What is a Proprietary Trading Firm?
A Proprietary Trading Firm (or “Prop Firm”) is a company that provides capital to skilled traders. Instead of risking your own money, you trade the company’s capital. In return, you keep a large split of the profits (usually 80% to 90%).
Most firms require you to pass a “Challenge” (a demo trading test) to prove you can manage risk. Once passed, you become a “Funded Trader”.
How We Ranked These Firms
Our ranking methodology focuses on safety, payouts, and trading conditions:
- Trust & Reputation: Does the firm actually pay out? We prioritize firms with years of history (like FTMO).
- Profit Split: We look for firms offering at least 80% profit split.
- Trading Rules: Are the drawdown rules fair? Can you trade news?
- Customer Support: How fast do they respond to issues?
Buying Guide: Choosing the Right Prop Firm
1. Challenge vs. Instant Funding
- Challenge Models (e.g., FTMO, FundedNext): You must pass a 2-step evaluation. Harder to get, but cheaper fee and higher capital.
- Instant Funding (e.g., The5%ers): No evaluation. You get real capital immediately, but the initial buying power is lower.
2. Drawdown Types
Pay attention to “Daily Drawdown” vs. “Max Drawdown”. Some firms calculate this based on your Balance, others on your Equity. Balance-based is generally safer for traders.
3. Scaling Plan
The best firms will increase your account size if you are consistently profitable. Look for plans that double your account every 10% gain.
Frequently Asked Questions (FAQ)
Q: Is Prop Trading legal? A: Yes, prop trading is fully legal. You are technically a contractor providing a service to the firm.
Q: Which firm is best for beginners? A: The5%ers is excellent for beginners because they offer instant funding, so you don’t have the stress of a time-limited challenge.
Q: Can I use Expert Advisors (EAs)? A: Most firms allow EAs, but check their specific rules regarding high-frequency trading (HFT) or arbitrage bots, which are often banned.