With the increasing number of Prop firms sourcing for traders all over the internet, it is easy for traders to get lost in the crowd when it comes to choosing the right Prop firm to trade with because of the wide range of options available at their fingertips.
If you are a new trader and wondering what prop firms are about, a Prop firm is a company that provides capital for traders to trade with, with the aim of getting a return of the percentage of the profits made according to the terms and conditions provided by the Prop firm.
Traders who trade with prop firms have an advantage of making higher returns as they are exposed to a more healthy trading capital which gives them room to make a good profit even with the least risk applied.
Because of the potential success prop trading provides for individual traders, most traders who apply for funding tend to overlook the underlying criteria to successfully manage a prop firm account. As a result of this, they lose the account almost immediately after acquiring it.
Therefore, if you are considering trading with a prop firm, it is very important to do your research about the prop firm before jumping on their offer. You should consider the following;
1. Your trading style
How do you trade and how has your trading strategy performed over time? Are you a scalper? Are you an intra-day trader? Do you swing your trades or are you a position trader? Are you a News trader?
After carefully analysing your trading style and performance, you need to confirm if the prop firm you intend to trade with allows your type of trading system.
If for instance you are a swing trader who likes to hold trades over the weekend, some prop firms do not permit holding traders over the weekend. This means that you may need to adjust your trading style to suit their terms or you simply look elsewhere.
2. Trading instruments/ Platforms
There is a tendency that the trading style provided by the Prop firm suits your system but the trading instrument you trade the most is not provided by the firm.
For instance, your focus could be on trading only cryptocurrencies like BTCUSD but the company only permits trading currencies.
You may also trade using Expert Advisors while the trading firm does not allow the use of EAs on their platform.
Also, consider what trading platform they provide. Some trading firms provide platforms like Meta Trader 4, Meta Trader 5, C Trader, and Web Analyzer. Ensure that you are able to access and use any of the platforms provided.
3. The funding process of the prop firm
There are variations in the way prop firms provide funding for their clients. You should consider if the prop firm requires that you go through an evaluation process or if they provide direct funding. Also pay attention to the expected profit target, daily or overall loss limits, timeframes allowed, duration of the evaluation process, duration of the contract, and maximum fundable amount. Taking all of these into account will help you find the firm that best fits your trading style and system.
How much will it cost you to get your desired funding capital? The majority of the prop firms provide different funding capital which comes with different prices.
For instance, they could provide funding packages like $5000, $10,000, $20,000 $50,000, $100,000, $500,00, and even higher amounts. These different funding capital have different price tags. The higher the amount, the more money you are likely to pay to get it.
Therefore, it is important to look at your budget and go for a funding package you can afford.
5. Customer Support
Look out for prop firms with excellent customer relationships. If you got queries or need assistance with anything related to your trading account, you want to be able to reach out to the customer support team for help. They should also be able to attend to whatever challenge you may experience without delay. Have all their contact details handy for just when you might need them.
Reach out to other traders who have traded with the prop firm you plan to register with and get feedback on their experience. It is also of good need to read through their reviews online both on their website and all their social media handles.
Without the right education about Forex trading, success in either trading with prop firms or trading with the traditional broker will be far-fetched. Before you take up a funding package, go for knowledge first. To begin learning how to trade the right way, click here to register for free training.