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Home | CTI Blog | Prop School | How to Become a Prop Trader | #1 Ultimate Guide for Beginners

How to Become a Prop Trader | #1 Ultimate Guide for Beginners

By Scott Geekie
July 30, 2024
6:45 pm
Prop School

Prop trading, short for proprietary trading, has become an increasingly popular way for retail traders to access larger capital and potentially speed up their trading profits.

In this ultimate guide, we’ll cover everything you need to know about becoming a proprietary trader, including:

who a prop trader is and how prop trading works;
the different types of prop trading fee structures;
how much prop traders can make and how they get paid;
the advantages (and potential pitfalls) of becoming a prop trader;
and key steps to take to become a prop trader.

We’ll also discuss the essential trading skills required to succeed in this field and how experienced traders can apply their trading expertise to maximize profits. Whether you’re a novice or an experienced trader, this guide will equip you with the knowledge you need to get started and thrive in prop trading.

What Is a Prop Trader?

A prop trader is someone who trades financial markets with other people’s money. The capital is usually provided by a prop firm or an online broker in exchange for a profit share.

This makes trading much more accessible to retail traders like you, me, and Joe at the pub.

Indeed, in recent years, we’ve seen a massive increase in traders applying to join our prop trading program at City Traders Imperium – and for good reason.

Prop trading can be incredibly lucrative. By leveraging their skill and having access to more capital, prop traders can make extensive profits. Some have even become full-time forex prop traders when demonstrating consistency and profitability to their prop trading firm.

So yes, becoming a prop trader can be a great career opportunity. And that brings us to the next question.

Do I Need Any Qualifications to Become a Prop Trader?

The good news is you do not need any special qualifications to succeed as a prop trader. Does it mean it’s easy? Not at all.

Prop trading isn’t for everyone. There are several key traits you’ll need to work on if you want to become a successful prop trader:

A winning strategy. Although you don’t need to reinvent the wheel, developing a consistent, profitable strategy is your ticket to success.
Unshakeable focus. Stay cool under pressure, manage emotions like a pro, and stick to your plan – even when things get intense.
Smart risk-taking. Protect your capital with clever risk management. Control losses, size your trades wisely, and keep your profits growing.

Additionally, each prop firm would have a different program with different rules that the prop trader must follow to meet specific requirements and qualify to access the company’s capital. Some firms make these rules more complex, while others make them easier.

Still, each prop firm’s main objective is to ensure that the prop trader who gets funded is skilled enough to obtain funding and trade with a larger amount of capital, giving the firm an edge over retail traders.

How Can You Become a Prop Trader?

A few years back, aspiring prop traders would have to locate a prop trading firm physically and pay a desk fee.

However, the way prop trading works has completely changed these days.

You don’t need to be lucky enough to live close to a prop trading firm in a big city.

All you need is a solid computer, a comfortable desk, and reliable internet. Well, some trading knowledge would also be a good thing to have.

Here’s a quick step-by-step guide on how to become a successful prop trader:

1. Educate Yourself and Research Prop Firms

Success as a prop trader starts with knowledge. Take time to learn and understand the financial markets and trading strategies that align with your interests, whether it’s forex, stocks, or commodities.

Our Academy is a good place to start.

Once you have a solid foundation, research the prop firms that fit your goals.

Each firm operates differently – some focus on forex, while others specialize in stocks or futures.

Look for details like their funding programs, profit splits, evaluation process, and trading rules to ensure they match your trading style and objectives.

2. Develop a Rule-Compliant Trading Plan

A solid trading plan is your roadmap to success. Start by creating a strategy that aligns with the rules of the prop firm you want to join.

This includes adhering to maximum drawdown limits, risk-per-trade guidelines, and trading styles they allow. Your plan should outline your preferred markets, entry and exit points, position sizing, and risk management strategies.

A well-structured plan not only ensures compliance but also boosts your confidence and consistency in meeting the firm’s expectations.

3. Select and Join a Funding Program

Once you’re prepared, it’s time to choose a funding program that suits your needs. Most prop firms offer evaluation processes to test your trading skills before providing access to capital.

These programs often include a demo phase where you trade virtual funds while meeting profit and risk targets.

Compare options carefully – consider factors like entry fees, evaluation timelines, and potential payouts. Once you pass, you’ll gain access to live capital and the opportunity to trade for a share of the profits.

You can see how our prop trading challenge works here.

What Are the Fees a Prop Trader Would Need to Pay?

With today’s proprietary trading firms, the fees are considerably cheaper than they used to be. That’s mostly because you no longer have to travel to a prop trading firm or have to pay monthly fees for a desk.

In today’s digital prop trading environment, these types of fees have become redundant. Still, you can expect to pay a fee (or fees) to access the prop trading platform. Here’s a quick look at two primary types of fees prop firms charge:

One-Time Fee

In this case, the Prop Trader would pay an initial fee upon sign-up.

Then, the prop trader would undergo an evaluation (1-Step), Challenge (2-Step), or Direct Funding (No Evaluation) and hit the profit target to qualify and become a funded prop trader.

Usually, the more difficult the rules are, the cheaper the one-time fee is.

For example, programs that have trailing drawdowns (drawdowns measured from the high water mark) are much more difficult to pass, and the pass rate is less than 1%. For this reason, many firms offer those at a lower price.

Therefore, you should always seek companies that offer absolute drawdowns, which are drawdowns calculated as a fixed value from the initial balance rather than from a high watermark.

Monthly Fee

This is the 100% No-Go to Funding option because you would be charged a monthly fee to access the account.

So technically, you need to pay the prop firm to trade.

But what happens when you want to take a break? Or when you don’t have a profitable month?

The fees will vary depending on the funded account size. The bigger the account size, the higher the fee. This model is usually more common with futures prop firms.

One piece of advice is to stay away from prop firms that offer this option because paying a high monthly expense just to get access to a funded account will only harm your trading psychology and hinder your performance.

How Much Prop Traders Make? How Do Prop Traders Get Paid?

Prop traders get paid by profit share between the prop firm and the prop trader.

The profit share given to the profit trader could be 50% up to 100%, depending on the chosen prop firm.

For example, at CTI, our starting offer is 70% profit share and it goes up to 100%.

Overall, the average salary of a prop trader in the US can vary from $100k to $500k. It all depends on how successful your trades are.

Prop Firm Funded Account vs. Personal Account

Personal Account Trading

Access to Capital: $10,000 Personal Capital.

Risk: To start making a decent profit, the trader would have to deposit at least $50,000 of their hard-earned money.

There’s no rocket science involved here. If you lose 10%, you risk losing all $5,000, with the potential to risk and lose the full $50K.

Prop Firm Funded Account

Access to Capital: $50,000 Prop firm’s Capital.

Risk: The fee the prop trader will pay, around $200 to $500, to get a $50K account, depending on the program chosen. That’s the only real risk you’d be taking.

Since you won’t be risking your own capital, you have the same opportunity as a retail trader with $50k without jeopardizing your personal funds. All you can lose is your signup fee.

The Potential

To put things into perspective, the risk-to-reward ratio is 1:1 because you need $50K of personal funds to fund a personal account with a broker.

Meanwhile, as a prop trader, the risk-to-reward ratio is 10 to 1 because you only need to pay a $200 to $500 sign-up fee to get access to the same $50K funds to trade.

Should You Become a Prop Trader? Weighing the Pros and Cons of Prop Trading

So yes, becoming a prop trader can be a great opportunity to make the most out of your trading experience without risking your own capital. But is it the right option for you? To answer that, let’s weigh the key advantages and potential downsides of prop trading.

Advantages of Becoming a Prop Trader

Access to Larger Capital with No Track Record

Traditional prop firms would not consider funding you until you can prove you have excellent math computer programming skills and at least 1-year of consistently profitable track record with your own capital.

This can take you years before you can get funded with large capital.

But the new online prop firms are different and only require you to pass a test to prove your skills to get access to large capital.

Accelerated Profit Potential

If you want to become a full-time trader but your personal trading account is likely too small to generate any significant profit. To maximize your profit, prop trading is the way to go.

Trading with a prop firm can unlock your potential to generate high profits while you risk little to nothing of your hard-earned money.

Little Risk, High Reward

After paying the initial access fee, you will not be liable for any losses because the firm will take the risk and manage it for you.

This gives you the mental peace you need to perform better without fear of losing large sums of your capital.

Building a Professional Track Record

Once you have a significant amount of capital under management, you can show external investors your track record to prove that you have professionally managed large capital.

Withdraw While Growing Your Account

When trading your personal account, any withdrawals you make will reduce your account size and limit its growth over time.

On the other hand, while trading for prop trading, your account size will not be affected if you wish to withdraw, so you can keep growing your account exponentially.

Becoming a Better Trader

This is not to say that all prop trading firms’ rules are good. Many of them have unrealistic rules that will only push you to overtrade and gamble.

The rules must be simple and straightforward. They must help the prop trader adhere to certain risk management rules so that they become more consistent with their trading and profitable in the long term rather than looking for a quick buck and losing their funded account the next month.

This is exactly what we have been preaching at City Traders Imperium (CTI). Our rules are realistic and very achievable, given that the prop trader has the right trade plan.

Potential Pitfalls of Prop Trading

Steep Learning Curve

Becoming a successful prop trader isn’t an overnight achievement. The steep learning curve demands time, patience, and consistent effort.

You’ll need to master trading strategies, develop emotional resilience, and hone your risk management skills to succeed in a highly competitive environment.

Expect setbacks along the way, but view them as opportunities to refine your skills and grow as a trader.

Tough Competition

As a beginner, you’ll face fierce competition from experienced traders who have already established themselves in the field.

This can feel intimidating, but it’s also a chance to learn by observing how seasoned professionals operate.

Be prepared to stay disciplined, stick to your trading plan, and remain focused despite the challenges of competing in a fast-paced market.

Navigating the Digital Shift

While the digital shift to online prop trading platforms has more pros than cons, one significant thing to consider is the lack lf immediate camaraderie and mentorship of being surrounded by professional traders.

Online communities and communication tools provide some support, but they often fall short of replicating the dynamic environment of a physical trading floor.

Become a Prop Trader Today

So, you’ve learned about prop trading and its many advantages. The question now is, are you ready to get started?

Becoming a prop trader comes with fantastic perks like access to more capital, lower risk, and the potential for higher profits.

But it’s not all sunshine and rainbows – you’ll need dedication, discipline, and a commitment to continuous learning.

If you’re prepared to put in the effort, stick to a well-defined trading plan, and keep learning, prop trading could be a game-changer for you, and there’s no better place to start than City Traders Imperium.

GET FUNDED TODAY

Get Funded Today

Scott is the CMO at CTI and a trader since 2018. He leads CTI’s marketing with a straightforward, no-nonsense approach, cutting through the hype that surrounds the trading industry. He believes that any trader can achieve success with the right mindset and psychology, rather than constantly chasing the next big strategy. Through his work, he helps traders see past the noise and focus on what actually leads to long-term success.

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How to Become a Prop Trader | #1 Ultimate Guide for Beginners

What Is a Prop Trader?

Do I Need Any Qualifications to Become a Prop Trader?

How Can You Become a Prop Trader?

1. Educate Yourself and Research Prop Firms

2. Develop a Rule-Compliant Trading Plan

3. Select and Join a Funding Program

What Are the Fees a Prop Trader Would Need to Pay?

How Much Prop Traders Make? How Do Prop Traders Get Paid?

Prop Firm Funded Account vs. Personal Account

Should You Become a Prop Trader? Weighing the Pros and Cons of Prop Trading

Advantages of Becoming a Prop Trader

Access to Larger Capital with No Track Record

Accelerated Profit Potential

Little Risk, High Reward

Building a Professional Track Record

Withdraw While Growing Your Account

Becoming a Better Trader

Potential Pitfalls of Prop Trading

Steep Learning Curve

Tough Competition

Navigating the Digital Shift

Become a Prop Trader Today

Related Articles:

Scott Geekie

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Weekly Market Sentiment – 27 April 2025

The Dopamine Problem: Are You Trading for the Right Reasons?

Weekly Market Sentiment – 20 April 2025

Weekly Market Sentiment – 13 April 2025

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