Day trading firms offer traders an opportunity to trade with a pool of capital rather than their own money in an arrangement from which all parties benefit. The reason most new traders fail is not caused by flaws in their strategy or a lack of desire to succeed but rather, retail traders face is undercapitalization.
Many proprietary (i.e., prop) trading companies set up a structure that allows the trader to receive a cut of the profits they generate through trades. This arrangement used by prop trading firms has the potential to be lucrative, but there are steep challenges that can make it difficult to generate those profits.
Young traders looking for a lucrative career in the FX trading space have most likely heard about proprietary trading. Prop trading companies are one of the hottest things in trading right now and for good reason. Proprietary trading companies have one goal of becoming profitable in the long term to which the company supplies traders with all of the cash required for trading the forex markets.
These two simple concepts comprise the core of the flexible and lucrative world of proprietary trading and open it up to high levels of profitability and freedom. There is no risk of losing your own capital ( apart from your subscription fees ) and trades depending on the prop company chosen and type of plan can be opened and closed where ever and when ever.
Depending on the prop fund in question, there are varying requirements for membership. On top of a record of profitable trading, a prospective fund member must complete a series of test trading in which they perform at a predetermined level. If an applicant performs well enough, they will be invited into the fund to begin trading the fund’s money.
In addition to knowing your trading personality and trading statistics very well, whenever you are considering any prop firm, use the following list as a guide for proprietary firm’s features.
- Trading market – what does the fund specialize in? Are you more adept to trade Forex, Futures, Stocks, or Options.
- List of tradable assets – Forex, Futures, Stocks, or Options
- Trading hours – what are the active trading hours? Are there inactive mandatory times such as during economic releases, major news events, etc.?
- Holding positions overnight and over the weekend. This is important if your strategy requires you to hold for a certain number of days then a prop company that’s doesn’t allow over night trades is not your best option.
- Trading costs and structure – Is it a monthly fee or a one off for a challenge which is usually re-imbursed on completion of the challenge
- Profit payout and Profit Split.
- Profit payout vs growth and what milestones need to be achieved to receive more funds.
- Leverage or buying power – How much buying power does the fund let their traders work with and will this work according to your strategy?
- Maximum loss / daily loss – All prop companies restrict maximum loss and some also enforce daily maximum loss. This is almost a good thing as most traders fail to stop when hitting a bad sequence of losing trade and end up revenge trading.
- Qualifying requirement – Most online prop firms will have a certain testing procedure.
From the floors of established banks to the comfort of a high-quality home office, today any experienced trader can develop a trading career for a fund while trading risk-free (once qualified), with high buying market power, and with fast growth potential. While there are a few models of prop trading programs, they are all about funding the best and most talented traders.
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