Prop Trading Firm Review: Comprehensive Analysis (2024)

FAQs

Do prop trading firms use technical analysis? ›

In conclusion, proprietary trading firms use a variety of strategies to generate profits, including arbitrage, technical analysis, global macro trading, swing trading, and day trading.

That result should look catastrophic for anyone who hopes to join a prop firm. The article from Lux Trading Firm provides slightly different results. According to it, 4% of traders, on average, pass prop firm challenges. But only 1% of traders kept their funded accounts for a reasonable amount of time.

While prop trading is one of the most profitable opportunities, it is affected by asymmetric risk. This means that the profit-sharing ratio may be from 75% to 90%, but you bear 100% of the risk of your trades. When becoming a prop trader, you often need to deposit an amount of money known as your risk contribution.

JPMorgan Chase & Co (JPM)

It also offers detailed technical analysis based on the buy/sell signals of moving averages (simple and exponential for a wide range of periods) and Buy, Sell, Overbought, Oversold or Neutral signals of common chart indicators (including RSI, MACD and CCI).

Also known as “prop trading,” it offers higher earnings potential much earlier in your career than jobs like investment banking or private equity. It's arguably the most merit-based industry within finance: if you make millions of dollars for your firm, you'll earn some percentage of it.

The FTMO challenge has a reputation for being extremely difficult to pass. Across FTMO's various account levels, it is estimated that only around 10% of traders are able to successfully complete the evaluation and become a funded trader. This means approximately 90% of those who attempt the challenge end up failing.

Traders may struggle or fail with prop firm such as True Forex Funds accounts due to factors such as lack of experience or education, insufficient risk management, overleveraging, emotional decision-making, unpredictable market conditions, lack of discipline, misalignment of strategies, failure to learn from mistakes, ...

Participating in a Prop Firm Challenge can be a stepping stone to a successful trading career. The benefits, including improved skills, access to capital, and networking opportunities, make these challenges an attractive option for traders looking to advance in the industry.

FTMO have now restricted access to all new US-based traders as of January 2024. This appears to be related to regulatory issues and may have something to do with the recent My Forex Funds case.

What are the negatives of prop firms? ›

In conclusion, the income of prop firm traders can vary greatly depending on several factors such as experience, performance, and the size of the firm. On average, a junior prop trader can expect to earn anywhere between $50,000 to $100,000 per year, while a senior trader can make upwards of $500,000 annually.

It's a competitive, high-stress field with drawbacks like any other career. It's also awash with less-than-reputable firms that offer zero base pay, limited profit sharing and often make new hires pay for training and tech. Avoid these types of firms as they're a ticket to plenty of risk with minimal reward.

Each Representative shall be required to pass the Series 7 General Securities Representative Qualification Examination unless his or her activities are so limited as to qualify him or her as a Proprietary Trader as specified hereafter.

When you are trading with a prop firm, your losses are usually limited to the foregone risk of your challenge/account fee. You are generally not liable for the prop firm's lost funds.

A swing trader aims to earn short-term or medium-term gains rather than long-term gains. They primarily use technical analysis, but they may also use fundamental analysis for more information about price trends or general market patterns.

Day traders typically use a combination of strategies and analysis, including technical analysis, which focuses on past price movements and trading patterns, and momentum, which involves capitalizing on short-term trends and reversals.

Popular Prop Trading Strategies in Practice

These tactics range from swift scalping techniques to trades informed by financial news. They also engage in merger arbitrage where they capitalize on price variations during company mergers and employ global macro-strategies that hinge on economic trends worldwide.

The algorithmic trading process typically begins with the development of a trading strategy. This strategy can be based on a variety of factors, including technical analysis, fundamental analysis, or a combination of both.