The world of proprietary (prop) trading is expanding rapidly, drawing in traders eager to leverage the resources of established firms in exchange for a share of their profits. But with so many firms emerging globally, how do you choose the right one for your trading goals? Below are some key criteria to consider when selecting a prop trading firm that best aligns with your needs.
1. Profit Split
One of the most important factors is the firm’s profit-sharing model. Most prop trading firms adopt a profit split to compensate traders, often ranging from 50% to 90% in favor of the traders. A higher percentage may seem attractive, but be sure to assess whether the accompanying conditions—like risk limits and fees—are practical.
2. Funding Opportunities
Look into how much trading capital the firm provides. Companies like FTMO and Topstep offer funding up to $200,000 if you pass their evaluation processes. However, some firms may start you off small and only provide higher funding after proving your consistency. Check if their funding structure matches your growth as a trader.
3. Evaluation Process
Most reputable prop trading firms have a screening process to evaluate skills. These can include trading challenges or simulated environments where you meet criteria such as profit goals and drawdown limits. Transparent and fair requirements indicate a firm is serious about onboarding skilled traders without predatory practices.
4. Fee Structure
While many prop firms charge an entrance or evaluation fee, it’s essential to understand what you’re paying for. Is the evaluation fee refundable after passing their assessment? Are there hidden charges for software, data feeds, or platform usage? Transparency in pricing reflects the credibility of a firm.
5. Trading Conditions and Support
Your trading experience depends heavily on the tools and conditions offered. Look for a firm with access to leading trading platforms (e.g., MetaTrader, cTrader), fair spreads, and quick execution speeds. Bonus points go to firms providing educational resources, mentorship, or technical support when needed.
6. Community and Reputation
A firm’s reputation among traders can tell you a lot. Platforms like Trustpilot and trading forums frequently provide reviews about firms’ payment reliability, support, and overall experience. A strong and active trading community often reflects a firm that values its traders.
