re Prop Firms Worth It in 2024, March (2024)

There’s no simple “yes” or “no” answer to whether prop firms are worth it because it depends on many factors. Which prop firm? Which broker do they use? What are their trading restrictions? How much must traders pay in fees?

There’s also the matter of the traders themselves—not everyone will benefit from a prop trading firm, depending on where they are in their trading journey.

Let’s explore the world of prop trading.

What is Prop Trading?

There are several categories of prop firms, and I’m going to focus on the following category:

Proprietary trading firms, or “prop firms,” are financial firms that allow traders to use the firm’s capital for trading in exchange for a percentage of the trading profits.

Prop firms are located worldwide, in the U.S., U.K., E.U. nations, and the Middle East. For example, Top Step, SurgeTrader, Funder Trading, and E8 are in the U.S., and Ascendx is in London, UK. SabioTrade is based in Ireland, while FundedNext is based in the UAE. One of the very first prop firms in existence, FTMO, founded in 2005, is based in the Czech Republic, an E.U. nation.

How Does Prop Trading Work?

The best prop firms give traders capital a live account and let them keep 80-90% of their profits, depending on the firm. However, first, the trader must pass an evaluation.

The Evaluation Process

The prop firm tests the trader’s profitability on a demo account with targets to meet before going live. What are the evaluation targets? They can include:

  1. Profit target.

The trader must grow the account by a specified percentage of the initial demo balance.

  1. Maximum drawdown.
  • The prop firm stops the evaluation process if the account is down by a certain percentage from the initial deposit. 8-10% is a typical maximum allowable drawdown.
  • Prop firms generally include balances from closed and open trades in maximum drawdown.
  1. Maximum daily loss limit.
  • Suppose the account is down by a certain percentage or dollar amount within the day. In that case, the prop firm prevents the trader from continuing that day.
  • The limit normally includes the value of closed and open trades.
  1. Minimum and maximum number of trading days.

Some prop firms want to see traders hit the profit target within a specified range of days to demonstrate consistency.

  1. Maximum winning day.

The best day cannot exceed a certain percentage of the profit target to ensure reaching the profit target through a series of winning days, which increases the likelihood of repeating their results.

What Happens After the Evaluation Process?

After passing the evaluation, the trader gets a live account with a pre-determined balance. Prop firms generally continue the same risk management rules from the evaluation phase when in the live phase.

Payout Policy

Prop firms have policies setting the terms for paying out profits. Typically, they allow traders to choose the frequency of payouts and pay traders within a few days of a payout request.

Which Markets Can I Trade with Prop Firms?

Many prop firms allow a range of markets, including Forex, metals, equities, and crypto. Some prop firms specialize in futures only.

What are the Prop Trading Costs?

The evaluation fee is usually the only cost. It ranges from a couple hundred to a couple of thousand dollars. Prop firms charge more if the trader wants a higher starting balance with the live account. Most prop firms allow traders to make multiple attempts without paying the fee again.

Some prop firms charge an additional monthly fee during the live account stage.

How Much Money Can I Make in Prop Firms?

Traders Receive a Percentage of the Profits (Often 80-90%)

A few prop firms will start traders at a lower percentage and then increase it as they show continued profitability.

Traders Can Make an Unlimited Amount Through Prop Trading

Successful traders can receive payouts in the tens and hundreds of thousands of dollars, sometimes more. For example, FTMO’s highest payout to a single trader is $1.2m at the time of writing.

Realistically, the profits depend on the initial balance, ranging from $10k to $200k. Most prop firms vary the entrance fee depending on the trader's starting balance.

Can I Lose Money in Prop Trading?

The only money a trader can lose is the entrance fee. Otherwise, the prop firm carries all the risk. This is one of the biggest advantages of trading a prop trading.

Pros and Cons: What are the Potential Risks and Rewards of Trading with a Prop Firm?

Pros: Rewards

  1. Profit earning potential. The biggest reason traders consider a prop firm is access to more capital and keeping a high percentage of the profits.
  2. The structure a prop firm gives. Profit targets and risk management rules help traders succeed because they provide an external structure they cannot ignore.
  3. Support. Prop firms offer online education and even performance coaches for one-on-one support. Many prop firms let their traders help each other. It’s easy to network with other traders online, but I only talk to successful traders in a prop firm.

Cons: Risks

  1. Trading restrictions. Some prop firms apply restrictions that may not suit everyone’s trading style. For example, some do not allow open positions on weekends or during big news events. Check that the rules are consistent. For example, I know one prop firm that allows weekend trades in the evaluation phase but not with the live account.
  2. The evaluation fee. This is usually the only financial cost.
  3. Broker restrictions. Traders must use the prop firm’s broker. This does not have to be a negative issue if the broker is good. Less reputable prop firms use brokers with poor execution or arrange an increased spread from which they take a payout from the broker, negatively affecting performance.
  4. The psychology of a larger balance. Some traders are psychologically unprepared to handle a larger balance size on a live account.

Should I Use a Prop Firm or Higher Leverage?

Some jurisdictions, e.g., the U.S., the E.U., UK, Canada, and others, have maximum leverage levels. Using a prop firm is better if I can’t get higher leverage. Some traders are comfortable accessing higher leverage if it means giving up strong regulation. Still, I do not like the idea of compromising regulation.

Bottom Line

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. The support and regulations can be excellent for success if they are open enough.

FAQs

Is joining a prop firm worth it?

Yes, it can be if the prop firm is reputable and has good terms.

What is the success rate of prop firms?

Prop firms find successful traders regularly, and success depends on the individual trader.

Do people actually make money with prop firms?

Yes, many traders do.

Are trading prop firms good?

Many reputable prop firms have allowed traders to make a lot of money.

Can you make a living trading with prop firms?

Yes, it is possible.

What happens if you lose money in a prop firm?

The prop firm can stop you from trading their money.

Is prop trading risky?

The prop firm carries the risk because it is their capital.

re Prop Firms Worth It in 2024, March (2024)

FAQs

Are prop firms really worth it? ›

In my experience, trading with prop firms like True Forex Funds has been incredibly profitable. Over the past 1.5 years, I've seen substantial gains, and their support and spreads have played a crucial role in my success. Definitely worth it!

What is the future of prop firms? ›

Prop firms that operate in strict adherence to regulations are likely to have a more stable and sustainable business model. Additionally, this situation may prompt prop firms to diversify their trading strategies and explore alternative markets and platforms.

Can you make a living with prop firms? ›

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.

Which prop firm is the best? ›

#1 – Funder Trading

Funder Trading stands first in our list of the top prop trading firms in 2024 due to multiple reasons but notably it is the only prop trading firm that offers options funding and includes coaching for every trader signed up.

What are the negatives of prop firms? ›

- Traders in prop firms often have limited control over the firm's capital. They may need to deposit their own money as collateral or risk management. - Additionally, payouts are subject to the firm's rules, which may restrict a trader's access to profits.

How many people fail prop firms? ›

Around 10% pass

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.

Is this the end of prop firms? ›

The future may see prop firms seeking new technologies and partnerships to continue offering their services, albeit within a more constrained and regulated framework. The unfolding scenario presents both challenges and opportunities for innovation in prop trading.

What is happening to the prop firm industry? ›

Major industry players have been navigating significant regulatory challenges, particularly concerning their operations in the United States. The heart of the matter is the concern over prop trading platforms onboarding U.S. clients because of the industry's relative lack of regulatory oversight in the country.

Are prop firms a pyramid? ›

There is a very slim likelihood that they will succeed if the prop firm does not have their best interests in mind. 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.

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.

What is the pass rate for prop firms? ›

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.

How much does the average prop firm trader make? ›

Prop Firm Trader Salary

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.

What is the best prop firm in 2024? ›

Quick Look: Best Prop Trading Firms
  • Best for Beginner Futures Traders: Apex Trader Funding.
  • Best for Experienced Traders: FXIFY.
  • Best for Stock Traders: Trade the Pool.
  • Best for Experienced and Beginner Forex, Indices and Metal Traders: The 5ers.
  • Best for All Futures Traders: BluSky.

Why is FTMO banned in the US? ›

FTMO have now restricted access to all new US-based traders as of January 2024. This appears to be related to regulatory issues and may have something to do with the recent My Forex Funds case.

What is the best prop firm for beginners? ›

Our Top 5 Best Prop Trading Firms for Beginners
  • FTMO. FTMO is one of the best prop simulated trading firms for both new and experienced traders. ...
  • Funded Next. Funded Next (MFF) was created in 2020. ...
  • The simulated Trading Capital. ...
  • E8 Funding. ...
  • The Funded Trader.

Are prop trading firms profitable? ›

Although commonly viewed as risky, proprietary trading is often one of the most profitable operations of a commercial or investment bank.

How profitable is prop trading? ›

Proprietary trading occurs when a financial institution carries out transactions using its own capital rather than trading on behalf of its clients. The practice allows financial firms to maximize their profits, as they are able to keep 100% of the investment earnings generated by proprietary trades.

Are prop firms good for beginners? ›

Conclusion. In conclusion, proprietary trading firms can be a great option for beginner traders looking to gain access to capital and resources. However, it is important to do thorough research and consider the potential risks before joining a PTF.

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