What To Look For In A Prop Broker
What To Look For In A Prop Broker
There are a few types of prop brokers to choose from, meaning you can find one that suits your individual needs. As well as knowing your own trading personality and statistics, the following list of prop firm features may help you decide which to choose. It’s also worth checking out detailed reviews.
- Demo vs real account: Some prop firms will evaluate your suitability before providing you with funds. This can be done using either a demo account or a live account. Trading on a real account means instant funding. Therefore, if you are profitable, you’ll receive money sooner.
- Market: It makes sense to prop trade for a firm that specialises in a market that you understand well and have experience in, whether that’s forex, options, crypto, equities, or futures.
- Trading hours: Each prop firm will have specific trading hours. Make sure the firm’s hours suit your own personal timetable. Some firms are restricted to day trading while others allow overnight trading.
- Profit split: Most prop firms set a split agreement with prop traders by the percentage of the profit. Some give a higher percentage to the trader. However, a percentage split does not necessarily reflect the potential profit in actual monetary terms. Make sure you understand what is on offer beforehand.
- Qualifying requirements: Most online prop shops have a testing protocol when hiring prop traders. Normally, your past performance is not taken into account, meaning beginners can start prop trading too. Most qualification procedures are done on demo or simulator accounts but involve real-time trading phases where you are expected to perform under various market conditions. Some prop trading brain teasers and drills are available online.
- Entry costs: There are 3 types of participation fees: subscription (a monthly fee once you are in the program), deposit securities (the fund will observe this to decide how much to add or buy with the trader), and a one-time fee (once you prove to be profitable and responsible for risk, there will be no further cost to you).
- Training programs: Some firms require their prop traders to use their investment strategies. As these may be unfamiliar to you, especially if you’re a beginner, you will have to take an education course before the qualification phase. Be mindful of the costs of these training courses. Experienced traders should also be wary that this might be a sign that the prop fund is just looking for execution traders rather than giving you the autonomy to use your own strategies.
There are other jobs available at prop trading firms other than becoming a trader, including a quant researcher, where you come up with mathematical models for trading algorithms and strategies, and a developer, writing code. There are also support jobs available, such as operations, finance, compliance, and HR.
There are prop trading houses and desks across many cities and countries in most continents:
- Europe: UK (London), Ireland (Dublin), Germany (Frankfurt), Luxembourg, Spain (Madrid), Netherlands (Amsterdam) and Switzerland
- North America: USA (Atlanta, Chicago, New York, Miami, Houston, San Francisco) and Canada (Toronto, Montreal, Quebec, Vancouver)
- South America: Brazil
- Australia: Brisbane, Sydney and Perth
- Asia: India, China (Hong Kong, Shanghai), Japan (Tokyo), Singapore, Dubai and Malaysia