To get into prop trading, begin by joining a prop firm, passing their evaluation, and honing your risk management skills. This lets you trade with the firm’s funds, giving you market access and a share of profits. Our guide outlines each step, from selecting the right firm to building a trading career.
To get into prop trading and become a funded trader, you’ll need to join a prop trading firm, pass their evaluation, and follow their risk management guidelines. Prop trading, or proprietary trading, allows traders to buy and sell assets like forex, stocks, and cryptocurrencies using the firm’s capital instead of risking their own.
In exchange for providing this capital, prop firms share the profits with traders through profit-sharing agreements. These firms also offer access to advanced trading platforms, risk management tools, and sometimes mentorship from experienced traders, helping traders enhance their skills without risking personal funds.
This guide provides a step-by-step approach to becoming a prop trader. We’ll explore the advantages of working with a prop firm over traditional CFD brokers, the selection process for finding the right firm, and the strategies to build a successful trading career.
Proprietary trading, aka prop trading, is an online trading practice where financial firms use their own capital to engage in trading activities across various markets.
These firms, known as proprietary trading firms or prop firms, employ skilled traders who execute trades with the firm’s funds, aiming to generate profits. This is different from traditional CFD trading, where you are using and risking your own money.
Prop firms operate more like independent trading entities, using their own capital to take advantage of market opportunities. Many start their traders with simulated or demo accounts as a proving ground before granting access to live-funded accounts.
This allows traders to build skills across various asset classes—such as forex, stocks, indices, commodities, and crypto—by focusing on price movement strategies without risking real capital initially.
Unlike brokerage firms that focus on executing trades for clients, prop firms provide traders with capital and tailored risk management tools within trading programs.
The main difference between prop trading and traditional CFD trading is whose money you’re using. In prop trading, you trade with the firm’s funds and keep a share of profits, but follow their rules and risk limits.
With traditional CFD trading, you use your own money, so while you keep all profits, you’re also fully responsible for any losses. Prop trading often includes growth options, while CFD trading offers more flexibility without firm-set rules.
What Do Prop Traders Trade?
Prop traders can trade a range of financial markets and assets like forex, stocks, commodities, indices, and cryptocurrencies. While the available trading instruments depend on the prop firm you sign up with, most offer popular major forex pairs, key indices, and high-demand commodities.
Although some prop firms also provide access to cryptocurrency and smaller stock markets, there’s only a few dominating this space. For more info on the best crypto prop firms, read our DNA Funded Review or Blueberry Funded Review.
Prop firms offer some key advantages over your standard forex brokers, with the most important being prop companies provide you with capital to trade instead of risking your own personal funds.
With a prop firm, you can typically access higher leverage than you’d usually be able to under FCA or ASIC regulation, allowing control over larger positions, while the firm absorbs potential losses.
Prop firms also reward successful traders through profit sharing and scaling opportunities, increasing account size with consistent performance. This setup allows traders to grow their skills and capital under structured risk management, unlike personal accounts with forex brokers.
Trading with a proprietary (prop) firm offers unique advantages that can accelerate your growth as a trader. With lower personal risk and increased profit potential, prop firms provide access to capital, higher leverage, and performance-based rewards. Here’s a breakdown of key benefits:
Prop trading firms operate by providing traders with capital to trade financial markets, allowing traders to earn a share of the profits without risking personal funds. Here’s a breakdown of how prop trading firms typically function:
By offering capital, structured challenges, and profit-sharing incentives, prop trading firms allow traders to develop their skills and grow their earnings within a supportive framework, contrasting with the independent risks involved in traditional trading.
To become a prop trader, you’ll need to select a prop firm, pass their evaluation challenge, and follow risk management rules to secure a funded account. Here’s more detail on each step to help you get started as a prop trader.
1. Start with the Basics
Before starting into trading, it’s crucial to get the basics down – this sets the foundation for becoming consistently profitable. The following will help you get there:
This is also a good time to explore different markets, including forex, crypto, stocks, and indices, to broaden your trading knowledge.
2. Choose a Trading Style That Suits You
There are multiple trading styles, each with its own rhythm and approach – and depending on your risk profile and trading preferences, you can try different trading approaches to find out what works best for you. Here are some popular trading strategies:
3. Find the Right Prop Trading Firm
Every prop firm has its unique setup, usually with different rules and trading environments. When selecting a firm, consider the following:
Research the firm’s reputation carefully. Look for verified reviews on Trustpilot and feedback from other traders to make sure you’re partnering with a credible, fair company.
For detailed reviews on popular proprietary trading firms you can look at our full list of Prop Firm Reviews.
4. Understanding and Passing the Evaluation Challenge
Most prop firms require traders to pass a challenge before they give you traders capital to trade. It’s their way of screening traders that are consistently profitable and within their rules before firms fund these traders.
Generally, prospective traders must show steady profits while avoiding big losses and managing risks appropriately. This helps firms find skilled, reliable traders rather than getting streaky or lucky traders.
Starting a professional trading career requires joining a firm that provides the right training, support, and opportunities for growth. If you aspire to become a successful trader, joining a prop firm can be a significant step toward achieving that goal.
Here’s how prop firms can help you to build a sustainable trading career path within online trading.
When you demonstrate consistent profitability and responsible risk management, prop firms often increase your trading capital, allowing you to trade with larger sums and potentially boost earnings. Many firms also offer accelerated scaling plans, helping traders reach higher capital levels more quickly.
In some cases, professional and funded traders may even receive a base salary, providing a stable income alongside performance-based profits.
Many prop firms provide access to experienced mentors who offer valuable insights, feedback, and support. These mentors can help you refine your trading strategies, manage your mindset, and help you survive market challenges.
Professional traders can often feel isolated, but prop firms often foster a community of like-minded traders. Platforms like forums and Discord groups allow you to connect with fellow traders, exchange ideas, discuss market trends, and learn from each other’s experiences. This sense of community can be crucial for motivation, support, and continued learning.
Staying ahead in trading requires continuous learning. Prop firms often offer educational resources such as webinars, workshops, and trading tools to help you expand your knowledge and improve your skills. By embracing lifelong learning, you can adapt to changing market conditions and enhance your trading performance.
Combining these elements—scaling opportunities, mentorship, community support, and continuous learning—prop firms provide a structured path to establish a successful trading career.
Choosing the right prop trading firm can make all the difference in your trading journey. With various options available, finding a firm that fits with your goals, trading style, and resources is essential.
Make sure you consider the following factors:
1. Costs and Profit Splits
2. Funding Options and Scalability
3. Educational Resources and Trading Platforms
4. Comparing Different Prop Firms
Starting in professional trading is exciting, but beginners often face common pitfalls that can impact their progress. From overleveraging to skipping essential steps like setting stop-losses, these mistakes are easy to make but crucial to avoid. Here’s a rundown of common errors and how to steer clear of them to build a successful trading foundation.
Leverage allows you to control larger positions with a smaller amount of capital, but it also amplifies potential losses. If you borrow too much money to trade and the market moves against you, you can incur significant losses very quickly.
How to avoid it
Failing to set stop-loss orders can lead to uncontrolled losses. Stop-loss orders automatically close your trade when it reaches a certain loss threshold, helping to prevent small losses from becoming much larger.
How to avoid it
Successful trading requires patience, discipline, and adherence to your trading plan. Making impulsive decisions or letting emotions like greed or fear influence your actions can undermine your trading performance.
How to avoid it
Each prop trading firm has its own set of rules and guidelines, including profit targets, maximum allowable losses, and permissible trading instruments. Not fully understanding these rules can lead to unintentional violations, which may result in penalties or the loss of your trading account.
How to avoid it
Remember that the answer to how do prop firms make money comes down primarily to the evaluation fees so don’t commit to a large amount then your willing to lose.
When considering a career in trading, it’s essential to weigh the advantages and challenges. While trading offers high earning potential and access to diverse markets, it also comes with significant risks and demands discipline.
You don’t necessarily need a degree to become a prop trader. While some firms may prefer candidates with a background in finance or economics, many prioritize actual trading skills and market knowledge. Even without formal education in finance, you can succeed by developing a strong understanding of trading, risk management, and building a solid trading track record.
To become a funded trader and pass the evaluation process, you need solid trading skills, financial market knowledge (such as forex, crypto, or stocks), and strong risk management abilities. Prop firms often test traders through challenges to evaluate their ability to meet profit targets while managing losses. Discipline and focus are essential to consistently improve and succeed in these evaluations. While formal education isn’t always required, mastering these skills is key to becoming a successful funded trader.
Based on our recent testing, DNA Funded topped the list of the best prop trading firms with a score of 97/100. Known for its low fees, flexible challenges, and competitive profit splits of up to 90%, the prop firm offers a top-tier trading environment backed by DNA Markets as the liquidity provider.
Prop trading isn’t always live trading; it often starts on a simulator, or demo account, where traders prove their skills without risking real capital. Successful traders on the simulator can then move to live trading with the firm’s funds, allowing them to trade in real market conditions while minimising initial risk.
To trade in prop firm challenges, start by carefully reviewing the firm’s guidelines, which include specific profit targets, drawdown limits, and trading rules. Successful challenge completion typically requires reaching a set profit target while managing risk according to the firm’s parameters, such as daily or maximum drawdown limits. Focus on disciplined trading and stick to a strategy that aligns with these requirements to meet funding qualifications.
