Proprietary Trading for Beginners

Proprietary trading, often called prop trading, is when a firm or individual trades financial instruments using their own capital instead of client funds, aiming to generate direct profits. Unlike traditional investing, prop traders use advanced strategies, leverage, and market insights to capture short-term opportunities in stocks, options, forex, commodities, or derivatives.

For beginners, prop trading offers the appeal of potentially high rewards and access to professional tools, but it also comes with significant risks. Understanding how prop firms operate, the skills required, and the risk management techniques involved is essential before diving into this fast-paced world of trading.

What is Proprietary Trading?

Large banks and brokerage firms trade on behalf of their clients; that is an important part of the business model. What you might know is that these large financial institutions also go to bat for themselves in the stock market, using their often-massive war chests to trade on their own behalf and try to increase their profits.

The process of a financial institution trading its own capital rather than that of its clients is known as proprietary or prop trading. The thought process is that the firm has a greater knowledge of markets, trends, and forecasting to beat other investors and therefore provide a greater return for their stakeholders. Institutions hire experienced traders to prop trade on behalf of the company. 

How to Start Prop Trading

Not just anyone can become a prop trader. Large financial institutions bring in prop traders with the expectation that they will make sound decisions with the company’s funds and grow their portfolio, so it takes time for someone to rise through the ranks and work as a prop trader. 

Here’s how to get started if working for a prop trading firm interests you.

Education

The building block of a career in the financial industry is a strong education in a field related to economics, statistics or business finance. Without at least a bachelor’s degree from a reputable university, it will be difficult to obtain a job as a prop trader. 

Some of the best candidates use multiple fields of study to help their resumes stand out. If you have a good working knowledge of statistics and finance, then you likely have a solid foundation in place to pursue a job as a trader. 

Gain Experience

Typically, traders with large firms are not hired without experience as an investor on the books. While obtaining your degree or shortly after graduation, start learning on the job with an internship or mentorship. 

Internships are often what you make them, so go beyond making coffee and set two main goals. First, learn as much as you can from people who have a career you would like to have, paying attention to the pros and cons of the job. Second, make personal connections with people in the field who can mentor or hire you full-time to help your future application as a prop trader stand out. 

Research Trading Companies

With a solid education and some experience, you have a great chance of landing a job in the financial industry. Ideally, you will have choices in where to work; researching which firms fit your trading preferences and lifestyle is key to success in your first full-time job. 

Apply and Begin Working

Once you have an ideal firm in mind, use the connections you made and apply for entry-level trading positions. Like any other job, you’ll want to tailor your resume to the position that you’re applying for. 

How Does an Active Prop Trader Work?

If you’re considering a career as a prop trader, the points below should give you some idea of what the day-to-day in this field looks like. While experiences vary depending on firms, locations, and experience levels, the main idea of being a trader still stands: you must produce results, whether that takes 30 hours per week or 60.

Daily Prep

Typically, a day begins with your team of traders recapping after-hours trading and discussing potential opportunities for the day. This process involves staying current on happenings in the financial world and having your finger on the pulse of the day’s activity before the opening bell.

Trading While the Market is Open

Traders are usually busiest, as you can imagine, at the start and end of trading every day, as they look to capitalize on market fluctuations. Some prop traders spend a lot of their time buying, selling, and talking with their connections to get a feel for what the market is doing at any given minute of the day.

Other traders are more analytical and use their sharp mathematical skills to take in data in real-time and adjust forecasts and models to determine the best possible trades to make at that time. You’ll put your unique trading strategy into place to work on opportunities identified during your morning meeting. 

Daily Recap

After the market closes, the team of traders discusses the day’s activity. As a new trader, this period can be a gold mine of information because you can learn who made successful trades and why they worked, and vice versa for bad decisions. New traders also typically work longer hours because they are expected to stay after the market closes and do the administrative work to ensure all trades are completed and everything is ready for the next day.

Advancement

Moving up in prop trading can happen fast for top performers. The company you’re working for likely values production significantly more than seniority, so the best traders can move up quickly. Typically, the career path starts as a junior trader, then moves to a senior trader and eventually a partner, with salaries increasing and administrative work decreasing every step of the way.

Benefits of Prop Trading

If you’re looking for an exciting career and have a knack for numbers and problem-solving, prop trading could be a great choice for your future employment. As long as you are selective about the firm you choose to work for, there are some great benefits to prop trading as a career.

• Potential salary: If you can rise through the ranks and become an effective prop trader, the possibilities for compensation are excellent compared to other careers in finance. 
• Teamwork: Because everyone on a trading team is working toward the same goal of increasing the company’s bottom line, there is typically a positive office environment of smart and high-achieving people.
• Level playing field: Most prop trading firms promote based on performance — not seniority. If you’re getting started in your career in finance but you’re confident in your skills as a trader, prop trading may provide you with the opportunity to move up faster in your career. 

Take the Next Steps to Begin Prop Trading

If you're ready to take the next steps to becoming a prop trader, check out some of the best proprietary trading firms below.

Apex Trader Funding

Try Apex Trader Funding to get qualified in as little as 7 days, keep 100% of the first $25,000 you earn, coordinate with Rithmic and Tradovate, and scale to the account types that work best for you. There are no caps on your payouts, and you can learn everything you need about each asset directly from he platform.

Plus, there are no daily drawdowns, and you can even trade on holidays or during certain off-market hours.

Trade the Pool

Founded in 2022, Trade the Pool uses reputable risk management tools and ensures that traders have a place to trade that serves both parties well. 

• Works for day traders, swing traders, and prop traders
• Supports professional traders who need another place to work
• Offers trading for stocks and CFDs
• Offers support for inexperienced traders
• Provides unlimited buying power
• A 14-day free trial
• Offers over 12,000 stocks and ETFs to trade
• Educates users
• Subscribes traders to several resources
• Provides space for traders to hone their skills

FXIFY

FXIFY is a new proprietary trading firm that offers access of up to $400,000 for those who pass the site’s assessment. With profit shares as high as 90%, you can scale your account up to $4 million. You can try the One-Phase or Two-Phase assessment, but make sure to review the terms and conditions of each assessment before beginning so that you know you’re taking the right path. 

Trading is available on MT4 or MT5 and assorted trading platforms through the firm’s partnership with FXPIG. There’s commission-free trading and access to stock indices, forex, precious metals, etc. Plus, you get relatively tight spreads, no trading restrictions, customizable leverage, and more.

You can even use expert advisors or other automated strategies to get the best results. Traders with FXIFY also get instant payouts, no consistency rules, unlimited trading days, and a 125% refund on the assessment fee with the first payout.

• Quick trader funding after your evaluation
• Quick account setup
• Powerful educational tools
• High profit shares (up to 90%)
• Several account styles
• A simple platform that’s easy to use

Frequently Asked Questions