Proprietary trading companies: how to get a trading account without investment?
Everyone knows that trading may be quite interesting and profitable occupation. However, there are not so many traders who are really good at it. To become successful in trading, you need to develop and master your trading strategy, work with your mindset, allocate time for trading and market analysis, but the most important – have funds. Talking about strategy, mindset and time – it's something you have to provide yourself, but is it possible to get enough funds to trade in case you don't have them? The answer is ‘yes’ – by joining a proprietary trading firm.
Proprietary trading firm – type of business where company provides individual traders with funded account for trading and takes fees from their profit.
Nowadays, these win-win companies are getting more and more popular, uniting traders in close communities and advancing their capabilities to a qualitatively new level. In this article we will find out more about prop trading firms and look at the ways to choose a good one for yourself to get into this business.
How to choose a proprietary trading company?
First of all, you should be ready to start your career in trading. This shouldn’t be your side job – this will be the main occupation in case you want to succeed. You ought to prepare yourself – have a fundamental knowledge in economics and finances as well as a working trading strategy that can generate profit from a distance. Also you need to have a ‘financial cushion’ – a reserve of money that will be able to use in case things don't go your way. Usually, the financial cushion should be in the amount of your three monthly average living expenses.
There are props in any kind of market: stocks, forex, futures, and even start-ups that emerging in cryptomarket. Therefore, you do not need to adapt to an unfamiliar market – you can work with the assets that are comfortable to you and are applicable to your strategy. Let's take a look at the most popular prop trading companies currently on the market.
Topstep – prop trading for futures traders
Topstep is a popular prop trading company that provides traders with an account to trade futures contracts on CME. Company was founded by Michael Patak in 2012, and for today according to INC.5000, TopstepTrader belongs to America’s 5,000 fastest growing companies. There’re more than 8,000 funded accounts registered from 143 countries around the world. In 2021 funded trader payouts processed is $3,324,114.
Earn2Trade – educational futures / forex trading company
Earn2Trade is a trading education company that helps traders learn to trade. Earn2Trade was originally founded by two registered Commodity Trading Advisors and a former university professor. Over time the original founders sold their shares in the company, and now it is run by a team of traders and educators. They also act as a recruitment company for proprietary trading firms and identify the best traders and let them trade funded accounts worth up to $200,000.
FTMO – prop trading for forex traders
FTMO is an award-winning prop trading firm specialized in forex trading. You can trade 44 currency pairs and 10 of the most popular cryptocurrencies. In addition, some cash indices, commodities and stock CFDs are also available for trading. FTMO started its business operations in 2020 and has seen immense growth since its inception: today, FTMO has registered traders in 180+ countries with over 6 million trades opened every month, and $23 million have been paid out so far in 2021.
Fondexx – prop trading company for stock traders
Fondexx is a proprietary trading company specializing in trading on the US stock market. Founded in 2016 in Kyiv, Ukraine by two traders Hlib Kozak and Dmitry Bakhtin, the company provides traders around the world with trading accounts for stock trading on the NYSE, NASDAQ and AMEX. Fondexx is the biggest prop trading company in Eastern Europe and it also provides services as a sub-brokerage company, a trading school and an investment fund.
Today we’ll focus on futures and stocks and compare two companies which offer funded accounts on these market types - Topstep and Fondexx - in a couple of major parameters.
What factors should you consider when choosing a prop?
There are several factors you should consider before starting a cooperation with a prop company, which vary from company to company. Here we tried to describe the most important of them.
Markets the company operates in
As was said earlier, Topstep specializes in trading on CME, therefore traders get an opportunity to operate with different types of futures: equity, forex and commodity futures. But don't get fooled by this - there are only a few dozen kinds of futures with some variations. It deprives traders of a large selection of instruments for trading, leaving only a few of the most popular options. Moreover, futures trading doesn't require you to have the assets you want to trade - you only have to pay margin. This makes futures liquidity excessively high and requires much larger deposits and skills from traders.
Varieties of Topstep trading products. Source: www.topstep.com.
Fondexx provides access to the stock market, allowing traders to trade stocks on NYSE, NASDAQ and AMEX exchanges. In total, you will get the opportunity to buy and sell more than 12,000 types of stocks that significantly expand your capabilities. Moreover, new companies are constantly entering this market and expanding opportunities even more. Equally important is that you are trading in the spot market - each share is a real asset and it is impossible to buy more of them than actually exist. This makes the stock market easier and more understandable for all kinds of traders, saving them from oddities and issues arising from the peculiarities of the derivatives market.
Negative crude oil futures price in April 2020. Source: CME Group charts.
Selection process
Both prop trading companies are open for hiring new traders who can prove their ability to generate profit. The processes of getting a place in the prop company are very similar and look like this:
- You leave a request to consider you as a prop trader;
- You prove your trading skills by passing a special type of exam – combine;
- In case you pass it, company may instantly invite you on prop team interview or advance to the next level of assessment;
- After clearing all assessment levels, the company offers you to join their prop trading team.
Combine – a paid test that everyone who wants to become a prop trader must pass. Applicant gets a demo account with a certain deposit and goal is to generate a target profit amount without violating prescribed risk-management rules.
This example is the most common way to obtain a funded account from a prop trading company. Some of them may offer more ways for traders to get into. For example, Fondexx may ask you to show your trading statement instead, provided that you already have sufficient experience in trading. Also, there is a special contest – Fondexx Prop Contest, which is held once a year in February. Whereas there is only one way to join Topstep’ prop team.
Combine conditions
Conditions generally refer to the size of the funded account you would get, loss limits, maximum position size and other important parameters. Both companies offer various types of accounts to match needs each single trader has due to their different trading strategies and risk/money management. We featured some of them in table below:
As you can see, each company has both pros and cons. Nevertheless some of them are much more important than others. Fondexx’s accounts are more flexible:
- Only 1 step combine – you shouldn’t waste a lot of time proving your skills;
- More ways to get into – Combine, Prop Contest, submitting your trading statement;
- Participation fee is lower and can be made free of charge;
- Bigger account sizes allow you to make more trades with more expensive assets;
- Lower target profit makes chances to get into the prop team higher.
Of course Topstep has its benefits too: you can participate in combine as long as you want, there are higher loss limits. But looking at the conditions overall, as well as the markets in which the companies operate, Fondexx is much more attractive in terms of conditions on the Combine for both beginners and professionals.
Funded account conditions
Once you have passed all steps of assessment, you are provided with a funded account of the same size as your account during the combine. In this step you ought to take a look at factors that affect your comfort and profitability: profit payout, fees, risks, additional features the company provides. Let’s compare some of them in another table:
As we can see conditions on funded accounts are quite different between these companies. Core Topstep pros – stable 90% payout, large choice of platforms and free access to some of them. But there is one giant problem – fees. Topstep has a very complicated fees system as well as these fees are pretty high. You can’t calculate all your expenses as easily as in Fondexx.
At the same time Fondexx provides cheap and easy-to-understand software, a clear fees system and a lot of additional features such as materials for studying and developing new trading strategies , coaching and mentorship plans, free trading signals, wide traders community and growth system, with an opportunity to increase your payout up to 90%.
Important little things
It's obvious that stages of getting into the prop and the working conditions on the prop account are the main aspects that you need to pay attention to and devote maximum time to their evaluation and analysis. But other less obvious factors are equally important. Now we are talking about organizational and technical issues that may escape attention during the initial assessment of the company, but result in significant inconvenience already in the course of cooperation. Therefore, we also recommend that you pay attention to such trifles as:
legal aspects – how the company regulates relations and obligations with the trader;
infrastructure – which ways the company provides access to the market, is it direct access and so on;
software – how high quality the software is, its stability, functionality, etc.,
ways of profit withdrawal – how fast and cheap can you get your profit;
tech support quality – how quickly company helps in uncertain situations, and how high quality of support will be.
Conclusion
There were most important things you should consider. Of course there may be a lot of nuances but the factors above are the most basic ones that you should definitely pay attention to when evaluating a prop company.
The final answer to the question "Which prop trading company to choose?" must be given to traders by themselves after a thorough analysis of the entire range of advantages and disadvantages of each of them. Traders must be sure that prop’ conditions fit all of their demands and provide access to markets which trader specializes in.
Our mission is to help you make the right choice, and if your choice falls on Fondexx – to help you start your own trading journey as comfortably as possible. Let's start together after quick registration by the link below!