The online prop firm space has exploded over the last fewyears, with traders all around the world having access to large tradingaccounts and earning more profits from the markets than ever before.
The bulk of prop firms have focused on forex trading andthe currency markets, however, there are now a number of stock trading propfirms focused on providing great opportunities to traders that specialize intrading stocks.
Stock trading prop firms provide stock traders with largevolumes of trading capital for the trader to use buying and selling stocks - inexchange for a profit split. The firms will usually keep 50%-20% of the profitsobtained by the stock trader each month - which is beneficial for bothparties.
In this article we’ll take a deeper look into stock tradingprop firms, the rise of this kind of model, the benefits of working with a propfirm instead of a broker and the best firm you can use for obtaining your stocktrading capital. So, let’s get into it…
Stock Trading Prop Firms - What Are They?
Stock trading prop firms are a great resource for tradersto leverage. They, in essence, are firms looking for profitable stock tradersto trade their capital for them.
These firms have very deep pockets and ultimately arelooking to generate some great returns consistently on their money.
Instead of employing traders in a local shop and limitingthe number of traders as a lot of firms do, online prop firms will allow anytrader around the world to trade a percentage of their capital.
When the trader makes profits at the end of the month, theprofits are split between the firm and the trader.
Considering prop firms are offering anywhere from $20,000to $10,000,000 in some cases, even just a 50% profit share will result in thetrader netting much larger profits than they would obtain just trading theirown capital.
The Rise of Online Prop Firms
If you’ve been around in the trading industry for a while,you may have not heard of prop firms until more recently.
There have always been physical prop firms with tradingfloors dotted around the financial centers of the world, but the online propfirm model didn’t really come to fruition until just a few years ago.
The prop firm industry grew massively throughout theCOVID-19 pandemic as people had more time to trade and social media was beingmore heavily used. Allowing for prop firms to expand rapidly throughout theindustry.
The stock trading prop firms have come into play even later- with the majority of the prop firms in the industry revolving around forexand a few commodities only!
Now, there are more stock trading prop firms popping up andmore forex-focused prop firms are creating stock trading offerings for theirclients.
Why Use a Stock Trading Prop Firm Instead Of A Broker?
You may be thinking that you’ve already been working with abrokerage so there is no need to work with a prop firm to trade stocks.
However, this is usually untrue as there are vast benefitswhen trading with a prop firm!
These benefits include:
- No risk to you as the trader, as you’re not trading your own capital.
- Your capital can be withdrawn from your brokerage account and invested elsewhere.
- Increased buying power (leverage) within the markets.
- Low cost of entry compared to a broker's minimum deposit.
- Capital scaling is possible, meaning you can soon be trading much larger amounts of capital.
- You will have a community of like-minded traders around you.
- Industry-leading trading conditions.
These are the main benefits of trading with a stock tradingprop firm rather than a broker but it’s worth mentioning that there are so manymore.
In fact, due to the risk parameters set by prop firms, mosttraders report making better trading decisions and actually becoming moreprofitable by working with prop firms as they’re almost forced to manage theirrisk and trade their plan!
What Makes a Good Stock Trading Prop Firm?
When choosing a prop firm to work with, there are a lot ofvariables that you need to consider. Not all prop firms will have the trader’sbest interest at heart, and you must ensure that your values align with thevalues of the firm you’re working with.
So, when choosing a prop firm, ensure you consider thefollowing:
- Reputation
Reputation plays a huge factor in which prop firms youshould be working with. Other traders will have done exactly what you’relooking to do and they can be a really useful resource to lean on and learnfrom when deciding which firm is best for you.
We’d recommend checking third-party sites like TrustPilotto establish which prop firms have the best reputations!
2. Support For Traders
The level of support offered by a prop firm is veryimportant. Whether this is educational support materials, a trading floor oreven just outstanding customer support, you want to be confident that thecompany can support you in every way they possibly can.
This should enable you to have peace of mind whilst you’retrading and hopefully obtain better results.
3. Leverage/Buying Power
As with any market, leverage is incredibly important andstock trading is no different. The amount of buying power a firm is willing togive you will greatly influence the amount of profit you can withdraw from themarkets.
With that being said, be cautious with firms that offer ahuge amount of buying power as they may be trying to force traders into losingtheir shirts by offering them too much risk.
4. Capital Scaling
Ideally, a prop firm should be offering you a chance toincrease your capital under management with them as you consistently prove yourprofitability.
If the firm does not offer this, you might be better offelsewhere as the difference in capital under management over the next few yearscould be huge if you work with a firm that rewards your consistent profits.
The Best Stock Trading Prop Firm - Trade The Pool
Trade The Pool iscurrently the world’s leading stock trading prop firm. They’re actually anoffshoot of The5ers brand - one of the mostestablished and reputable forex prop firms in the industry, being one of thelargest players since 2016.
Trade The Pool offers over 12,000 stocks and ETFs fortraders to make use of, including penny stocks - providing a huge range oftrading opportunities for stock traders.
They allow swing trading, pre and after-market trading andprovide the ability to short any penny stock with no extra fee on “hard toborrow”.
How does it work?
- Choose between 4 tiers, from $20,000 to $260,000 buying power
- Pass the evaluation by reaching the program goal
- Get funded and keep up to 80% of the profit
If you’re looking to become a funded stock trader, this isthe firm for you!
In Summary - What Are Stock Trading Prop Firms?
In conclusion, stock trading prop firms are a vehicle forstock traders to have access to large volumes of capital and make much largerprofits in the markets without taking on any additional risk themselves.
Currently, Trade The Pool is the most reputable stocktrading prop firm in the industry, so it’s worth checking them out.
