Trading is simple. It is not complicated, yet most traders are struggling to even breakeven, let alone win. The market gives out millions of profit opportunities to participants, capitalized by those who come in with a proper game plan. Given that the industry is booming, despite the COVID-19, new horizons are open round the corner.
But we don’t have to wait for them after all as we got an exciting opportunity for retail investors to make as low as $100,000 up to a million each month without having to invest a single penny.
It may seem like a joke at first, but you’ll be rushing in for your pockets after you are done reading the article. You must follow some rules; however, we will be discussing how to overcome any potential hurdle across our way.
What are proprietary companies?
Prop firms hunt out for profitable or beginner traders and provide them with substantial funding for trading stocks, forex, futures, etc. Previously you could find them operating on Wall Street, hedge funds, and floors of big banks where a group of several traders was busy scanning the market for setups. To make way inside one of them would be a remarkable feat as the proprietary companies only selected investors with sufficient trading knowledge.
Nowadays, it is possible to trade with prop firms from the comfort of your home. Various private companies offer trading capital starting from $1,000 to $1,000,000.
Terms and conditions of prop firms
To get funded, you have to purchase one of their challenges in most cases. After the challenge, there is usually a verification stage where the company representatives will contact you and question you about your trades. For protecting its capital, a proprietary firm will impose certain conditions that you must adhere to at all costs. Failure to implement them may cause them to expel you from their program.
The following terms and conditions are most important:
- Risk. The first and foremost important factor in managing risk. Most companies offer a 10% threshold for their traders. Your account must not hit below 10% of its initial value. There are also daily loss limits of 5%.
- Profit. There are no requirements for achieving a profit target once you become a fully funded trader. However, in the challenge and verification stages, you may have to reach a certain point to show that you are profitable.
- Participation. Senior companies want their traders to show up on the trading floor at least an hour before the market opens and discuss the potential setups. Similarly, after the close, traders are required to journal their trades. Discussion with other top traders is highly appreciated.
- Prohibited conditions. Some market conditions, such as news trading, specific sessions, etc., may be banned. The reason is the high amount of slippage and uncertainty. Depending on the firm, overnight or weekend positions may not be allowed.
Benefits of prop firms
The benefits of prop firms amuse many traders as they understand the return on investment.
Traders who do not have sufficient trading capital at their disposal can look to prop firms for getting funded. As mentioned before, you can have $10,000 to a million dollars in funds to trade, and this is just the beginning.
As the prop firms impose strict conditions for all of their traders to follow, it is possible to induce a good amount of discipline in your trading. Having a proper set of rules is beneficial for investing in markets.
The major catch is the number of potential earnings at one’s disposal. Proprietary companies have limitless capital for those who show a good amount of profitability. As you get more money to manage, there are increments in the lot sizes and the drawdown value. Risk is proportional to reward, and you have your answer there.
Institutional grade spreads and speed
You have access to the best possible spreads and latency in the industry. Trading costs may not seem like a huge burden, but if you analyze your statistics in a performance chart, you will see the benefits of not having them.
All the proprietary companies have the best mentors and gurus to help beginners and amateurs. Having a great coach at your side can help speed up your learning curve by providing valuable insights. There are regular sessions before and after each market session where top traders share their trades and look over others proficiently. Other traders sitting next to you on the floor are also available for face-to-face conversation.
End of the line
Proprietary companies put serious attention on profitability and risk analysis. For making 100 grand a month, take individual challenges from top online prop firms. They will be enough to give you a total amount of trading capital above $2 million.
If you make a puny 5% on even all the accounts, you have successfully created $100,000 a month. As your trading becomes even better, you can earn 10% or 15%, which increases earnings to $200,000 or $300,000. With scaling plans, it is also possible to go even further. Make sure to follow all the restrictions not to end up losing the trading capital.