A Guide To Forex Prop Firms

Forex proprietary firms, commonly referred to as ‘Forex prop firms’ provide the opportunity to fund traders with significant amounts of capital should the trader be successful in meeting specific targets that are laid out by the Prop Firm. The maximum capital allocation by each firm tends to vary but a maximum capital allocation of up to $1,000,000 can be common with some prop firms offering as high as $3,000,000 to their successful traders. In this article, we will discuss what exactly are prop firms, the pros, and cons of them and more.

Generally speaking, forex prop firms are there to provide various levels of funding for traders who can meet the targets of the prop firm. The programs are aimed at traders who don’t have large amounts of capital to trade with and as the majority of new traders don’t have significant amounts of capital to trade with, the demand for these programs is high. The most common forex prop firm model is the challenge-based model. The challenge models are typically based on a two-stage evaluation phase. During each phase traders will normally have various targets to follow with the main targets including drawdown limits, profit targets and a minimum number of days to be traded.

Once the challenge/evaluation stages are passed most prop firms tend to offer a base funding amount of anywhere between $5,000 – $200,000 depending on the plan that was selected by the trader. How traders actually make money is from the profit split that these firms provide. The majority of prop firms provide a profit split of 70-90% paid to the trader once they are funded, meaning that the prop firm itself only receives a share on average of 10-30% of the profits made. With good performance, while adhering to the rules provided by the prop firms, traders can scale their accounts to be offered larger capital allocations.

Although fewer, there are instant funding forex prop firms also available. The primary difference being that the instant funding models provide funding without the need for challenges or evaluations. With that being said, as these firms are providing significant amounts of capital to traders without completing any challenges for them to view one’s trading performance the leverage and drawdowns offered by the instant funding prop firms tend to be lower than the challenge models to compensate for this.

Nowadays, there are many forex prop firms to choose from however what prop firm a trader selects will depend on your trading style and personal requirements. With the large amount of prop firms to choose from and the options available the search for a firm can be overwhelming. We are continually monitoring and reviewing prop firms so that you can make an informed decision.

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