Prop firms are the best-kept secret in the stock trading world because they transform how retail traders approach the market. It is one thing to acquire trading skills that can allow you to grow an account consistently. It is another thing to get enough capital to make your trading a career that gives you enough income to support yourself.
Prop firms bridge this gap between skills and capital. They provide skilled traders with the capital they need to grow their careers. Unlike traditional brokers, who handle their clients’ money, prop firms handle their own money, giving it to the best traders.
UNDERSTANDING STOCK PROP FIRMS
Before diving into the benefits stock traders get from prop firms, it is essential to understand how they work.
REPUTATION
The best prop firms have a good reputation and great reviews. Traders who work with these prop firms get to experience all they have to offer in terms of trading technology, funding, and profit shares. Therefore, it is easy to see whether a prop firm has a good or bad reputation online. For instance, a prop firm that fails to pay traders their profit shares will quickly get a bad reputation.
FEES
FTMO fees
Prop firms operate on fees, which is one of the ways they make money. The fee is the cost traders incur when starting to work with a prop firm. Usually, traders have to pay for a challenge or evaluation, where the firm will test their skills. On FTMO, the fee starts as low as 155 euros and goes up to 1080 euros.
Winning a challenge or evaluation will allow you to move to the next level, which is funding. Some prop firms then refund the money you used for the challenge when you get your first profit split. On the other hand, if you fail the evaluation or challenge, you lose the initial fee.
EVALUATION
Trade The Pool evaluation
The evaluation or challenge determines whether you can trade with a prop firm. However, some stock prop firms offer instant funding for those ready to pay a higher fee. During the evaluation, traders get a demo account with a profit target for a given period. This evaluation can have one or more stages. When you win the evaluation, you get the funding to start trading with the firm’s capital.
RULES OF TRADING
You will have clear rules guiding your daily trading activities as a funded trader. These rules will center around risk management. For instance, you might have a maximum daily loss and an overall maximum loss. This will determine your position sizing and where you place your stop losses. Other prop firms will require that you open each trade with a stop loss. Since you are trading their money, you must trade with their risk parameter. Violation of these rules can lead to termination of an account.
Other rules of trading can include strategies. Some prop firms do not allow traders to use the same strategy on two accounts. Meanwhile, others might not allow news trading. It is important to know all these rules before you pick to work with any stock prop firm.
PROFIT SPLIT
Trade The Pool profit split
Finally, the profit split determines how much you take home as a stock prop firm trader. For each profitable trade, you share the income with the prop firm. Some give a profit split as low as 50/50, while others give over 90/10, with the trader getting the bigger share.
Furthermore, some prop firms will increase the trader’s profit share depending on their long-term performance. On Trade The Pool, the profit share depends on the account type.
Join FTMO and get funding with a profit split of up to 90%. Join TradeThePool today and get funding with a profit split of up to 80%.
BENEFITS OF USING STOCK PROP FIRMS
Stock prop firms are slowly taking over from traditional brokers due to the numerous benefits they offer traders.
ACCESS TO SIGNIFICANT CAPITAL
FTMO capital
Prop firms give retail traders access to capital to grow their careers. Finding funding as a trader was difficult, especially when you had to explain trading from scratch. However, stock prop firms have made it easier for traders to go from developing skills to making a significant income.
With FTMO, traders get funding of up to $200,000. Meanwhile, Trade The Pool gives traders up to $160,000 in funding. This gives you enough buying power to make much bigger profits than you would with your little capital.
ACCESS TO SOPHISTICATED TECHNOLOGY
Stock prop firms go out of their way to acquire the best technology for traders. These include the best trading platforms and other software used for trading. Access to the best platforms will improve your performance as a trader because you will have access to faster execution speeds and tight spreads.
COMPREHENSIVE TRAINING AND EDUCATION
FTMO academy
Stock prop firms give traders education and training to advance their skills. This is a significant advantage because finding the best place to improve your trading can be difficult. Whether you are a beginner or intermediate, you can improve your results by getting training from a stock prop firm like FTMO.
Here, you can go through the FTMO academy. Additionally, these prop firms give traders the support and mentorship they need to grow their accounts.
ADVANCED TRADING TOOLS
Stock prop firms are great because they offer a wider range of trading tools than brokers. These tools are used for technical, fundamental, and performance analysis. Access to these tools can give you an upper hand in trading compared to traditional brokers.
REDUCED PERSONAL RISK
As a stock prop firm trader, you will only risk the amount you use to buy a challenge or an account. After that, there is little personal risk since you will trade the firm’s capital. This is much better than working with a broker, where you must put up the initial capital and risk losing all your money in the account.
ROBUST RISK MANAGEMENT
Stock prop firms have robust risk management rules that ensure you do not risk so much that you hurt your results. These strict guidelines instill discipline in traders, allowing them to survive longer in the trading industry. This differs from a broker, where traders can risk as much as 50% of their capital in a single trade. When trading with a broker, blowing an account and losing all your capital is much easier.
CONTINUOUS GROWTH
With a stock prop firm, traders can continuously grow their account size and the amount of profit they make. Because you do not handle that balance, you can never decide to pull out all the money or reduce it by half. With a broker, life circumstances can push you to withdraw large amounts from your account, leaving you with little to trade. However, with a prop firm, your balance will either remain near the starting amount or increase.
Join FTMO or TradeThePool today and experience all the benefits of working with a stock prop firm.
