How to Become a Prop Trader at a Top Prop Trading Firm

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I’m sure you want to be a prop trader because you realise what a great opportunity it is and what a rewarding career it can offer… but you realised like many you do not know quite a few things.  

Like how to become a prop trader to begin with, how a prop trading firm fits to it, or what is prop trading to begin with?! 

Let’s go systematically, if you are researching how to become a prop trader, I am going to assume you are newer to prop trading compared to someone searching for a prop trading firm.  

First a prop trader trades other company’s money in the financial market, the other company’s money that retail traders trade tend to be a prop trading firm.  

 Do I Need Qualifications?

To address what you likely have in your head, the answer is: no, prop traders do not need any qualifications. Know how to trade and you are good. Define this as having a good trading strategy/system, good grasp of your trading psychology and emotions and you must have good risk management.  

Those are the aspects you under your control that you can develop.  However, the other side is the prop trading firm.  

Each prop trading firm has their own requirements and set of rules. Some will be easier than others, it comes down to compatibility and if your trading style, your plan, and psychology, works well with the prop firm’s trading rules in other words how they manage risk. 

What’s The Process?

How to become a prop trader and the best tips for selecting a prop firm, while related are different processes.  

But do not worry, becoming a prop trader is not difficult these days. It isn’t like the pre 2010s where you would have to live close to a financial hub, ideally a trading hub, or anywhere close to a group of wealthy investors. Prop trading firms are remote these days meaning you can avoid super high desk fees and save on travel! 

That is not to say there are no costs associated with prop trading firms. This article is about how to become a prop trader, now how to become a prop trader for free. While it has considerably evolved, there are fee structures with prop firms you should be aware of: 

Evaluation: prop traders pay a fee to cover their loss, then undergo an evaluation for a specific period. Under the condition they meet the passing criteria, they qualify for full funding. There is an evaluation time, some firms go as short as 3 months, some go slightly longer at 6 months, whereas some (like City Traders Imperium, CTI) prefer to go up to 1 year. The profit share is not equal in all firms either and ranges from 50%-70%; not every prop trading firm offers the same scaling plan.  

Direct Funding: this is an option available for prop traders that do not want to go through the evaluation period and want to dive right into the prop trading firm’s funding hence it is called “Direct Funding”. Considering the skipped evaluation, naturally the fees are higher for this option. The value some would find is the time that they would have used on the evaluation is better served going right to the funded account. If you are looking at this “how to become a prop trader” brief, do choose this option unless you are very confident in your trading strategy.  

Challenge: a prop trading firm expects traders to complete a challenge such as make 10% in 30 days. This quick money approach attracts many people, but statistically traders opting for this will lose big. To give you perspective, the best traders make 20% a year. And we are talking institutions too. Keep this in mind; they encourage bad habits.  

Monthly: a rip off in day’s world. Worse than the old prop trading firm desk fees. You need to keep paying them to access your accounts, and a 50-50 profit split is really against you when you consider the monthly fee.  

Evaluation

Ultimately the answer for how to become a prop trader is to keep in mind the advice in this article, and if you require assistance consider a prop trading firm willing to support your development.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.