Our prop firm blueprint clearly illustrates the decision tree process from the idea of joining a prop firm to finally getting funded by a prop firm with a funded account.
Know The Benefits
The most significant benefit of joining a prop firm is that you don’t need to open a brokerage account with your own funds, which means that your private capital is never at risk.
Also, the participation fees for a prop firm challenge are low and available for under $100 per month.
The payouts based on the profit split go as high as 100% of the profits made in a funded account.
Prop Firm Vs. Brokerage Account
The entry barrier for futures trading is relatively low, and futures trading accounts can be opened for $500. Still, if you open an account with $500 and your first trade in a real account goes against you, you can’t trade anymore because you don’t meet the initial margin requirements anymore if you want to trade an E-Mini contract.
If you trade for a prop firm, you typically handle an account with a buying power of $25,000 or more, and you can trade multiple futures contracts.
Be Aware of The Risks
Before you make any money that you can withdraw, you have to reach the funded account. To reach the funded account, you have to pass the prop firm challenge. If you fail the prop firm challenge, you don’t get funded, and you can’t withdraw profits.
That means that while you can make money trading futures contracts from day one by using a regular futures broker, you have to reach the funded trader status before making money with a prop firm.
Also, be aware that different prop firms have different rules about how and what you can trade during a prop firm challenge or within the funded account.
There are also fees you have to consider. While during the challenge status, everything is typically included in the participation fee, things change once you become a funded trader.
For example, if you trade as a funded trader, then you are classified as a professional trader. As a professional trader, you have to pay higher futures exchange fees for the futures exchanges you trade on. Many oversee this, but that’s the reality. Fees on the CME depend on what assets you trade, so you can come away with about $80 in monthly exchange fees. However, if you trade across multiple future assets, you might get billed $200 and above. This by itself is not a problem, as long you do your research first and then act based on a specific trading plan.
Choose The Tradeable Asset
Think about the assets you want to trade before you start. Most traders trade equity futures like the E-Mini S&P 500. But if you want to trade crude oil or corn, that’s okay, too. You just have to know what you want.
Once you decide what you want to trade, check if your favorite prop firm lets you trade these contracts during evaluation and in live funded accounts.
If you are not sure what to trade, consider the liquidity of the available markets, bid-ask spreads, the fees per half turn and round trip, and the availability among the asset list of your broker.
Choose The Best Prop Firm
Once you are aware of the benefits and risks and decide what to trade, it’s time to choose the right prop firm that is the best fit for reaching your goals efficiently.
We help you compare the prop firms based on multiple parameters like account sizes, costs, tradeable assets, and more.
Trade By The Rules
Trading by the rules sounds so simple, but it’s not. Instead, it is likely the most difficult part – in regular trading using a brokerage account, but also when joining a prop firm.
In the first step, make sure you know the rules of your prop firm challenge. This is essential because only those who know the rules can trade by the rules.
While with your own account, you might make one or the other mistake and still continue trading with a prop firm, it’s different. If you trade against the prop firm rules, your challenge ends, and you have to start over again.
Get Funded
If you trade by the rules and reach the defined profit target, you get access to your funded account. Once you are funded, things are even harder because now you are under pressure to be successful, to make profits, and to withdraw the money you make in the funded account.
Before you begin trading the funded account, make sure to understand the difference regarding the trading rules and fees of your funded account in comparison to your prop trading challenge.
This is important because many prop firms have different rules during evaluation and funding accounts. Often, the rules ease with the funding, but sometimes, there are specific things that are more restricted.
For example, sometimes you have to follow a scaling plan in a funded account, while during the challenge, there was no scaling plan to consider.
If you are not sure, ask the support team of the prop firm you trade with.
Trade By The Rules
So, here we are again. Trading by the rules as a funded trader is even more important. That’s because you can now withdraw part of the profits you make in the funded account, and if you trade against the rules, you start from zero with a challenge.
Learn and Adapt
Congratulations! You learned all about proprietary trading, became a funded trader, made money trading the funded accounts, and withdrew your first profits from your bank account. This is a good feeling.
All trading is a learning process, and you’ll learn something new every trading day.
Changing a system that works is typically not a good idea. On the other hand, if there is something you can improve to become even more profitable, it still can be a good idea. Carefully transitioning from one strategy to the other is a good idea. Take your time. Test strategies in a paper account, if possible, without risking your live-funded account.
Only implement changes that are proven to increase your profitability in the long term.