Prop-Trading actually stands for English Proprietary Trading and means something like proprietary trading. It is about companies that trade the equity of the prop company on the stock exchange. This is e.g. in contrast to an investment company that uses borrowed capital (their customers’ money) for speculation and gets commission for it. From the prop trader ‘s point of view, the prop house’s money is of course also outside capital. But the name arises from the perspective of the prop company .
In order to spread the risk, a prop trading company tries to hire as many talented traders as possible, who receive a commission for making profits. This can be up to 80% with some providers .
If you want to become a prop trader, you should know the associated costs before you start.
In general, it is important that you are already profitable and have had a few years of trading experience (it should be 1-2 years). There should be a proven trading strategy that you trust and know the statistics for.
In general, due to the narrow risk parameters, I personally believe that prop trading is more suitable for short-term traders and scalpers. However, it also depends on the instrument and the provider. There is e.g. For example, more and more providers in the forex area that also allow holding through news and over the weekend. These are then also aimed at day and swing traders. Therefore, you have to look here to see which provider best suits your own trading style.
If a trader is able to stay within risk parameters and remain consistently profitable, prop trading offers tremendous opportunities. Without risking or having to raise any of your own money, you can manage a large trading account and use the purchasing power in your favor for a small fee (if you can complete the evaluation relatively quickly). This makes it possible to work full-time as a trader and make a living from trading.
And even if you have a really bad day (every trader knows that), you simply complete a new evaluation and get the account back. For storm-tested traders , even that should be profitable.
The admission process is more or less identical for practically all prop trading firms and consists of two sections: