What to Look for in a Prop Trading Firm

Key Highlights

Finding the right prop trading company to partner with on your trading journey is never about chasing the biggest payout possible: it’s about finding a prop firm that has a structure that can seamlessly fit with your trading style. In a nutshell, these are some of the things to consider:

• Trading rules
• Profit splits and payouts
• Trading instruments and platforms
• Customer support & trader resources 
• Regulatory compliance 
• Scaling program and growth opportunities 

What to Look for in a Prop Trading Firm

One thing many beginner traders fail to understand is that not all firms in the prop trading space are created the same. 

In my years in this field, I have seen and worked with firms that provide actual opportunities for traders to build professional careers.

And unfortunately, I have also come across others who do nothing but make promises they can’t fulfil! These are the same ones that will load you up with fees and rules designed to make you fail.

What I want you to understand is that choosing the best prop firm isn’t about finding the company with the flashiest bonuses. It’s about locating a partner that matches your trading system.

A partner who understands your goals and your trading style.

It’s only by finding such a partner that you can best position yourself to pass the evaluation challenge and begin scaling from there.

Below, I will guide you on what to do to filter out the unnecessary noise and find a prop trading firm that will give you a real shot at profitability, and not just survival. 

Trading Rules

Reputable prop trading firms are known to provide clear and relaxed trading rules designed to instill discipline while providing the trader with some level of autonomy. Therefore, start by assessing the company’s rules and trading policies to determine whether they align with your preferences. 

While at it, establish whether the firm has restrictions on implementing certain strategies or trading specific financial assets. Remember, failure to follow the rules will lead to a violation and subsequent account termination. You must, therefore, only work with a firm that provides flexibility in these aspects. 

With regards to rules, you can research the firm’s consistency rule. Your goal here is to learn whether overall profitability will be sufficient or whether you need to remain consistently profitable from month to month to retain your funded status. 

Profit Splits and Payouts 

The profit split or profit-sharing agreement provided by a prop trading company is another important consideration. Seasoned traders will always try to seek equitable profit distribution for the time and effort they put into trading.

Given that this agreement will have an impact on your earning potential, please pay careful attention to the following payout details:

• Payout threshold: Has the firm set a minimum amount that must be earned before you can complete a withdrawal?
• Payout methods: Which payment methods has the proprietary trading firm made available? Do these methods incur withdrawal fees?
• Profit calculations: How will the prop firm calculate your profits? Will it be using a high watermark approach, or will the profit targets be reset at the start of each month?
• Profit split percentage: What is the profit split ratio? Most prop trading firms provide a profit split ratio of between 70% to 90% in favor of the trader.

Trading Instruments and Platforms

You’ll need to evaluate the compatibility of the prop trading platform to ensure that it meets your trading needs. An ideal platform has a user-friendly interface and comes loaded with all the features needed to successfully execute your trading strategy. 

On the issue of platforms, you’ll come to realize that there are those that use well-known platforms like MT4 MT5 and DxTrade, with others choosing to use proprietary trading software. It’s upon you to confirm that you’re conversant with the platform and that it does, in fact, meet your trading style. 

Trade with Audacity Capital

Trading Platforms

Trade with Audacity Capital

Trading Platforms

Apart from the trading platform, you must also consider the available financial instruments. Ask yourself, ‘which markets can I trade?’ ‘Can I trade commodities, forex, indices, or just stocks?’ The more assets you can trade, the better it will be for you. 

Customer Support & Trader Resources 

A strong customer support presence goes a long way in enhancing the trading experience. Confirm that the prop firm fosters an environment where seasoned and beginner traders can exchange ideas and learn from each other. 

Additionally, the provision of an efficient and prompt customer service for trading or technical-related inquiries is vital. Having a reliable and knowledgeable support team can positively influence a trader’s journey by creating a sense of community and togetherness.

During your analysis of each prop trading firm, try to look for the following:

• Support Channels: How many support channels are available? Can you reach the support team via Discord, live chat, phone, or email?
• Support Availability: When is the customer support team available? Is it possible to reach them round the clock when the need arises?
• Trading Community: Does the prop firm have an active community where you can interact with other beginner and funded traders?
• Educational and Training Resources: What kind of training materials are available? Does the company provide trading guides, webinars, or strategy sessions?

Regulatory Compliance

Regulatory compliance holds a lot of importance as it shows that the prop trading firm has registered with the authorities and that it conforms to all trading regulations. Compliance also shows that a company is keen on providing a secure environment for its traders.

While investigating compliance, make sure to look into the following:

• Regulatory Status: Although prop trading firms tend to operate differently from traditional brokers, this doesn’t place them above the law. They still need to follow accepted industry best practices. Read more about our article What Are Prop Firms in Trading? How They Work?
• Company History: You’ll want to know how long the firm has been in the trading industry. Ideally, you should only engage with prop firms that have years of operational history.
• Community Feedback: Go online and research what the trader community has to say about the firm. This is the surest way to determine the trustworthiness of a prop trading company.
• Transparency: Has the company clearly disclosed its business model, including the risk management procedures in place?

Audacity Capital Empowering Traders Since 2012

Join the Best Prop Firm

Audacity Capital Empowering Traders Since 2012

Join the Best Prop Firm

The Scaling Program and Growth Opportunities 

Prop trading companies employ different funding approaches. Researching whether a company provides instant funding or requires an assessment is crucial. During the research process, try to pay close attention to vital factors such as contract duration, daily or overall loss limits, and profit targets. 

Knowing that you have a clear path to a large capital allocation can immensely boost your profitability and earning potential. Important factors to consider at this stage include:

• Maximum Funding Potential: This will help you determine the highest amount your funded account can achieve.
• Scaling Timeframe: It helps you understand the duration of time it will take to progress to a higher capital allocation. Some firms focus on performance while others have time-based requirements. 
• Scaling Requirements: The purpose of this is to establish the performance metrics that you must satisfy to qualify for an increased allocation, e.g., low drawdown and consistent profitability.
• Multiple Accounts: Will the prop trading firm allow you to manage more than one funded account to boost your overall available capital? 
• Scaling Increments: Will your capital allocation increase in significant jumps, or will this happen gradually as you continue to trade?

Not sure how this works? Check our Funded Trader Program

Conclusion

Knowing what to look for in a prop trading firm is a vital step to starting your trading journey. Keep in mind that any decision you make today will substantially impact your earning potential, scaling opportunities accorded to you, and your overall trading experience. Use the above tips to find a good prop trading company like Audacity Capital that has 12+ years of experience and which is a trusted name in this space. 

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