What Is A Prop Firm + Benefits of Using Prop Firms
Discover what is a prop firm and learn about the benefits of using prop firms to enhance your trading career.
You may have heard of prop firms but don't know much about them. Or you've even tried your hand at trading but didn't have much success. You might feel discouraged, wondering if trading is even for you. What if there was a way to make trading less risky and give you a better chance at succeeding? This is where prop firms can help.
This blog will explore what a prop firm is and how it works. We'll also look at AquaFunded's funded trading program and how it can help you achieve your trading goals. Keep reading to learn about the best funded trading accounts.
What is A Prop Firm
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Prop firms are companies that give traders capital to trade with. In return, they take a percentage of the profits. Prop firms have one goal: helping traders become better at trading. They do this by providing access to large amounts of capital. This allows traders to open larger positions, make more money, and take on more risk without fearing losing their capital.
Prop firms also give traders access to resources such as training, sophisticated trading tools, and software to help them improve their trading. Prop firms provide traders with mentorship and support from experienced traders. All of these factors help traders become better at trading.
Where Are Prop Firms Located?
There are several prop firms worldwide. Some of the largest and most well-known firms are in New York and London, and many smaller firms are also located worldwide. While prop firms may vary in size and structure, they all operate under the same business model.
What Do Prop Firms Do?
Proprietary trading firms, or prop firms, provide traders the capital to trade financial markets. Unlike other trading companies that allow traders to start with a demo account, proprietary trading firms do not use demo accounts.
They hire prop traders to trade for them and give them a certain amount of capital, depending on their skills. When the trader makes profits, the company will deduct its amount depending on the agreement made.
Profit Split Agreements in Prop Trading Firms
The agreement between the company and traders usually varies from company to company. Some companies like Audacity Capital prefer to share a 50/50 profit split with our traders. Companies may give you a 25-30% profit split depending on your skills. Most prop trading firms have a desk fee.
This fee covers:
- Utilities
- Terminals
- Trading software
- Personnel wages
It is up to you to decide which prop trading firm to join.
Understanding Currency Pair Correlation in Trading
Reading charts and currency pair correlation tables are also crucial as it help one understand how correlation functions.
- A less than -70 and more than 70 reading means a strong correlation.
- Currency pairs are not strong or less correlated if a reading ranges between -70 and 70.
The formula below explains well how the correlation coefficient is calculated. As mentioned earlier, prop firms provide traders with the capital to trade. Traders must work hard to ensure they make enough profit for the company.
Resource Availability and Profitability in Prop Trading Firms
Thankfully, many prop trading firms provide traders with enough resources to multiply their money. If a trader fails to profit for the company, nothing much can happen because prop firms understand that losses are part of trading. The trader may need to double their account. With Audacity, we always double all trading accounts once they attain a target of 10%.
Jumpstart Your Trading Career With AquaFunded
AquaFunded is a Dubai-based proprietary trading firm that provides traders:
- Access to funded trading accounts of up to $5 million and profit splits of up to 95%.
- The company has a unique funding model with easy-to-achieve profit targets of 8% and fast bi-weekly payouts.
- There is even an option for the first payout to be processed in just seven days.
AquaFunded caters to traders of all experience levels, from beginners to those with a few years of experience who want to trade with reduced risk using the firm's capital instead of their own. With its competitive features and UAE-based operations, AquaFunded aims to stand out in the crowded prop trading market and provide a trustworthy platform for traders looking to scale their profits.
Get started with AquaFunded's funded trading program today!
Related Reading
- What Is Prop Trading
- What Is a Funded Trading Account
- What is a Funded Trader
- How Do Funded Trading Accounts Work
- How to Get Funded for Trading
- Top Prop Firms
- How to Become a Prop Trader
- How Much Do Funded Traders Make
- Are Funded Accounts Legit
Is Prop Firm A Good Idea?
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New traders often believe that a proprietary firm is a place only for experienced traders. Prop trading is a great opportunity for new traders to get funded, learn how to trade, and develop discipline and risk management skills. A funded account is like an apprenticeship for trading, and prop firms are great at helping new traders learn the ropes.
Do Prop Firms Give You Real Money?
Do prop firms give traders real money to trade with? Yes, proprietary trading firms give traders access to real money for trading. The money these firms provide is not a direct payment to the trader; it's capital that the firm allows the trader to manage. Here's how it typically works:
The Evaluation Phase
Many prop firms require traders to pass an evaluation or assessment phase. During this phase, traders must demonstrate their trading skills and risk management abilities by trading on a simulated or live account with strict rules.
Getting Funded
If a trader successfully passes the evaluation, the prop firm provides them with a funded trading account. The money in this account is real, and the trader uses it to trade in the financial markets.
Profit Sharing
When a trader makes a profit using the firm's capital, they receive a percentage. The exact percentage can vary depending on the firm. It's common for traders to keep anywhere from 50% to 80% of the profits, with the firm taking the remainder as compensation for providing the capital.
Risk Management Rules
Prop firms usually have strict risk management rules. If a trader incurs losses beyond a certain threshold, the firm may reduce their account size or terminate their funding agreement. So, while the money you trade with is accurate, it belongs to the prop firm, and your earnings come from the profits you generate using that capital.
Benefits of Using A Prop Firm
1. Get Your Hands on Cutting-Edge Technology
Joining a prop trading firm gives you access to advanced technology. These firms invest heavily in state-of-the-art trading platforms, tools, and analytics to ensure their traders have the best resources. With the latest technology, you can:
- Quickly identify profitable trading opportunities
- Track market trends
- Make data-driven decisions
Cutting-edge technology in prop trading firms includes:
- Sophisticated algorithmic trading tools
- Advanced charting software
- Real-time market data feeds
This technology enables traders to execute trades faster, more accurately, and less risky.
2. Get Expert Guidance and Mentorship
When you enroll with a proprietary trading firm, you're not merely signing up with an organization – you're entering a fraternity of seasoned traders devoted to championing your success. Armed with a wealth of experience, these seasoned experts are equipped to offer:
- Invaluable perspectives
- Counsel
- Assistance
As you traverse the intricate labyrinth of trading. Through imbibing wisdom from industry stalwarts, you fortify your arsenal to execute more intelligent trading choices and foster the growth of your enterprise. This collaborative environment can serve as a catalyst, propelling your trading prowess to unprecedented heights in the fast-paced world of financial markets. The expert guidance and mentorship prop trading firms provide can come in various forms, such as:
- One-on-one coaching sessions
- Group seminars
- Even informal discussions among traders
This mentorship enables traders to learn from others' experiences, both their successes and failures.
3. Gain Access to Capital
One of traders' most significant challenges is having enough capital to trade effectively. Prop trading firms offer traders access to their capital, which means they can trade larger positions and earn higher profits. Access to capital can significantly impact traders, allowing them to seize profitable opportunities they otherwise may not have been able to pursue.
4. Benefit from Risk Management
Trading can be a high-risk venture, but prop trading firms have robust risk management systems to protect the trader and firm. As a prop trading firm member, you'll benefit from their risk management strategies, which can help you minimize losses and maximize gains. This gives you the confidence to take calculated risks, knowing a safety net is in place.
5. Enjoy Competitive Commission Rates
Prop trading firms offer competitive commission rates, saving you money on your trades. Lower commission rates mean higher profit margins, which is especially beneficial for high-volume traders who can see significant savings over time.
6. Embrace a Flexible Schedule
As a prop trading firm trader, you can set your schedule. This flexibility allows you to trade when it's most convenient, whether in the early morning, late at night, or somewhere between. This flexibility can be a significant advantage for traders with other commitments or who prefer to work outside of office hours.
7. Take Advantage of Professional Development Opportunities
Prop trading firms are committed to their traders' ongoing growth and development. As a result, they often provide a range of training programs, workshops, and seminars designed to enhance your trading skills and knowledge. These professional development opportunities can significantly benefit you in the latest trends and improve your trading career performance.
8. Discover Networking Opportunities
Being part of a prop trading firm allows you to network with like-minded professionals who share your passion for trading. Building relationships with other traders can lead to:
- Valuable collaborations
- Information sharing
- New business opportunities
These connections can be invaluable as you navigate the ever-changing world of trading and finance.
Top 10 Prop Firms For Trading
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1. AquaFunded: Prop Trading with a Splash
AquaFunded is a Dubai-based proprietary trading firm that provides traders:
- Access to funded trading accounts of up to $5 million and profit splits of up to 95%.
- The company has a unique funding model with easy-to-achieve profit targets of 8% and fast bi-weekly payouts.
- There is even an option for the first payout to be processed in just seven days.
AquaFunded caters to traders of all experience levels, from beginners to those with a few years of experience who want to trade with reduced risk using the firm's capital instead of their own. With its competitive features and UAE-based operations, AquaFunded aims to stand out in the crowded prop trading market and provide a trustworthy platform for traders looking to scale their profits.
2. Apex Trader: Easy Evaluations and Huge Profit Potential
With Apex Trader Funding you'll trade mini or micro contracts in the evaluation period, and once the evaluation has been passed, you'll move to a funded account. You'll receive 100% of your 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.
You can use Rithmic or Tradovate and choose from one of several different accounts with a particular number of contracts, a profit goal, a trailing threshold, and more.
3. Earn2Trade: Assessment-Based Futures Trading Education
Earn2Trade, founded in 2017, is a futures trading education and evaluation company. It provides flexible funding programs to help traders of all skill levels start trading futures professionally and scale their accounts. The company offers single-step evaluations in a simulated environment to test:
- Traders' proficiency
- Discipline
- Risk management skills
Successful candidates receive a guaranteed funding offer from their partner proprietary trading firm. Earn2Trade supports traders from the evaluation stage through to post-evaluation success. Funded traders enjoy easy profit withdrawals, while candidates benefit from access to free educational materials and advanced trading tools.
4. Funder Trading: A User-Centric Approach to Prop Trading
Funder Trading claims our top position in our best proprietary trading firm rankings due to its user-centric strategy for traders. Most traders using some of these prop trading companies often know how complicated they can be.
Prop trading firms may offer:
- Minimal customer service
- Over-the-top complexity
- Need more Education
These are among some of the commonly-named drawbacks of prop trading.
Funder Trading’s Options Funding Platform
Funder’s day trading platform is designed for the everyday trader by regular traders. We especially like that Funder Trading is the only prop firm in 2024 offering options funding without certification or upfront trading capital. That’s a big deal for this trading, especially given its popularity over the last few years.
5. FXIFY: A Platform with Huge Earning Potential
FXIFY is a proprietary trading firm that offers access to up to $400,000 for those who pass the assessment. With profit shares as high as 90%, you can scale your account up to $4 million.
Trading is available on MetaTrader 4 (MT4) or MetaTrader 5 (MT5) and assorted trading platforms through the firm’s partnership with FXPIG. FXIFY offers:
- Instant payouts
- No consistency rules
- Unlimited trading days
- A 125% refund on your assessment fee will be issued with your first payout
6. TopStep: Rigorous Evaluations Focused on Education
TopStep has one of the most recognized funded trader programs in the industry. The two-phase evaluation, consisting of a Trading Combine and a Funded Account stage, is rigorous but fair, ensuring that only skilled traders can access the funded capital for this trading pit.
Although most of this is an additional charge, one notable highlight of Topstep is its focus on education and performance coaching. Traders can access a wealth of educational resources to improve their trading experience. The performance coaching services provide personalized advice to help traders develop strategies and manage risks effectively.
7. Trade the Pool: Diverse Trading Options to Fit Your Style
Established in 2022, Trade the Pool prioritizes providing you with robust risk management tools and caters to a diverse range of trading styles, including:
- Day trading
- Swing trading
- Professional trading needs
With support for trading stocks and CFDs, the platform welcomes traders of varying experience levels, offering guidance and assistance to inexperienced traders. They offer access to over 12,000 stocks and ETFs, and the platform aims to diversify trading options and provide educational resources to enhance users' trading knowledge.
8. My Funded Futures: Strong Evaluation Success Rates
MyFundedFutures is a rising star on this list for various reasons, but most notably because it boasts one of the highest pass rates for its evaluation program out of all the futures prop firms on this list. More importantly, MyFundedFutures is a prop trading firm that has gained attention for its accessible approach to funding futures traders.
The firm offers a clear path to funding for traders, emphasizing flexible trading strategies and a supportive learning environment. Its rules are much less stringent than those of other prop firms, making your funding path much more accessible.
9. The 5%ers: Low-Cost Access to Forex Trading
The 5%ers platform offers a gateway into prop trading, allowing you to access forex, metals, and indices trading with minimal barriers to entry. The platform supports MT5 trading and offers profit splits of up to 100%, exclusive resources, and salary offers on select higher-stakes programs.
The 5%ers offers a demo account for as little as $95, which allows you to enjoy instant trading access after passing the evaluation. This will enable you to develop your trading strategies without the burden of subscription fees.
10. TopOneTrader: Flexible Evaluations with Large Funding Limits
At Top One Trader, accessing forex trading is straightforward. With flexible evaluations and conditions, you can secure up to $200,000 in funding, extendable to $5 million with consistent success. No trading day restrictions exist; weekend and news trading are allowed, even with expert advisors.
Related Reading
- How to Get a Funded Trading Account
- How Do Prop Firms Make Money
- Prop Firm Reviews
- Proprietary Trading Firms for Beginners
- What Is a Prop Firm Challenge
- Best Prop Firms for US Traders
- Forex Prop Firms
- Trading Companies in UAE
- No Minimum Trading Days Prop Firm
- Best Forex Funded Account
- How to Pass Prop Firm Challenge
Are Prop Firms Legal?
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A proprietary trading firm, or prop firm, is a business that lets traders use its capital to trade financial markets. Traders keep a percentage of the profits they generate. To earn the capital, traders must demonstrate their ability to generate profits by selling a demo or simulation account.
Once funded, traders aim to meet specific profit targets with the firm’s capital while adhering to its risk management rules. If successful, traders can continue to trade the firm’s account for as long as they like, and the process is often likened to running a business where the trader is the owner and the prop firm is an investor.
Regulatory Challenges for Broker-Dealers in Prop Trading
The regulatory landscape for prop trading firms is complex. Typically, these firms operate with their capital, placing them outside many securities regulations. Firms acting as broker-dealers must register with the SEC and FINRA in the USA.
Some firms exploit regulatory loopholes, such as using demo accounts or aligning with Section 240.15b9-1 of the 1934 Securities Exchange Act, which allows broker-dealers to remain unregulated if they carry no customer accounts and become members of a national securities exchange.
Evolving Trends in Prop Trading Firms and Regulatory Evasion
A new type of prop trading firm has emerged, offering funded accounts to independent traders instead of hiring them directly, thus avoiding regulation. These firms often market themselves as financial education businesses and connect traders' demo accounts to the firm’s capital.
While this practice allows them to escape SEC regulation, the SEC is actively seeking to close these loopholes and expand its regulatory scope to include previously exempt proprietary trading firms.
Join Our Funded Trading Program Today - Trade with our Capital and Keep 90% of the Profit
AquaFunded is a Dubai-based proprietary trading firm that provides traders access to funded trading accounts of up to $5 million and profit splits of up to 95%. The company has a unique funding model with easy-to-achieve profit targets of 8% and fast bi-weekly payouts. There is even an option for the first payout to be processed in just seven days.
AquaFunded caters to traders of all experience levels, from beginners to those with a few years of experience who want to trade with reduced risk using the firm's capital instead of their own. With its competitive features and UAE-based operations, AquaFunded aims to stand out in the crowded prop trading market and provide a trustworthy platform for traders looking to scale their profits.
Get started with AquaFunded's funded trading program today!
Related Reading
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