Con #1: Evaluation and Fees: Prop firms charge a fee for an evaluation which can include a one-time fee, reset fees, as well as monthly fees for access to data and platforms. It’s one of the mechanisms to filtering out the random people on the internet who are gamblers vs. those who are serious about trading as a business, as well as generating a nice net income stream for the firm.

These fees are not cheap, so you’d better have a profitable system and some sort of track record before committing relatively large capital to any prop firm.

Con #2:Big Brother is Watching. Prop firms aren’t just a free handout. They have rules, man! And they’re usually super strict.

Expect daily & max loss limits, rolling trailing stops, restrictions on what/when you can trade, and the constant nagging feeling you’re going to get fired if you don’t make their cut.

Con #3: Where’s My Slice of the Pie? If you hit it big, guess what? They get a big chunk of your profits. Sharing is caring…even if it kinda stings.

But consider what’s better: keeping 10% gains on a $1K account or sharing 10% gains on a $500K account? You do the math.

Also consider that props firms are not created equal. As with any industry, there may be some who may not be the most trustworthy or reliable options out there, and then there are some great ones with a long history of doing trustworthy business. Make sure to do your due diligence and start slow with a reputable firm if you feel going with a prop firm is right for you.

By the way, looking for help to make fundamentals based analysis & strategy easier for you? Then check out BabyPips Premium to see if it’s right for you!

Trading Your Own Hard-Earned Dough

Trading your own money with a broker is the ultimate freedom… and the ultimate terror!

Here are some quick trade-offs you may want to consider before handing over your hard earned capital.

Pro #1: Ain’t Nobody the Boss of You. Want to trade crypto at 3 am in your underwear? Go for it! You call the shots, set your own risk limits and processes, which markets to trade and you keep every penny you make…although, the government might have something to say about that last benefit!

Pro #2: The Sweet Taste of Victory. There’s a different kind of satisfaction when you’re trading with the money you worked hard to earn. Wins feel extra sweet, like you’ve truly conquered the market.

Con #1: Market Risk Stress is REAL. Every bad trade feels like a punch to the wallet (because, well, it IS). This emotional strain can cause some folks to second-guess themselves into paralysis or, even worse, make risky moves out of desperation (i.e., revenge trading).

Con #2: Trading goals may take longer to reach. Unless you have a lot of capital to trade and/or you’re an extremely talented risk manager that can execute consistently, growing a small account in a safe and sustainable way will take time. Like years and no matter your trading situation, a positive outcome is not guaranteed.

Of course, it is possible to grow a small account into a very large one in a small amount of time, but that usually requires a high level of risk. The extreme volatility that comes with that level of risk is an environment that can psychologically crush even the most hardened market veterans, let alone trading newbies like us.

Con #3: Brokerage risks. Remember that once you deposit your money with a broker you give up all control of your capital. This means that if your brokerage goes belly up, commits fraud, refuses a withdrawal, etc., there’s really nothing much you can do to get your capital back.

Just like prop firms, not all brokers are made and do business the same. Do your own due diligence and try to stick to regulated brokers in countries with strong financial systems to reduce the non-market risks discussed above.

So What’s the Verdict?

It’s kinda like choosing between a steady paycheck and a wild entrepreneurial adventure. Prop firms offer access to larger accounts for relatively low capital outlay, but you’re also on a shorter leash. Trading your own money means total control of how you want to trade, but the trade-offs for that control may not be for everyone.

At the end of the day, prop firms and brokers are just tools to express ideas and manage risk, and either can be a good option for any trader if used properly. And in some situations, a trader may want to even use both for different trading styles & strategies.

The “best” solution always comes down to your particular trading situation, available risk capital, risk tolerance, skills and execution abilities.

Just remember, no matter which path you choose, those charts are always going to toy with your emotions. So, take the time to research and choose the route the has you screaming a little less on that wild roller coaster ride to whatever your long-term goals may be!

Having a tough time recording your thoughts & trading statistics? Check out TRADEZELLA! It’s an easy-to-use analytics & journaling tool that can lead to valuable performance & strategy insights! You can easily add your thoughts & track your psychology with each and every trade. Click here to see if it’s right for you!

Disclaimer: Babypips.com earns a commission from any signups through our affiliate link. When you subscribe to a service using our affiliate links, this helps us to maintain and improve our content, a lot of which is free and accessible to everyone–including the School of Pipsology! We appreciate your support and hope that you find our content and services helpful. Thank you!

Prop Firms vs. Going Solo: The Inner Battle of a Trader (2024)

FAQs

Prop Firms vs. Going Solo: The Inner Battle of a Trader? ›

Prop firms offer access to larger accounts for relatively low capital outlay, but you're also on a shorter leash. Trading your own money means total control of how you want to trade, but the trade-offs for that control may not be for everyone.

Which prop firm is better than FTMO? ›

FTMO 's top competitors in May 2024 are: FunderPro, the5ers and more. FunderPro is currently rank as the number one on the list of top Forex Prop Firms.

What percentage of traders pass prop firm challenge? ›

That result should look catastrophic for anyone who hopes to join a prop firm. The article from Lux Trading Firm provides slightly different results. According to it, 4% of traders, on average, pass prop firm challenges. But only 1% of traders kept their funded accounts for a reasonable amount of time.

Is it better to trade alone or in a group? ›

One of the main advantages of trading by yourself is that you are free to experiment. The thing is, in groups, people tend to think alike. This means that when you want to veer away from the norm and think outside the box, there tends to be a lot of criticism and resistance.

Is trading for a prop firm worth it? ›

While prop trading is one of the most profitable opportunities, it is affected by asymmetric risk. This means that the profit-sharing ratio may be from 75% to 90%, but you bear 100% of the risk of your trades. When becoming a prop trader, you often need to deposit an amount of money known as your risk contribution.

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 best funded trader program? ›

Top 5 Best Funded Trader Programs 2024
  1. Bespoke Funding Program. Bespoke Funding Program is a prop firm where traders come together to help each other grow and succeed. ...
  2. Funded Trading Plus. ...
  3. Trade The Pool. ...
  4. The 5ers. ...
  5. Instant Funding.
Mar 15, 2024

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.

What is the failure rate of prop traders? ›

Understanding the Prop Firm Challenge

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.

Why do most people fail prop firm challenges? ›

The most common reasons traders fail prop firm challenges are simply overleveraging their trades, not understanding the rules, and not having a profitable trading strategy. In this article, we'll break down the 6 most common reasons traders fail prop firm challenges and what you can do to avoid this happening to you.

When should you not trade? ›

If you can't find a reasonable price level for your stop loss, or you have to set your stop too far away and, therefore, have a reward:risk ratio that is too small, don't take that trade. Most amateurs fiddle with their stop until they think that the potential profit is large enough.

What are the best pairs to trade as a beginner? ›

Opting for stable, liquid, and easily understandable currency pairs such as EUR/USD, USD/JPY, GBP/USD, USD/CHF, and AUD/USD provides a solid foundation for novice traders.

What is the easiest trade to do? ›

Carpentry is one of the easiest trades to learn. It involves constructing and repairing structures made from wood, such as houses, furniture, and other wooden objects. Carpenters typically use hand tools like saws, hammers, chisels, planes and drills to create their projects.

What are the disadvantages of prop firms? ›

5 Cons of Prop Trading
  • Auditions. For some traders, the requirement to pass an Audition or Challenge may be viewed as a drawback. ...
  • Competitive Environment. ...
  • No Guaranteed Income. ...
  • Long Learning Curve. ...
  • Psychological Pressure.
Oct 20, 2023

What are the downsides of prop trading? ›

Personal Risk: One of the significant drawbacks of prop trading is the potential personal financial risk. If a trader doesn't perform well, they may lose their deposit, and in some cases, their job. Loss Limitations: Prop firms often implement daily loss limits to protect their capital.

Do prop firms really pay out? ›

There is nothing inherently scammy about the business model of prop firms. But how do they make money then? For starters, prop firms, of course, do not give money to just anyone who asks. Typically, they have a multi-stage evaluation process to make sure the traders they employ know what they are doing.

Is TopStep better than FTMO? ›

Features Comparison: TopStep vs FTMO

Range of Markets: FTMO offers a wider range of trading instruments compared to TopStep's focus on futures. Profit Sharing: FTMO tends to offer a higher profit share ratio. Educational Support: TopStep provides more structured educational content, especially for futures trading.

Which prop firm has the fastest payout? ›

The Top Forex Prop Firms Ranked by Pay-out Frequency
Prop FirmPayout Cycle
Lux Trading FirmWeekly
Funded Trading PlusWeekly
Finotive FundingWeekly
FTMOBi-weekly
12 more rows

What is the success rate of FTMO? ›

The FTMO challenge has a reputation for being extremely difficult to pass. Across FTMO's various account levels, it is estimated that only around 10% of traders are able to successfully complete the evaluation and become a funded trader. This means approximately 90% of those who attempt the challenge end up failing.

References

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Domingo Moore

Last Updated:

Views: 6142

Rating: 4.2 / 5 (73 voted)

Reviews: 80% of readers found this page helpful

Author information

Name: Domingo Moore

Birthday: 1997-05-20

Address: 6485 Kohler Route, Antonioton, VT 77375-0299

Phone: +3213869077934

Job: Sales Analyst

Hobby: Kayaking, Roller skating, Cabaret, Rugby, Homebrewing, Creative writing, amateur radio

Introduction: My name is Domingo Moore, I am a attractive, gorgeous, funny, jolly, spotless, nice, fantastic person who loves writing and wants to share my knowledge and understanding with you.