Prop trading has seen explosive growth in recent years, with traders around the globe now using funded trading programs to access large capital bases while minimizing their personal financial risks. Not all trading firms are created equal, however, and it is essential to compare key aspects of a prime funded account and ascertain if a company meets the criteria to be the best prop firm for you before signing up.
Choosing the right prop firm can make a huge impact on your future as a trader. Your profit split, trading rules, how your account is scaled and the platform quality all contribute to your experience as a trader. Understanding what are the key features of a prime funded account can help you avoid common mistakes and make a more informed decision about your trading career.
Profit Split Structure
One of the very first key features to consider when comparing a prime funded account is the profit split structure. The profit split dictates how much of the trading profit remains with the trader, and how much is allocated to the prop firm.
The best prop firm is likely to offer competitive profit splits for traders, typically giving the trader between 70% and 90% of the profits they have made trading. High profit split means greater earnings for the trader over the course of their trading career.
Take notice also whether or not the profit split is tiered; in many cases traders who can remain profitable and consistently scale their accounts gain access to more profitable split tiers, potentially giving them even more of the profits.
Evaluation process and trading challenges
Before you get access to a prime funded account you’ll be tested, and most prop firms will provide a trading challenge that you need to overcome. This challenge will measure your consistency and discipline over a period of trading and your ability to manage risk when trading.
What are the features of the trading challenge you should be comparing? The level of difficulty is obviously important-a prop firm that has a challenge with realistic targets you are unlikely to reach without reckless behavior will generally provide a better environment for traders to grow in.
Some of the parameters to compare here include:
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Profit targets
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Maximum daily draw down
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Maximum overall account draw down
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Minimum trading days
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Time to pass the challenge
There are firms out there who will give traders quite relaxed targets and time limits on the trading challenge, and those who will impose much stricter parameters.
Maximum Drawdown Rules
The risk management policies of the prime funded account is also something you should analyze carefully. All prime funded accounts will have a limit that you can lose over the course of the day, or of the account as a whole; if you exceed this then your account will be closed.
The best prop firm for you should provide you with drawdown rules that suit your trading style and aren’t unnecessarily restrictive. A prime funded account could come with a trailing drawdown, or a static drawdown. A trailing drawdown increases as the profits in your account increase and will therefore get progressively smaller. A static drawdown will simply remain the same throughout your trading career with the firm.
Exceeding the drawdown limit will cost you your prime funded account so knowing the parameters is key to success.
Trading Platforms and Technology
As well as everything we’ve already covered, the platform and technology provided by the prop firm should also be a consideration. The best prop firm will likely have a fast and stable trading platform with professional charting and execution capabilities. Many prop trading firms allow their traders access to platforms such as MetaTrader 4 and MetaTrader 5, or cTrader where the traders are free to execute trades and monitor the market in a professional manner.
Some features of a trading platform worth looking out for:
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Execution speed
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Platform stability
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Access to mobile trading
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Custom indicators and expert advisors
A clunky platform can significantly hinder your trading, so if you intend to scalp, or you plan on placing a lot of trades, a fast and stable platform is essential.
Account Scaling Opportunities
One of the most exciting aspects of a prime funded account is the possibility to scale your account over time. After consistently demonstrating your trading skills over a period of time, the best prop firms will allow you to trade a more profitable amount, without you needing to invest any of your own capital.
The more profitable you are, the larger your prime funded account will grow over time. This gives you the opportunity to make even larger sums of money, but to be sure the firm’s growth strategy suits you:
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How does the account scaling work?
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What percentage gain must you achieve to qualify for more capital?
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Is there a maximum size for the account?
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Is there any limit to the frequency with which you can scale your account?
You should choose a prop firm that allows your account to scale proportionally to your success.
Payout Frequency and Withdrawal Methods
Having access to your funds quickly and easily is always a major priority, and all of the top prime funded accounts offer this capability. Many firms are able to payout your profits bi-weekly or even weekly, giving you quick access to funds.
Other details of the payout system include:
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How long after you withdraw do you get your profits?
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What withdrawal fees are involved?
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What withdrawal methods do they support?
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Do they have any minimum or maximum withdrawal limits?
If the prime funded account provides you with a fast payout it really helps to build up trust between you and the prop firm.
Trading Style Flexibility
Depending on your trading strategy, you’ll want a prop firm that either doesn’t enforce very strict rules, or doesn’t have any rules at all regarding trading styles. Scalping is a popular strategy but many prop firms don’t permit it due to its high risk.
Consider if the following styles of trading are allowed or disallowed:
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Scalping
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News trading
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Trading on weekends
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Overnight positions
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Automated trading systems
It’s important to research any rules a prop firm has in relation to what style of trading is permitted before committing to one.
Customer Support and Reputation
Your prop firm’s reputation should be paramount. Before committing any capital (either real money or by paying the challenge fee), ensure you have researched the prop firm thoroughly. Take a look at reviews and see what other traders have to say about them.
The best prop firm will also have excellent customer support that can deal with all of your queries effectively. This may not only be regarding issues with trading but could also include problems with withdrawals, or account settings.
Concluding thoughts
Comparing a prime funded account may seem complicated at first, but it will all come down to comparing profit splits, drawdown limits, platform availability, payout schedules and much more. The best prop firm will give you a transparent service where you can trust that it can assist you with all of your trading needs.