Top 3 Reasons Why New Traders Are Turning to Prop Trading for Big Wins

If you’re considering a career in trading on the market, one of your options is to join a proprietary or prop firm. Prop firms can provide the capital many beginning traders need and offer a chance to earn a significant share of profits from their performance.

With the possibility of earning outsized results, new traders are signing on with prop firms in increasing numbers instead of going it alone in retail trading or working in prop trading for financial institutions such as investment banks or hedge funds.

Here are the top three reasons new traders turn to prop trading for big wins.

Why New Traders Are Turning to Prop Trading

Even if you’re short on money, you can get into prop trading and use someone else’s capital to earn substantial profits. Here’s more on this key selling point and other reasons new traders are getting into prop trading for big wins.

1. Access to Larger Capital Pools

One of the biggest hurdles to becoming a professional trader is scrounging together capital. Prop firms lower this barrier to entry by providing traders access to capital – often substantial amounts. Using someone else’s money to trade minimizes your financial risk, leaving you to focus on your trading strategies.

You must pass a test before being granted access to a given firm’s capital. These challenges often have one or two stages for you to clear within a specified number of trading days. Prop firms use such tests to assess would-be traders’ skills, gauging their risk tolerance and ability to attain profit targets.

Many prop firms charge a fee to attempt the challenge to gain access to their funding programs, but not all do. If you pass, you’ll receive a funded account for the amount you signed up for.

Examples of funding programs include:

• Axi Select, which has no fee, offers a 90% split and a maximum account of $1 million
• E8 Markets starts at $33, with an 80% split and a maximum account of $400,000
• The 5%ers begin at $39 and allow 100% profit on account of up to $4 million

Beginning traders are often attracted to a particular prop firm because of its profit-sharing model. Prop firms typically allow you to keep 60% – 90% of your profits, although some may be higher and some lower.

2. Comprehensive Training and Support

Education is another major advantage prop firms frequently offer new traders over some outfits that specialize in proprietary trading and retail trading. Prop firms often provide comprehensive training and support that covers foundational concepts, risk management, trading strategies, market analysis and more.

Training and support may be delivered through webinars, workshops, performance monitoring and feedback and/or mentoring and coaching.

Educational opportunities benefit both traders and the prop firm.

New traders can accelerate their learning, quickly gaining knowledge and experience from seasoned traders. Experienced traders, meanwhile, can sharpen their skills and keep up with industry changes. Better-educated traders who continually improve their performance can, in turn, help the prop firm increase its revenue.

Learning in a real market environment with professional guidance can be crucial to your success as a trader. The market changes fast and new traders often underestimate the skills required to be profitable.

An amateur trader can build confidence and competency by developing skills in financial literacy, risk management, market analysis, strategy development, discipline and setting realistic expectations.

Besides the training and educational resources prop firms make available, you might also enjoy perks like proprietary software, cutting-edge technology, high-speed trading platforms, research, charting and analytical tools. Access to these tools and technologies can help you become a more effective trader in less time.

3. Performance-Based Growth Opportunities

You might subscribe to a prop trading firm without much capital or knowing anyone in the industry. But no worries – your lack of personal capital isn’t what determines your success in prop trading.

Prop trading firms are meritocracies: Your success depends entirely on how well you perform. If you learn the necessary skills and apply disciplined trading strategies, you’ll have the same chance as any other trader to turn your prop trading venture into a career.

You can grow your career by scaling up your accounts and earnings and you can do that by proving that your trading strategy works.

It’s possible to achieve steady growth by prioritizing risk management, consistently applying a profitable trading strategy, gradually increasing your position size as your performance improves, monitoring your win rate and profit factor and reviewing your trades to refine your approach.

Increasing position size gradually means scaling into a trade. You might start with only 25 shares of a 100-share position. As the market moves in your favor, you’ll monitor your success over a specific period and add more shares, incrementally moving up to 100 if the market continues to go your way.

Ultimately, finding success (in other words, becoming a consistent performer) as a trader can allow you to make some serious money and lead to advancement within the firm or other financial institutions.

Working with the right prop firm can offer a great opportunity to gain that success. The capital, education, support, tools and resources you’ll gain will give you the flexibility and freedom to focus squarely on your trading strategy and execution.

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Getting Into Prop Trading for Big Wins

Proprietary trading may be a little scary for beginners. However, it’s important to remember that you’re not trading with your money and that prop trading firms will furnish many resources beyond capital to aid you in your trading journey.

The basic idea behind prop trading firms is that they’ll be successful if you’re successful. They seek individuals who consistently trade profitably from initial challenges to funded accounts. That will require continuous learning and improvement, but it could lead to a fruitful career as a trader.

When you take advantage of your access to capital, learning resources, advanced platforms, tools and market research, you can increase your chances of hitting it big in the market.

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