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.

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.

Try Apex Trader Funding

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

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

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

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

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

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

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

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