We will cover the essentials traders must consider before evaluating Forex proprietary firms (or ‘prop firms’ as they are typically known) to solve one of the biggest problems in Forex trading – having a big enough cash deposit to run a long-term successful strategy that makes consistent returns in the market.
MT4/MT5 accounts at Australian-based multi-asset CFD broker Eightcap
Maximum leverage of 1:10 with a 75% profit share
Excellent transparency & industry-leading trust scores
Maximum leverage of 1:100 with 80% to 90% profit share
Highly rated prop firm with excellent transparency and trust scores
Up to 90% profit share & generous trading conditions
MT4/MT5 trading accounts with maximum leverage of 1:100.
80% profit share with a maximum drawdown of 8%
No evaluation fee or demo account challenges
Monthly subscriptions from $99 to $1,099 & a 50% profit share
4.0/5 in this category
Prop traders get a one-step evaluation process with a 10% profit target, a tremendous challenge to achieve in 30 days, but it remains the industry standard. The 4% daily loss limit and 5% maximum drawdown make Funded Traders Global one of the strictest firms based on conditions. It presents 300+ assets, placing it at the top among asset selections.
The minimum evaluation fee is $100 for a $10,000 MT4 prop trading account, but traders should consider the upgraded option for $145. The maximum evaluation fee is an industry-high $5,430, and traders can pay the fee via cryptocurrencies.
4.0/5 in this category
FTMO ranks highly with its transparency, profit-share, and trading conditions, placing it among the most competitive and honest prop trading firms. FTMO pays its prop traders up to 90%. FTMO was the Deloitte Technology Fast 50 Winner for the past four years, starting in 2019, and traders can use MT4, MT5, and cTrader.
The trading conditions, while challenging, rank among the more generous ones, with a daily loss limit of up to 10% and a maximum drawdown of 20%. FTMO levies a minimum evaluation fee of €155. Traders benefit from balanced asset selection, and a free trial exists.
4.0/5 in this category
Fidelcrest is one of the most transparent and trusted prop trading firms. It features a two-step verification process and offers micro prop trading accounts from $15,000 for a one-time evaluation fee of €99 and unlimited retrials if traders do not violate the rules. The maximum payouts of 80% to 90% places Fidelcrest at the top of the list, where only a few prop firms compete.
Traders benefit from the most generous trading conditions industry-wide, as Fidelcrest grants 60 days to achieve the 10% profit target, while the maximum drawdown is 20%. Algorithmic trading and manual copy trading are allowed.
3.0/5 in this category
E8 Funding has an excellent trust score based on 1,000+ reviews but lacks operational history. Interested prop traders can start with a 14-day free trial, and the minimum evaluation fee is a reasonable $138 with a two-phase verification process. Besides the standard 30-day period to achieve the profit target, E8 Funding offers an extended 60-day alternative.
Traders must pass the Letsdeel KYC process, which processes all E8 Funding withdrawals. Letsdeel accepts traders from all countries except 19. The 80% profit share places E8 Funding in the upper echelon, and the maximum leverage of 1:100 enables competitive trading conditions.
1.0/5 in this category
Unlike most prop trading firms, BluFX does not have an evaluation period or trading challenges but relies on a monthly subscription-based model. Traders only get the cTrader trading platform with maximum Forex leverage of 1:30 and no minimum trading days, while BluFX prohibits algorithmic and copy trading. All accounts are US Dollar accounts, but BluFX pays profit share withdrawals in British Pounds.
The 50% profit share is the lowest in the prop trading industry. Once traders account for the monthly subscriptions, it can drop into single digits. Prop traders must weigh it against their strategy and expected profit potential.
Forex prop firms offer to ‘fund’ traders with cash allocations for trading on margin accounts and operate on a profit-share basis, sometimes up to a 90% share for the traders. One of the reasons many active traders fail is a lack of trading capital. It causes overtrading, frustration, and profit-chasing, which generally results in trading losses, as evident by the high failure rate among retail traders.
Trading with and for a Forex prop firm solves the capital problem, as traders get allocations anywhere between $10,000 to $2,000,000 in funded trading accounts. They must pass an ‘evaluation period’ and often pay monthly maintenance fees for access to capital. Traders must also consider the added stress and performance pressure this setup may cause.
Forex prop firms provide margin capital and trading infrastructure to their traders, usually they have a strict risk management team to protect their bottom line. They operate on a profit-share basis, which ranges between 50% and 90%. Most Forex prop firms scale up available capital once traders reach pre-agreed performance goals. For example, they may double the allocated funds each time a trader exceeds 10% in profits.
Forex prop firms are generally legal. There are no rules governing how to open a Forex prop firm, nor against it. Forex prop firms are unregulated since they do not provide financial services or asset management for third-party clients. They trade their capital for their own benefit and can hire as many traders as they wish, and there are no licenses to operate a Forex prop firm or to become a Forex prop trader. Some regulators question the current framework and may introduce some form of regulatory approval in the future to register a Forex prop firm, but currently, none exists.
Traders should consider the reputation of the Forex prop firm they are considering working with, evaluate their conditions and fees, ensure the risk management parameters suit their trading strategy, and maintain the freedom to withdraw their profits without restrictions.
Several ways exist to start a career as a Forex prop trader, but the below guide covers the most common steps to get started with a Forex prop firm.
Here are the few required steps to become a Forex prop trader, which can vary slightly from firm to firm:
- Apply to a Forex prop firm, which often includes details about the individuals trading background and experience.
- A potential interview may follow, but it is not always necessary, especially if traders have the relevant know-how and where there is an outline of their strategy and preferred markets to be traded.
- An evaluation period, usually using demo accounts, where the Forex prop firm offers strict guidelines and performance goals the trader must meet to advance.
- Once traders pass the evaluation period, they can become funded prop traders, can select their account package, and often pay a fee for access to capital or trading infrastructure and general support, trade signal etc.
Forex prop firms engage in a profit-share agreement, usually between 50% and 90%, with their prop traders and often attach minimum profit requirements that must be achieved before a trader can withdraw profits made using the allocated capital.
Most Forex prop firms charge a monthly fee for access to capital, which can range between $100 and $500, depending on how much capital a prop trader seeks from the firm. Some ask for a one-time fee during the evaluation period. Prop traders must also inquire about the trading conditions, fees, spreads etc. These are costs charged by brokers and some have a volume-based rebate program, which can be useful if the trader’s strategy involves making many trades.
Stress and performance pressure are the primary risks prop traders face. The absence of a basic income and no job security can result in avoidable trading mistakes. Most aspiring traders cannot handle the pressure to outperform markets in any condition with sustainable results, experiencing burnout while having to pay monthly fees to remain with the Forex prop firm.
Traders interested in Forex prop trading should consider the pros and cons before registering with any Forex prop firm.
The pros of Forex prop trading are:
- Lower overall trading fees due to the volume Forex prop firms typically trade monthly.
- Significant amount of trading capital available
- Low entry requirements with high earnings potential
- An exciting career and access to a professional community with like-minded traders
- A competitive landscape
- A risk management team that acts as a layer of security
The cons of Forex prop trading are:
- Extreme-stress environment to continuously perform in any market condition and potentially lose capital provided by the firm.
- No job security, as any Forex prop firm will cut underperforming or losing portfolios.
- One-time, monthly, or annual fees for access to capital, trading platforms, and cutting-edge trading tools
- Capital investment from the trader, which some Forex prop firms require, as a buffer to potential trading losses
- Ultra-competitive and performance-driven environment, which some traders cannot handle.
- Strict daily loss limits and overall drawdown conditions
- No basic income guarantee.
A Forex prop firm will offer the right trader an excellent opportunity unavailable elsewhere. Most traders either lack the strategy or the mindset to perform in an ultra-competitive, performance-driven environment, and the possibility of stress and burnout is high for many whom don’t have the right mental approach. However, the rewards are potentially high, and access to capital is very tempting to the underfunded trader.
Which is the best prop firm for Forex?
The best prop firm for Forex depends on what the traders seek from a Forex prop firm, but it should include high payouts, no monthly fees, no restrictions on trading strategies, and no withdrawal limitations on profits.
Do prop firms make money?
Yes, Forex prop firms usually make money by diversifying their capital among tens of thousands of traders, implementing strict risk management and control policies, and swiftly replacing unprofitable or underperforming traders. Firms which charge evaluation fees can also have this as a significant part of their income as so many aspiring prop traders fail.
How much do prop traders make?
The amount prop traders make depends on their ability to generate profits in the Forex market, but Forex prop firms have payouts between 50% and 90% of profits.
Is it hard to become a prop trader?
Yes, it is hard to become a prop trader. Becoming a prop trader is straightforward but can differ as it depends on the Forex prop firm. It usually includes a demo trading evaluation period, where the Forex prop firm gives traders specific performance goals to achieve within set risk parameters. The process can consist of multiple test periods before traders get approved to trade live portfolios. Typically, the evaluation goals are extremely difficult to meet.
How do I get started in prop trading?
To get started in prop trading, traders must have a profitable trading strategy, register with a Forex prop firm, and pass their evaluation stage. Some Forex prop firms have tight daily stop loss limits and overall drawdown restrictions that prevent traders taking on large risks, and traders should carefully research the requirements before paying a fee to start with any Forex prop firm.
How do I join a prop trading firm?
To join a prop trading firm, traders must register with their preferred Forex prop firm, pass the evaluation and tests, select their account preference, and pay the fee, which can be a one-time, monthly, or annual fee. It depends on the Forex prop firm and the amount of capital a trader seeks to manage.
Do you need a license to work at a prop firm?
No, a license is not a requirement to work for a prop firm, as traders will not manage client assets but trade and often pay for the capital the Forex prop firm provides. Forex prop firms are not financial service providers, trade their money for their benefit, and never solicit third-party assets.