Before we discuss how, let's review the basics: What exactly is a prop trader?
What Is A Prop Trader?
In simple terms, a prop trader is a person who uses someone else's money (usually a firm's capital) to take part in the financial markets. They can trade pretty much anything - stocks, currencies, you name it. The goal of trading with prop firms is the same as that of the real world–win big. Because the prop firm provides the upfront capital, the gains are split. More often than not, these prop traders look for a suitable prop trading firm to provide them with capital, and they're often willing to invest some of their own money to start trading. It's like putting some skin in the game to show they're not just playing around - they're ready to win.
Now that we’ve covered that, it’s time to discuss what you’re really here for.
What You Need to Know to Become A Prop Trader
If you’re looking to become a prop trader, it’s important to have a grasp of what it entails. And we’re here to break it down for you, piece by piece.
Do You Need Any Qualifications or Education to Become a Prop Trader?
You don't need a degree or specific qualifications to become a prop trader. Most prop firms are more interested in your skills, mindset, and potential than your paper credentials. Whether you've got a degree in finance or you're self-taught, what matters most is your ability to understand and navigate the markets.
If you don’t know where to start to begin your learning process, TopTier Academy Plus is a recent addition to our educational resources for traders. This platform provides live classes with seasoned traders, direct access to your mentors, and a support community to accompany you on your trading journey.
How Much Money Do You Need To Start Your Prop Trading Career?
The amount of money you need to become a prop trader can vary, depending on the prop firm you’re looking into, yet, it’s possible to start with as little as $100. Proprietary firms commonly offer different account sizes or even monthly fees for you to trade at different price ranges.
TopTier Trader, for example, has a wide variety of account sizes, depending on the chosen capital or add-on features for your challenge.
How Much Does A Prop Trader Make?
As of 2024, based on the report of annual salaries from ZipRecruiter, prop traders are raking in an average of $101,533 a year. But it gets even more interesting - this field has a very wide range of salaries. Some traders are bringing home $196,000, while others are starting at around $53,000. Most fall somewhere in the middle, around $57,500 and $181,000. If you go rogue and take trading into your own hands with the help of a remote prop firm like TopTier Trader, there's no cap on what you can make, and that's how we differ from traditional prop firms.
How Long Does It Take to Become a Prop Trader?
There's no set timeline - it depends on your learning speed and the path you choose. Some might start trading within a few months, while others might take a year or more to feel confident. The truth is that the markets are always changing, so in a sense, the learning never really stops. You'll need to stay on your toes and keep adapting to new market conditions.
If we were to speak in literal terms, without the learning process involved, the time depends on how long it takes you to complete a challenge and become a funded trader. That’s when you can be fully recognized as a prop firm trader. Most prop firm challenge accounts have two evaluation phases that you have to pass before you become funded. At each stage, there is a profit target that you have to hit to move to the next stage. This progression depends solely on your trading skills and discipline, for some, it takes days, and for others weeks.
What’s Being a Prop Trader Like?
In simple terms, a prop trader is a person who uses someone else's money (usually a firm's capital) to take part in the financial markets. They can trade pretty much anything - stocks, currencies, you name it. The goal of trading with prop firms is the same as that of the real world–win big. Because the prop firm provides the upfront capital, the gains are split. More often than not, these prop traders look for a suitable prop trading firm to provide them with capital, and they're often willing to invest some of their own money to start trading. It's like putting some skin in the game to show they're not just playing around - they're ready to win.
Step-by-Step Guide To Becoming A Prop Trader
Now that you know what a prop trader is, we can now go over the steps to becoming one! Start your journey to becoming a prop trader with these steps:
1. Learn How To Trade:
The foundation of any career starts with learning. Start by immersing yourself in the world of finance. Read books like "Forex Trading: The Basics Explained in Simple Terms" by Jim Brown, which focuses on market analysis, trading psychology, risk management, and more. Take online courses or attend webinars to understand different financial instruments and market dynamics.
If you want to start off on the right foot, you could always sign up for TopTier Academy. Within this course, we cover every aspect of forex trading, such as:
Introduction to Trading: Understanding all the basics and terminologies within the forex market industry.
Trading Psychology: Tips and tricks to establish a strong mindset for approaching the markets.
Market Analysis: Every facet of analysis, from technical to fundamental, that can be implemented within a trading strategy to make informed decisions.
Trading Strategies: Go over practical examples and exercises to learn how to create a strategy that works best for you.
Platform Navigation: Get hands-on experience with popular trading platforms and tools, including TopTier Trader.
Everything you need to know to become a successful trader, with quality education coming from the top traders out there. Trading Psychology: Tips and tricks to establish a strong mindset for approaching the markets.
Market Analysis: Every facet of analysis, from technical to fundamental, that can be implemented within a trading strategy to make informed decisions.
Trading Strategies: Go over practical examples and exercises to learn how to create a strategy that works best for you.
Platform Navigation: Get hands-on experience with popular trading platforms and tools, including TopTier Trader.
2. Develop Your Trading Skills:
Open a demo account with a trading platform and start practicing. Experiment with different strategies, learn to read charts, and understand technical indicators. Take your time before you start risking real money.
3. Create Your Trading Strategy:
Develop a clear, well-defined trading strategy. This should include your entry and exit points, position sizing, and risk management parameters. Your strategy should be based on thorough market analysis and align with your trading style. Remember, a good strategy is repeatable and can be back-tested on historical data.
4. Master Risk Management:
Understand the importance of risk-to-reward ratios, position sizing, and stop-loss orders. Remember, in prop trading, capital preservation is just as important as making profits.
5. Research Prop Trading Firms:
Look into different proprietary trading firms. Each has its own culture, trading style, and compensation structure, so choosing the right one for you is the key to success in your trading career. Make sure to find one that aligns with your goals and trading style.
6. Get Funded and Start Prop Trading:
Once you’ve chosen the right prop firm for you, it’s time to truly put your skills to the test. Here's what it typically involves:
Pass the Evaluation: Most prop firms require you to pass a trading evaluation or challenge. This usually involves trading a simulated account to prove your skills and discipline. You'll need to meet specific profit targets while adhering to risk management rules.
To provide an example, let’s go over the TopTier Trader’s Challenge:
Phase 1: The Initial Challenge
Duration: 4 trading days
Profit Target: 8% or 10% (depending on the chosen account size)
Focus: Demonstrating trading skills while adhering to strict risk management rules
Phase 2: Consistency and Discipline Profit Target: 8% or 10% (depending on the chosen account size)
Focus: Demonstrating trading skills while adhering to strict risk management rules
Duration: 4 trading days
Profit Target: 5%
Focus: Proving consistent performance and disciplined trading behavior
Understand the Funding Structure: Profit Target: 5%
Focus: Proving consistent performance and disciplined trading behavior
Different firms offer various funding models. Some might start you with a smaller account and increase it as you prove yourself, while others might offer larger accounts right away. It’s important to consider a few key factors:
Profit-split models (e.g., 50/50, 70/30) between different firms
Firms that offer scaling plans to increase your account size over time
Monthly fees or subscriptions some firms charge
Any minimum trading activity requirements
Restrictions on withdrawing profits
Learn the Platform: Firms that offer scaling plans to increase your account size over time
Monthly fees or subscriptions some firms charge
Any minimum trading activity requirements
Restrictions on withdrawing profits
Familiarize yourself with the firm's proprietary trading platform. Each system has its quirks, so take the time to master it before diving into live trading. In TopTier Academy, there is a specific module that includes a walkthrough of the platform to provide you with a detailed overview to make an informed decision.
Follow the Rules:
Adhere strictly to the firm's risk management guidelines. These often include daily loss limits, maximum position sizes, and restrictions on certain trading strategies. Common rules include:
Maximum daily/weekly drawdown limits
Position sizing restrictions (e.g., max 2% of the account per trade)
Restricted trading times (especially around major news events)
Limitations on holding positions overnight or over weekends
Adapt to Live Market Conditions: Position sizing restrictions (e.g., max 2% of the account per trade)
Restricted trading times (especially around major news events)
Limitations on holding positions overnight or over weekends
Remember, live trading can be very different from simulations. Be prepared to adapt your strategies to real-world market conditions. A few tips to keep in mind are:
Monitor your emotional responses to wins and losses
Develop routines for maintaining focus and discipline
Stay informed about economic events that could impact your trading
Regularly review and adjust your strategies based on market performance
Develop routines for maintaining focus and discipline
Stay informed about economic events that could impact your trading
Regularly review and adjust your strategies based on market performance
How Do I Choose the Right Prop Firm?
After everything we’ve gone over, you might be asking yourself this very question. Navigating the world of prop trading firms can be daunting for aspiring traders. These firms offer a unique opportunity to trade with substantial capital without risking your own funds. However, choosing the right one is crucial for your trading journey. Let's explore the key aspects to consider when making this important decision.
Prop firms typically share some common features that you should take a look at before deciding, such as:
1. Evaluation Process: Most use a challenge-based system to assess traders' skills.
2. Funding Options: Account sizes often range from modest $5,000 accounts to impressive $1,000,000+.
3. Profit Sharing: Traders usually keep 70-90% of their profits.
4. Trading Guidelines: Each firm sets its own rules regarding losses, drawdowns, and profit targets.
5. Market Access: While Forex and Futures are standard, some firms offer stocks and crypto trading.
But for the true evaluation process for prop firms, you should consider these crucial elements: 2. Funding Options: Account sizes often range from modest $5,000 accounts to impressive $1,000,000+.
3. Profit Sharing: Traders usually keep 70-90% of their profits.
4. Trading Guidelines: Each firm sets its own rules regarding losses, drawdowns, and profit targets.
5. Market Access: While Forex and Futures are standard, some firms offer stocks and crypto trading.
1. Credibility: Research the firm's reputation within the trading community. Look for reviews on platforms like Trustpilot to gauge other traders' experiences.
2. Clear Communication: Opt for firms that are upfront about their rules, profit splits, and payout procedures. Transparency is key to a smooth trading experience.
3. Platform Quality: A user-friendly, reliable trading platform is essential for executing your strategies effectively.
4. Support System: Responsive and knowledgeable customer service can make a significant difference in your trading journey.
5. Learning Resources: Some firms, like TopTier Trader, offer extensive educational materials. These can be invaluable for honing your skills and understanding the firm's expectations.
6. Profit Withdrawal: Understand the frequency and process of withdrawals. Some firms offer faster processing times, which can be a deciding factor.
7. Trading Rules: Some firms are stricter than others when it comes to the established rules. Make sure you understand the restrictions and whether they align with your trading preferences.
8. Trading Style: The firm should allow you to execute your strategies without an issue, which means you need to take the time to check that they allow your trading style.
Remember, the right prop firm can be a powerful ally in your trading career. It provides not just capital, but also structure and support. By carefully weighing these factors, you'll be well-equipped to choose a firm that aligns with your goals and sets you up for long-term success in the challenging world of trading. 2. Clear Communication: Opt for firms that are upfront about their rules, profit splits, and payout procedures. Transparency is key to a smooth trading experience.
3. Platform Quality: A user-friendly, reliable trading platform is essential for executing your strategies effectively.
4. Support System: Responsive and knowledgeable customer service can make a significant difference in your trading journey.
5. Learning Resources: Some firms, like TopTier Trader, offer extensive educational materials. These can be invaluable for honing your skills and understanding the firm's expectations.
6. Profit Withdrawal: Understand the frequency and process of withdrawals. Some firms offer faster processing times, which can be a deciding factor.
7. Trading Rules: Some firms are stricter than others when it comes to the established rules. Make sure you understand the restrictions and whether they align with your trading preferences.
8. Trading Style: The firm should allow you to execute your strategies without an issue, which means you need to take the time to check that they allow your trading style.
Can Anyone Become a Prop Trader?
Prop trading has always seemed like an exclusive club, but the reality is that it's way more accessible than you might think. While not everyone will crush it, the door's open for anyone willing to give it a shot. Whether you’re fresh out of school, switching careers, or looking for a profitable side hustle, you can potentially become a prop trader.
But we will make one thing clear, prop trading isn't easy. The learning curve is steep, and markets can be brutal. But don't let that scare you off! Many successful traders started from scratch and learned through sheer determination. Challenges include mastering complex financial concepts, creating winning strategies, handling mental pressure, and keeping up with fast-changing markets. Keep a strong mindset, stay determined, and learn from your mistakes; it will eventually shine through in the final results.
If you are determined to invest in this new path in your life, we have a great resource for you. We’ve launched TopTier Academy Plus, a quality education program that gives you direct access to expert traders and mentors through a Discord channel and live classes every week. Sign up now to dive deeper into the prop trading industry!
Ready To Get Started?
So, there you have it! Prop trading might seem intimidating, but with the right effort, it’s a great path to success. It's a field open to anyone with the right mindset, willingness to learn, and determination to push through tough times. Remember, every trading expert started as a rookie. Why not take the plunge? You might just be the next prop trading success story.
