Proprietary Trading That Most People Still Don't Understand - A Guide for New Traders

If you are looking for a new way to enter the proprietary trading industry, it might be the answer you’ve been searching for. But before rushing in, let’s understand what this is about and how to prepare.

What does it really mean: Prop Trade in simple terms

Proprietary trading or simply Prop trade is actually when a company of this type provides capital to traders to use in the market. Although it sounds too good to be true, there are some conditions you need to know.

Prop trading companies do not give money purely out of charity; it is their investment. When you make a profit, the company shares the gains according to the contract. Some may offer a 50/50 split, others only 25-30%. It depends on your skills and the company.

What you need to remember is that when you join, you must pay an evaluation fee, which covers utilities, software, trading costs, and other expenses.

Two different types in the Forex Prop Trade world

First type: Traditional Forex Prop Trade

This is the one with a company that employs traders as official staff. They have salaries, bonuses, and benefits. Although more stable, this is quite rare.

Second type: Online Prop Trade - The new era

This is where most traders go. No need to join a firm physically, just apply online. If you pass the assessment, you get access to funds immediately. Over the past year, online Prop companies have grown rapidly, especially after 2020.

The key difference is online Prop companies are not intermediaries. They provide market access, but traders are responsible for their own trading. This means you need to understand risk management, trading psychology, and strategies deeply.

Steps to get funded: How to make it happen

1. Find the right company

Not all companies are the same. Check reputation, platform used, and profit split rates.

2. Check initial conditions

Most companies require at least 18 years old, trading experience, and other criteria.

3. Submit an application

A standard online application asking about your experience and goals.

4. Interview

If you pass the first round, you’ll be invited to discuss strategies, markets of interest, and your skills.

5. Receive funding

The good part is, if you pass, you can start right away. But remember, the evaluation period usually lasts between 30-60 days for most. During this time, you must demonstrate consistent profitability.

Why do people choose this: Attractive advantages

✅ Freedom of time and decision-making - No need to go to an office, set your own working hours.

✅ Unlimited profit potential - If you make money, that money is yours (after sharing profits with the company)

✅ Risk is diversified - The company bears the main capital risk. You only risk the evaluation fee.

✅ Access to large capital - For individual traders, this is a big problem that Prop trade can solve.

✅ Supportive community - Good Prop companies often have traders willing to share strategies and offer 24/7 support.

But wait — here are some disadvantages

❌ Requires iron discipline - No boss to force you to work; you must self-motivate.

❌ Trading psychology can be your enemy - FOMO, revenge trading, overleveraging — these can destroy your account.

❌ Entry exam fees - If your income is limited, you may need multiple attempts to upgrade your funding.

❌ No fixed income - No salary, no sick leave, no guaranteed benefits.

Prop Trade vs Hedge Fund: What’s the difference?

Many people confuse these; understand the differences:

Hedge Fund pools money from external investors (often wealthy individuals) and invests it. Hedge fund managers charge management fees and performance fees.

Prop Trade uses the company’s own money, not external clients. The goal is to profit from price swings.

Moreover, hedge funds usually trade long-term, while most Prop trades focus on short-term.

Who is it best suited for?

The truth is, not everyone can become a Prop trader.

If you:

• Are just starting out and have no track record, you might try a lighter company.
• Have experience and a good track record, your chances are higher.
• Can accept mental setbacks (like prolonged drawdowns), then you’re ready.

Strategies to know for passing the assessment

1. Risk Management is an art

No matter how you trade, you must protect your account, reduce losses, and play to win.

2. No immediate revenge trading

Revenge trading is not a strategy. If you lose, let your mind breathe for a moment and come back.

3. Stick to what you know

If your strategy works, why change? Don’t follow the latest trends or new teams.

4. Support and Resistance are your friends

Identify resistance and support levels. Sell at resistance, buy at support. This is bread and butter.

5. RSI (Relative Strength Index) — how to interpret

RSI indicates overbought (>70) or oversold (<30). When RSI >70, it might be time to sell; when <30, it might be time to buy.

Risk management: Number one priority

If you are in Prop trade, take this seriously.

Step one: Learn the market first

Forex, crypto, stocks — understand what you will trade.

Step two: Have a plan

Your trading plan must include entry, exit, risk-to-reward ratio, and money management rules. The key part of the plan is stick to it. Even if you lose, that’s disciplined trading.

Step three: Test often

Backtest with historical data, try in demo accounts before going live.

Step four: Be smart about position sizing

Risk only what you can afford to lose. This is not just a trend; it’s a principle.

Norms: What’s the difference between Hedge Fund and Proprietary Trading

In conclusion

Proprietary trading can open the door to the trading world you dream of, but it’s not for everyone.

In reality, it requires:

• Iron discipline
• Deep understanding of markets
• Skilled risk management
• Strong mental resilience

If you are ready, and choose a reputable Prop trading firm, the results can be astonishing. With the right mindset, proper tools, and repeated training, becoming a successful trader through Proprietary trading systems is definitely achievable.