New to prop firms? Here’s how they work — then, make up your own mind about them.

No matter which path you take in trading (personal account or prop firms), don’t use real money until you’re ready. There’s money to be made, but only if you’re serious. The prop firm route is valid and the personal live account route is valid. The common denominator is that both are extremely difficult. There is nothing more I can do than make that clear. The rest is up to you.

If you pass the evaluation/test at a prop firm, then you become a funded trader and are given a trading account that is illegible for payouts. If you fail this funded account by hitting the maximum loss limit, you owe the firm nothing — they take that “loss,” and you lose the account. In order to become funded again, you just have to pass another evaluation. If you earn money on a funded account, then you get to keep 80%-90% of the profit. It’s an incredible opportunity once you’re ready, but it’s a money pit if you start before you’re ready (just like with ALL trading). There’s a free and full prop firm trading guide here. I only work with and trade through the best firms in the industry.

Why do I personally trade through prop firms?

Easy answer. I paid $77 for a 50k account evaluation, passed it, made $5,000 on that account, and now that’s in my bank account. Instead of dealing with the pressure of trading a personal brokerage account and watching a position move up and down $100 every 5 seconds, I can trade risk-free knowing that it’s on the firm if I lose. The reduction of that stress allows me to execute my system without as much hesitation. If I make money, then I get to keep 90% of it. Do I pass every evaluation? Of course not. Do I get payouts on every funded account? Of course not. However….

I would have to fail a prop firm account TWENTY SIX times with 0 payouts to spend the equivalent of losing just 1 $2,000 deposit into a personal brokerage account. That is the true “leverage” and appeal of a prop firm. That is why they are an incredible opportunity (ONLY once you’re ready). But what about all the rules that make it hard to get your payouts? The ones I use don’t have difficult rules. For me, prop firms remove a significant amount of pressure and allow me to trade position sizes that create meaningful returns (rather than being limited to 1 micro contract on a personal account). It’s an easy choice for me, but decide for yourself. Sim trade on NinjaTrader.

Remember…

It doesn’t have to be one or the other. If you don’t like prop firms and would rather have the full freedom of a personal account, then go for it. Many people I know have a personal brokerage account AND prop-firm funded accounts. Just like trading with real money before you’re ready, starting with prop firms too early is practically a guaranteed way to lose money. Start with the guide, and never risk what you can’t afford to lose. Think for yourself and make up your own mind.