Prop trading firms have become extremely popular in the world of finance. And this popularity is expected to increase as we progress into 2024.
This fame stems from the numerous benefits offered to both prop traders and financial institutions.
We are going to tell you everything you need to know about prop trading firms in this article. Specifically, we’re going to illustrate why 2024 may be the best year yet to get involved.
If you’re a beginner and looking for the perfect crash course, however, check out Modest Money’s best prop trading firms for aspiring traders.
Table of Contents
A Crash Course on Prop Trading Firms
Those who are new to this kind of language may be confused as to what a prop trading firm is. They also want to know how it works.
In short, a prop trading firm is a company that provides its traders with investment capital. In return, the company gets a percentage of the profits earned.
The benefits of this partnership are endless.
Traders are given access to capital through these funded trading accounts that they may or may not have had before. Additionally, they get the trading experience they can employ in their personal lives.
The firm, on the other hand, is investing and profiting from using its own money. Otherwise, it would just be investing client money and getting a smaller cut.
As you can see, this is a win-win for both the trader and the firm.
The 2024 Predictions
The proprietary trading industry is on the cusp of having a lucrative year. Put simply, business is booming.
A recent survey of over 100 senior prop trading executives reported that 68% of firms are planning an above-average technology investment budget for 2024. Twenty-five percent said their budget would be significantly above average.
Additionally, prop trading firms are taking initiative outside of technology. Eighty percent of respondents are planning to increase staff numbers in 2024.
Despite the current economic turbulence that is wreaking havoc on global markets, this is good news for prop traders–who usually benefit in times of volatility. The expectations are high and 73% of respondents are predicting an above-average year.
The numbers seemingly point to one thing: the time has come for prop traders on every level to take advantage. It’s time for aspiring and veteran traders alike to put the stock screeners to work. And they can do that with the prop trading firms listed below.
Best Prop Trading Firms to Check Out
Just like everything in life, prop trading firms have pros and cons. But this isn’t what turns most people off. It’s the hard work, the learning curve and the risk that deters potential traders.
It doesn’t come easy. But neither does anything worth having.
TopStep Trader
TopStep is known as one of the most reputable trading firms on the market. This is due to the profit splits and the generous payouts.
With TopStep Trader, you get to keep 100% of your first $5,000 earnings and 90% after that.
TopStep welcomes beginners and advanced traders to their platform, offering them the opportunity to enhance their skills. To become funded is a two-step process known as Trader Combine. Those who pass the combine move on to Trader Bootcamp to learn about trading psychology and risk management.
FTMO
Like TopStep, FTMO requires aspiring traders to pass an examination before getting funded. This also comes in a two-part series–Challenge and Verification.
The FTMO challenge is 30 days, however, you can advance to the verification stage if you complete it early. The verification phase is 60 days. Passing this, traders can manage an account of up to $400,000.
There are a few things to keep in mind:
- You must trade a minimum of 10 days to pass the stages
- There is a 5% maximum daily loss
- A 10% profit target
- A maximum account loss of 10%
Features to Remember
Now that we mentioned maximum daily losses, we are reminded to look out for some key features when choosing a prop trading firm:
1) The platform itself – When choosing a funded trading account, it’s essential to be sure you know how to navigate the platform. This enables you to better analyze market data and make trades more efficiently.
2) Educational resources – This is especially true of beginner traders. Most prop trading platforms offer educational tools and resources where you can enhance your skills.
3) Reputation – Make sure the firm you are going with is notable and trustworthy. This ensures your protection.
4) Fees – Read the fine print! You don’t want to be hit with hidden fees a couple of months in.
A Final Note
Becoming a prop trader offers many advantages. But it takes hard work. Fortunately, the prop trading firms we mentioned take some of the load off. And they will be there with you every step of the way.
About Carson Derrow
