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

What is the best futures prop firm in 2024? ›

The top futures prop firms are TopStepTrader, Jane Street, FTMO, 3Red Partners and The Trading Pit. Jane Street and 3Red Partners are very secretive about their fees and profit splits but they do offer some of the best technology and high-frequency trading.

What is the future of prop firms? ›

The prop trading space is relatively new—no more than 10 years old—but growing fast. It was estimated at $6.7 billion globally in 2020 and is projected to expand at a compound annual growth rate (CAGR) of 4.2% from 2021 to 2028. Like any financial strategy, it offers significant opportunities as well as risks.

Is prop firm trading worth it? ›

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.

Are prop firms here to stay? ›

In conclusion, forex prop firms are legal both to own and to trade with, although largely unregulated in the online space currently. We expect to see regulation coming and strengthening in the upcoming years. If you want to stay ahead of this as a trader, ensure you're trading with a real money prop firm.

Which prop firm is the most reliable? ›

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.

Which prop firm is better than FTMO? ›

FTMO 's top competitors in June 2024 are: FunderPro, the5ers and more. FunderPro is currently rank as the number one on the list of top Forex Prop Firms.

How many people fail prop firms? ›

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. While this result is not nearly as bad as the one discussed earlier, it still looks bleak for prospective prop traders. But why is the percentage of failure so high?

How much do prop firm owners make? ›

In conclusion, the income of prop firm traders 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.

Can you make a living trading for a prop firm? ›

Also known as “prop trading,” it offers higher earnings potential much earlier in your career than jobs like investment banking or private equity. It's arguably the most merit-based industry within finance: if you make millions of dollars for your firm, you'll earn some percentage of it.

What are the negatives of prop firms? ›

Among many other potential factors, the main disadvantages of prop trading arise from being classified as a market professional, unfavorable profit sharing, and whether your net trading profits are taxed as capital gains or ordinary personal income.

What if a prop trader loses money? ›

Profits from trades are generally divided between the firm and the prop trader; however, the risk distribution is asymmetric. This means that in the event of a loss, the trader bears 100% of the losses, while they don't receive 100% of the profits.

What is the cheapest prop firm? ›

Cheapest Prop Firms Forex 2024 - with $5K Funding Accounts...
  1. The5%ers. The5%ers specializes in providing funding of up to $100,000 to forex traders. ...
  2. FTMO. ...
  3. MyForexFunds. ...
  4. Earn2Trade. ...
  5. The Funded Trader Program. ...
  6. OneUp Trader. ...
  7. Apex Trader Funding. ...
  8. True Trader.
Feb 27, 2024

Do prop firms really pay out? ›

Statistics on Average Trader Payouts

Profit Split: The average prop firm will offer a 80-20 profit split once you become a funded trader. TFT, on the other hand, gives up to a 90% split, — even as high as 95% in some promotions — the highest in the industry.

What is the best futures contract? ›

What futures are most profitable? Trading in futures markets such as the Micro E-Mini Russell 2000 (M2K), Micro E-Mini S&P 500 (MES), Micro E-Mini Dow (MYM), and Micro E-Micro FX contracts can be highly profitable due to their distinct market characteristics.

Which prop firm has the fastest payouts? ›

The Top Forex Prop Firms Ranked by Pay-out Frequency
Prop FirmPayout Cycle
Leveled Up SocietyBi-weekly
Bespoke FundingBi-weekly
Goat Funded TraderBi-weekly
Audacity CapitalMonthly
12 more rows

What are the most active futures? ›

Most Active
SymNameHigh
ZNU2410-Year T-Note111-010
ESM24S&P 500 E-Mini5,443.00
ZFU245-Year T-Note107-065
NMM24Nasdaq 100 Micro19,679.25
45 more rows

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