If you have been trading for a while or even just reading about it, chances are you already know what a prop firm is. These companies give traders access to capital and take a portion of the profits they make in return. With the number of prop firms on the rise, choosing the right one has become a crucial decision for beginner and experienced traders alike. Here is what you really need to keep in mind when choosing a prop firm.
What’s the Evaluation Process Like?
Most firms will not just hand you capital after you say, “I can trade.” They want proof and this proof usually comes in the form of a challenge or evaluation phase where you need to hit a certain profit target without violating the rules.
Questions you should ask:
- How many steps is the evaluation?
- How many trading days are required?
- What is the drawdown limit?
- Do they allow retakes?
Profit Splits and Payouts
At the end of the day, the whole point of prop trading is to get paid. Different prop trading firms offer different splits, usually ranging from 70/30 to 90/10 in the favor of the trader. The higher the split, the better, but it is not the only thing to consider. Also check how often they pay out, the minimum withdrawal amount, and any bonus payouts for high performance.
Trading Rules and Restrictions
This one is important because some firms have rules that might not work with your trading style or strategy. For example, look into whether news trading is allowed, and if you can hold trades over the weekend. Also sometimes trading is restricted to certain instruments. Always read the fine print, and watch out for firms that are quick to terminate accounts for tiny violations.
Customer Support and Community
When things go wrong or you simply need help, you would want a support team that actually responds. A strong and helpful community is a bonus. It shows the firm is active and involved with its traders. Check online trading communities and groups for reviews. See if the firm responds to people within a day or two.
A great prop firm has support staff that understands trading. Look for any history of unfair bans or blocked payouts. If traders are constantly complaining about customer service or transparency, it is probably not a good sign.
Fees and Refunds
Most prop firms charge a fee for their evaluation or challenge phase, and some offer a refund if you pass it. Others don’t. Take your time to research and find out: Is the fee competitive compared to other firms? Do they refund the fee once you are funded? What happens if you fail? Can you retake the challenge?
Instant funding options are becoming more popular too, where you skip the evaluation and get funded instantly. Just make sure the terms are still fair.
Conclusion
Choosing between prop firms does not solely rely on who offers the biggest payout or fastest funding. A good firm is one that suits your trading style, supports your goals, and gives you a fair chance to succeed. So, take your time, read the fine print, and listen to other traders’ experiences before you choose to sign up with a firm.