How to Get into Prop Trading? (7 Steps Guide)

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Date of Release : 2023/07/05

Fund shortage is no longer a problem for capable traders! Prop trading is the concept of firms allowing traders to use their money for buying and selling different assets on various markets. After the trading, each side gets a predetermined share of the gained profit.

In the following blog post, we’ll answer the question: how to get into prop trading?

Stay tuned, as we are going to cover all the aspects of the career.

First of all, let’s get to know more about prop trading itself.

What is Prop Trading, and What Does a Prop Trader Do?

Prop trading is short for proprietary trading! It refers to the trading conducted by a trader on behalf of a bank or financial company.

The term is commonly used when firms buy and sell assets, including stocks, foreign currencies, cryptocurrencies, futures contracts, ETFs, and more, with their own money and via a trader. In such cases, we are dealing with the concept of prop trading.

A prop trader is an individual who receives funding to employ profitable trading strategies and generate profits for the firm.

Each trader has their specific strategies and approaches, and the prop firms try to take advantage of these differences to generate yield.

As we said above, these funded individuals have the ability to trade a diverse range of assets within the financial markets.

While the trades are profitable, the firm and the trader are happy. In case of losses, predetermined rules set by the investing firm dictate the actions to be taken.

So, a prop trader is someone who trades with the firm’s capital or other’s money.

The gained profit will be split between the trader and the firm provided the capital. Each side’s shares differ based on the rules of the chosen firm. Several firms in this field offer funds to traders eager to learn more and make tons of money.

Although most firms give the trader 50% of the share, some give less, and some offer more. Generally, the minimum amount is around 25%, while some firms offer a 75% share.

The trader’s income depends solely on their ability to generate profits. However, some prop firms offer a minimum salary to ensure the prospects work with enhanced focus.

How Much Money Can a Prop Trader Make?

Technically, there is no limit! The more profit the trader makes by buying and selling at the correct times, the more money they earn.

However, several factors can affect their income.

For instance, the pre-agreed share percentage directly impacts the final gain—the country where the prop firm is located is also a key factor.

For instance, in the US, the expected income is from around 42,000 dollars to an enormous number, 793,000 dollars per year.

The firm you choose to get funded by is also an important decision that affects your paycheck. There are monthly fees, commissions, etc., that you should consider because they’ll determine how much money you can make as a prop trader.

In general, prop trading is a lucrative career if you, the trader, are profitable with successful strategies to employ and make more money with the firm’s capital.

Knowing these numbers makes you more likely to become a prop trader.

Unfortunately, you must understand that money is not the best motivator, and you may get frustrated by the challenges in your way. In this blog, we will delve deeper into these aspects.

In the next section, we’ll learn how to get into prop trading step by step.

How to Start a Career as a Prop Trader?

Assuming you have made your choice and want to be a prop trader, we have outlined a series of steps to guide you through the process. Here’s the first step.

1.Love What You’re Going to Do

Many come to this game for money, and it’s totally fine. After all, it’s a highly lucrative job compared to many other professions. But, alongside cash, you must have the passion to do this.

Consider that prop trading is a competitive field, and there are many experts you must compete with.

This fact cause several challenges that the trader must encounter each day. Are you ready to face those challenges? Are you mentally prepared to fail and rise again?

If not, trust us; money won’t take you further in this career. Passion is what it does.

So if you love trading and are eager to look at the charts daily to extract needed data and make a call based on them, feel free to continue reading.

2.Learn Trading and Understand Different Markets

Well, you’re going to make a living trading. So, it’s obvious that trading is the first thing you should learn.

As mentioned earlier, a prop trader has the ability to buy and sell assets across various markets. The more comprehensive your market understanding, the more influential you can become.

Try different strategies and methods, know them well and ensure that you can make money using them.

Research different markets and take note of each’s advantages and disadvantages. By knowing each market well, you can make a more suitable decision for your preferred trading approach.

3.Get to Know Each Market’s Rules and Conditions

No matter what market you choose to enter, there are some rules and restrictions you should be aware of.

We could add this to the last part, but as it is a crucial point, we’ve decided to dedicate a separate subheading.

While researching various markets, look for the rules and conditions of each.

The trader must know what restrictions are in the chosen market and what actions are prohibited. You may find your strategy suitable for ETFs, but the rules in the mentioned market are just like barriers to success.

A comprehensive knowledge of markets’ rules gives you the upper hand to make a better decision.

Therefore, remember to check each market’s rules before entering and initiating your trading.

4.Opt For Paper Trading

Prop trading firms look for traders with successful records of training. Thus, being a professional is crucial to get accepted by them.

If you’re already an expert, you may skip this part. However, if you’re a beginner who wants to start your trading career, we suggest starting with demo accounts.

There are many things you should learn. Risk management, for example. Before using real money, opt for paper trading and test different strategies with a demo account.

It’s important to understand that your ability to generate profits must be demonstrated. All the training and experience you acquire through demos or real accounts can serve as valuable references during interviews.

Therefore, if you want to ensure your capital (or firm’s capital) is safe, it’s advised to use paper trading and deal with fake money for a start. After dominating different strategies and finding the best one, you can fill out the form to use a prop trading firm’s fund.

5.Find the Best Prop Trading Firm and Submit Your Request

Until now, we have a well-trained trader who possesses knowledge of different markets and their respective rules. Someone who started with demo accounts and, after finding an excellent profitable strategy, is ready to start as a prop trader.

Now is the time to choose a prop firm for getting funded.

There is no best option. Each firm offers unique features and opportunities that cater to specific groups of traders.

Note the following points in order to make a reasonable conclusion:

The percentage of profit split that the firm offers.
The prospect firm’s terms and conditions.
The platform and indicators that the firm provides for the traders.
Fees and commissions that the firm charges the traders.
Does the firm offer the ability to work remotely, or must the trader do the job on-site?
Is it necessary to provide a related degree to the firm?
Trading guidelines and conditions are determined by the firm.
Does the firm scale your account after achieving success in initial trading?
The credibility of the chosen firm and positive user reviews.

By considering these points, you can make a well-informed decision that will lead to profitable trading.

6.Fill Out the Form and Get Ready For the Interview

After finding the best prop trading firm, submit your request to join them and get funded.

Well, they’re going to give you their money, so it’s understandable that they want to know more about you and your trading abilities. It’s normal for them to conduct interviews with prospective traders to assess their profitability and risk management skills.

To increase your chances of securing the capital, prepare for these interviews. Present yourself as a confident trader who seeks to multiply their funds. Be ready to showcase your previous trading track record as evidence of your experience. The prop trading firm wants to ensure that its capital is entrusted to an expert account.

If you’re successful in gaining their trust, the process of trading will begin shortly after.

Note: usually, there is an evaluation period in which traders must trade assets as some kind of test. Firms do this because they want to make sure each individual they choose to work with is a capable trader able to make a fortune for them.

7.Stick to the Profitable Strategy of Yours

Now, assuming you’ve passed the interview successfully and acquired the capital, everything is ready for trading and generating yield.

If you already have a profitable strategy (which you must!), stick to it and focus on executing successful tradings.

Remember to abide by the rules that govern both the market in which you trade and the firm you have chosen to work with and receive funding from. Managing risks and establishing yourself as a lucrative trader are key. By doing so, you demonstrate to the firm that you are a valuable trader worth continuing to work with.

By following these steps, you can increase your chances of long-term success in prop trading.

By far, you’ve learnt how to get into prop trading! Now let’s examine both cons and pros of this kind of trading.

Advantages and Disadvantages of Prop Trading

If you want to start a career as a prop trader, it’s crucial to know both downsides and upsides of the job.

Let’s start with the bright side of this profession:

Easy entry process (if you are already a trader).
Extremely high earning potential (up to 793k per year in the US).
Accessing an enormous amount of money, which leads to generating bigger yields.
Zero risk of losing capital for the trader, only the possibility of losing the firm’s trust and, thus, the opportunity.
Improving trading skills with the help of mentors and experts in the investing firm.

And of course, there are some disadvantages you should know before entering the field:

There is heavy competition (especially if you are a beginner)
Usually, prop firms don’t offer basic income. You earn as you make.
It’s among the most stressful jobs in the world.

Comparing the bright and dark sides gives you a good understanding of whether prop trading fits you.

Unlock Your Trading Potential with Prop Trading and Propiy

If you’re a trader looking for investment, prop trading is your best option.

There are firms ready to fund you and get a predetermined percentage of the yield you generate.

In this blog, we’ve discussed how to get into prop trading. With a seven steps guide, we’ve tried to walk you through the process and prepare you to become a prop trader.

Propiy is one of the best prop firms you can opt for and get funded by. With the JumpJet option in Propiy, you won’t need to pass the evaluation period and will reach the capital required immediately.

How to Get into Prop Trading? (7 Steps Guide) | propiy (2024)