What is a Prop Trading Firm? (2024)

Proprietary trading firms (prop trading firms) offer experienced traders an opportunity to access a firm’s capital and top investing tools. Prop firms allow traders the chance to use firm-provided capital to keep a portion of the profits on trades they make. Prop trading firms and prop traders have a mutual interest in supporting the other’s success because the two parties share the profit.

Table of Contents

  • What is a Prop Trading Firm?
  • Trade
  • Educate
  • Mitigate Risk
  • Create Profit
  • Benefits of Prop Trading
  • Considerations With Prop Trading
  • Compare Prop Trading Firms
  • Try Apex Trader Funding
  • Try FX2 Funding
  • Try Top Tier Trader
  • Try Trade the Pool
  • Try The 5ers
  • Try FXIFY
  • Try SurgeTrader
  • Try OneUp Trader
  • Frequently Asked Questions

What is a Prop Trading Firm?

A prop trading firm is a company that provides traders with capital to make trades. The firm gives capital to the traders for trades in exchange for a portion of the profit. The exact amount of profit given to a trader varies.

While it’s common for prop trading firms to have an assessment and application process for prospective traders, the details differ by firm. Some firms examine a trader’s skill level and risk management during the assessment process. The benefits of working with a prop trading firm include access to a wealth of trading knowledge, tools and knowledgeable leaders.

Trade

Prop trading firms employ individual traders to make profitable trades. The firms specify an allotted amount of loss for traders that can be broken down to a daily level. Traders can access $100,000 or more in capital from top prop trading firms. Most prop trading firms require a downpayment or an initial audition fee.

Educate

Prop trading firms provide relevant data and analysis to help their traders make successful trades. Prop trading firms are incentivized to offer traders quality educational resources because the traders are using capital provided by the firms.

Mitigate Risk

The firms strive to diversify assets based on a range of classifications such as type of investment and timeline. Firms recognize the volatility of the market and strive to diversify portfolios to mitigate risk.

Risk mitigation remains a main area of focus for prop trading firms. Firms provide traders with top tools such as financially-savvy artificial intelligence (AI) to better navigate the markets.

Create Profit

Prop trading firms aim to create a profit by having traders make successful trades.

Benefits of Prop Trading

Prop trading can improve a trader’s skill level. The positives range from risk management tools and access to capital.

Risk management: Top prop trading firms have a set framework to guide traders to mitigate risk.

Access to capital: Prop traders have access to a significant amount of capital that they use to trade stocks, bonds and currencies.

Lower trading fees: Prop traders benefit from lower trading fees.

Professional trading tools: Firms offer traders a variety of educational tools and resources like automated software and trading-related technologies. Many prop trading firms have useful blogs, articles and videos that can provide insight into the world of trading.

Considerations With Prop Trading

While prop trading can be lucrative, it comes with risks and drawbacks.

Personal risk: Traders may lose their deposit and eventually their jobs if they don’t trade profitably.

Potential loss limitations: The room for error when prop trading varies. Certain prop trading firms have daily loss limitations that hover around 5%, which can be difficult to maintain depending on current market trends.

Possible tax changes: Traders face potential tax changes that categorize trading profits as capital gains or personal income.

Compare Prop Trading Firms

Benzinga provides useful insights and tools to explore prop trading firms. Consider comparing the top prop trading firms to better understand the available opportunities.

  • Read Review

    Best For:

    Beginner Future Traders

    securely through Apex Trader Funding's website

  • Read Review

    Best For:

    Experienced Traders

    securely through FXIFY's website

  • Read Review

    Best For:

    Stock Traders

    securely through Trade The Pool's website

  • Best For:

    Seasoned and Undercapitalized Traders

    securely through Top One Trader's website

  • Read Review

    Best For:

    Experienced Yet Undercapitalized Forex Traders

    securely through Tradiac's website

  • Read Review

    Best For:

    Experienced and beginner forex, indices and metal traders

    securely through The5ers's website

  • Best For:

    Accelerated Trader Funding

    securely through SurgeTrader's website

  • Read Review

    Best For:

    Prop Traders Looking for a Multi-Asset Platform

    securely through The Trading Pit's website

  • Read Review

    Best For:

    Day Traders

    securely through FundedNext's website

Try Apex Trader Funding

  • Read Review

    Best For:

    Beginner Future Traders

    securely through Apex Trader Funding's website

When you want to get into prop trading, it can be difficult to know where to start and which platform to choose. UsingApex Trader Fundinghelps you get into the futures trading space with a funded account for which you can qualify in as little as 7 days. You will trade mini or microcontracts in the evaluation period, and once the evaluation has been passed, you will move to a funded account and get paid for your trading skills.

Traders receive 100% of their first $25,000 earned per account with up to 20 accounts active at once and 90% after that, meaning this platform pays the most of any futures prop trading account. There are no daily drawdowns, you can trade on holidays and use your own system to get the best results.

Try FX2 Funding

  • Read Review

    Best For:

    Undercapitalized Traders

    securely through FX2 Funding's website

If you want to try a prop trading platform that’s simpler and more affordable, go with FX2 Funding. The profit splits are high, the evaluation only uses one step and you can get customer care 24/7. Traders who want to get started can get funded up to $200,000 and are allowed to:

  • Trade forex
  • Trade indices
  • Trade crypto and other instruments
  • Utilize weekend holding
  • Try copy trading
  • Employ expert advisors and other forms of automation

Try Top Tier Trader

  • Read Review

    Best For:

    Traders of All Levels

    securely through Top Tier Trader's website

Top Tier Trader or TTT has a 2-step evaluation that allows you to trade in a demo account, get used to the platform and earn access to somewhere from $300,000 to $2 million in funding. Profit splits sit between 80% and 90%, depending on the program you’re in.

While you cannot always use EAs or copy trading, the platform is perfect for those who want to start investing for a living and need the funding to make it happen. True, the evaluation has 2 steps, but it has no time limit, ensuring that you can truly prove yourself and access as much funding as possible.

Try Trade the Pool

  • Read Review

    Best For:

    Stock Traders

    securely through Trade The Pool's website

Most traders have an issue with getting into the markets because they lack the capital required to take risks and see massive returns.This is why traders turn to Trade the Pool. Trade the Pool does more than give you the funds you need to get into prop trading. Trade the Pool also:

  • Works for day traders, swing traders and prop traders
  • Support professional trader who need another place to work
  • Offers trading for stocks and CFDs
  • Offers support for inexperienced traders
  • Provides unlimited buying power
  • A 14-day free trial
  • Offers over 12,000 stocks and ETFs to trade
  • Educates users
  • Subscribes traders to several resources
  • Provides space for traders to hone their skills

Try The 5ers

  • Read Review

    Best For:

    Experienced and beginner forex, indices and metal traders

    securely through The5ers's website

The 5ers is a prop trading firm that makes it easy to access the prop trading marketand affordable to get started. On the platform, you can trade forex, metals and indices, pay as little as $95 for a demo account and get several benefits, including:

  • Instant trading access after passing the evaluation
  • Freedom to develop your own trading strategy
  • No subscription fees
  • MT5 trading
  • Profit splits up to 100%
  • Exclusive resources
  • Salary offers on some of the higher-stakes programs
  • Easy scaling options

Try FXIFY

  • Read Review

    Best For:

    Experienced Traders

    securely through FXIFY's website

FXIFY is a new proprietary trading firm that offers access to up to $400,000 for those who pass the site’s assessment. With profit shares as high as 90%, you can scale your account up to $4 million. You can try the One-Phase or Two-Phase assessment, but make sure to review the terms and conditions of each assessment before beginning so that you know you’re taking the right path, especially if you’re new to the industry.

Trading is available on MT4 or MT5 and assorted trading platforms through the firm’s partnership with FXPIG—You can learn more about these options on the FXIFY site.

There’s commission-free trading and access to stock indices, forex, precious metals, etc. Plus, you get relatively tight spreads, no trading restrictions, customizable leverage and more. This all helps you reduce your overhead and increase profits.

You can even use expert advisors (EAs) or other automated strategies to get the best results, if that’s something you feel will help you become and stay successful. Traders with FXIFY also get instant payouts, no consistency rules, unlimited trading days and a 125% refund on the assessment fee with the first payout.

Try SurgeTrader

  • Best For:

    Accelerated Trader Funding

    securely through SurgeTrader's website

SurgeTrader is one of the most prominent figures in the prop trading scene. When you want to invest with the massive funds available for a larger trading house, you can turn to a prop trading firm. SurgeTrader offers a range of benefits, including:

  • Quick trader funding after your evaluation
  • Quick account setup
  • Powerful educational tools
  • High profit shares (up to 90%)
  • Several account styles
  • A simple platform that’s easy to use

Try OneUp Trader

  • Best For:

    Prop Traders Looking for Capital to Fund Futures Trading

    securely through OneUp Trader's website

OneUp Trader provides a unique prop trading program for investors that makes it easier to get into the industry. OneUp partners with multiple prop trading firms in an effort to guarantee trading funds that could be as high as $250,000.

Using innovative and simple technology, you can take the 1-step evaluation that helps OneUp understand if you have what it takes. You don’t jump through hoops, and you also get:

  • The opportunity to extract profit from the markets without spending your own money
  • Several account styles
  • Funds ranging from $25,000 to $250,000
  • Accounts with specific risk parameters
  • Placement with a funding partner when you pass the evaluation
  • The chance to extract your first $10,000 in profit
  • A 90% profit split after the first $10K

Frequently Asked Questions

Q

How much do prop trading firms make?

A

Although the exact split between prop traders and prop trading firms varies, the prop trading firm takes a much larger percentage of profits.

Q

Are prop trading firms worth it?

A

For experienced traders, prop trading firms can be worth it.

What is a Prop Trading Firm? (2024)

FAQs

How does a trading prop firm work? ›

A prop trading firm is a company that provides its traders with access to capital. In return, the traders share a percentage of the profits they generate with the company.

How much do prop firm traders make? ›

Base salary: Most prop trading firms offer their traders a base salary, which is usually paid on a monthly or annual basis. This salary can range from $50,000 to $100,000 for junior traders and can go up to $500,000 or more for senior traders.

Are prop firms a pyramid? ›

Actually, one could compare the 95% of prop companies to a pyramid scheme. They either set you up to fail or compensate you with other traders' losses.

Is prop firm trading legal? ›

Currently, online forex prop firms are legal, although there is lacking documentation and regulation for prop firms to follow. It is not illegal to operate or trade with a prop firm. However, where most online prop firms come unstuck is in their business practices and terms of service.

Do prop firms give you real money? ›

In a typical challenge model, the prop firm will give the trader a certain amount of virtual money to trade with. The trader will then have to meet certain profit targets in order to pass the challenge. Once they pass the challenge, they will be given a funded account that they can use to trade with real money.

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

To summarize, the amount of money you need to open a prop firm can range from $10,000 to $1 million, depending on the type of prop firm, the technology, the registration, the liquidity, and the CRM tool.

What are the negatives of prop firms? ›

Let's explore some of these pitfalls:
  • Strict Risk Management Rules and Trading Guidelines: ...
  • Profit Sharing: ...
  • Profit Targets During the Evaluation Period: ...
  • Limited Control Over Capital and Payouts: ...
  • Lack of Regulatory Oversight: ...
  • High Leverage and Margin Requirements: ...
  • Financial Risk and Capital Exposure:
Feb 11, 2024

What are the disadvantages of prop firms? ›

Among many other potential factors, the main disadvantages of prop trading arise from being classified as a market professional, unfavorable profit sharing, and whether your net trading profits are taxed as capital gains or ordinary personal income.

Is five rings a prop trading firm? ›

Five Rings is a proprietary trading firm founded with a vision of combining strategy, innovation and technology to succeed in today's global markets. Based in New York, we trade in various domestic and international markets, both established and esoteric. Five Rings does not depend on clients or outside investors.

Why are prop firms getting shut down? ›

Prop trading firms have been shutting down or suspending their services, particularly to U.S.-based clients, because of a crackdown from MetaQuotes, the company behind the popular MetaTrader trading platforms.

Can you make a living with prop trading? ›

Prop traders can operate under their own rules-based system using the fund's capital, not money from outside investors. Prop traders also get to keep a large portion of their profits, which brings up the next primary perk: compensation. Prop traders often get a base salary, a cut of the profits and performance bonuses.

Why was prop trading banned? ›

Proprietary trading by financial institutions racked up huge losses and was one of the factors that forced American taxpayers to bail out the banking system. That crisis destroyed financial institutions, caused significant investor losses, and obliterated the household wealth of average Americans.

How do trading prop firms make money? ›

Prop firms fund traders to earn a share of their profits, which constitutes a major part of their revenue, and may also gain income through subscription, joining fees, and selling educational courses.

Is trading for a prop firm worth it? ›

Is working with a prop firm worth it? There are many unique advantages that make working with a prop firm worth it. These include access to unique software and information, trading with the firm's capital, and cashing in a large portion of your winnings.

How do prop traders get paid? ›

Prop firms, or proprietary trading firms, give traders access to simulated capital. In return, the traders agree to give the firm a percentage of their profits. Traders normally have access to various markets, including crypto, Forex, and even the news.

What happens if you lose prop firm money? ›

Proprietary trading firms often provide evaluation accounts where you prove your trading skills. Usually, you pay a one-time fee to enter this "challenge." If you lose money during this evaluation, you won't owe anything beyond the initial fee.

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