In the wake of the COVID-19 pandemic, a new wave of opportunity has swept through the financial world, igniting an explosive surge in the popularity of retail prop firms. This trend has reshaped the landscape of retail trading. Plus, it has introduced dynamic shifts and innovative changes throughout the industry.
So what exactly is retail prop trading?
A retail prop trading firm, or “retail proprietary trading firm”, is a financial company that provides trading capital and resources to individual traders, also known as retail traders.
In exchange for using the firm’s capital, traders typically share a percentage of their profits with the prop firm.
If you’re considering a prop trading career, read on — because you’ll soon be facing a major decision. Your choice of a prop firm can shape your entire career.
So, how do you decide what firm to choose?
Aspiring prop traders often find themselves at a crossroads when choosing a firm. Each retail prop firm offers unique advantages and challenges. This decision goes beyond finding a job — it’s about selecting the right firm for your development as a trader. Many traders feel overwhelmed by the number of options and the critical factors to consider in this process.
We’ve broken this all down for you in simple steps.
Factors to Consider When Choosing a Retail Prop Trading Firm
Retail prop trading firms, especially those that operate remotely, offer flexibility and independence. However, each option has its pros and cons, making it critical to evaluate what aligns best with your career goals and personal preferences.
The sheer amount of information can be overwhelming. You could spend countless hours researching firms, only to feel more confused and uncertain.
Strategic Considerations for Choosing a Retail Prop Trading Firm
To make a strategic decision, you need to evaluate several factors. It’s helpful that you consider the following:
- The resources available at each firm
- The quality of the firm’s training programs
- The firm’s financial stability
- The firm’s reviews
- The fees you must pay
- How the firm pays out your profits
Let’s take a look at each of these.
The Resources Available at Each Firm
You should evaluate the trading platforms, real-time data feeds, and analytical tools that the firm provides. High-quality resources can enhance your trading efficiency and decision-making processes, giving you a competitive edge in the market.
The Quality of the Firm’s Training Programs
Look for firms that offer comprehensive and ongoing training programs. These should cover a wide range of trading strategies, risk management techniques, and provide continuous learning opportunities to keep your skills sharp and up-to-date.
The Firm’s Financial Stability
It’s important to assess the firm’s financial health to confirm its stability and longevity. A firm with strong financial backing is more likely to weather economic downturns and provide consistent support to its traders.
The Firm’s Reviews
Read reviews, ratings, and testimonials from current and former traders. This information can give you valuable insights into the firm’s operations, support systems, and overall trader satisfaction. Pay attention to common themes or recurring issues that might affect your decision. Ideally, if you can speak to a few traders from the firm you’re considering, this could be worth its weight in gold!
The Fees You Must Pay
Unlike traditional trading, where you deposit your own money into a trading account, retail prop trading firms provide the trading capital once you pass your evaluation. Therefore, your primary financial commitment is the evaluation and subscription fees and not a capital deposit.
It’s critical to investigate any fees associated with joining and trading with the firm, such as platform fees, data feed charges, initial evaluation fees, monthly user subscription fees, and profit-sharing percentages. Understanding these costs upfront will help you calculate your potential net earnings and determine if the firm is financially viable for you.
Here’s more info on the common retail prop trading fees:
Evaluation Fees: Most retail prop trading firms, like Apex and Topstep, require you to pay an evaluation fee. This fee covers the cost of assessing your trading skills and makes sure you can trade profitably and within risk parameters. The evaluation process involves trading in a simulated environment where your performance is monitored.
Monthly Subscription Fees: During the evaluation phase, some firms charge a monthly subscription fee. This fee grants you access to their trading platforms, data feeds, and other necessary resources.
Apex Trading
Evaluation Fee: $150 to $400, depending on the program and account size.
Monthly Subscription: $100 to $200 during the evaluation phase.
Topstep
Evaluation Fee: $165 to $375, depending on the program and account size.
Monthly Subscription: $125 to $275 during the evaluation phase.
How the Firm Pays Out Your Profits
You should also understand exactly how the firm you’re considering will pay out your profits. Take a close look at the firm’s payout structure, including profit splits, payout frequency, and any conditions attached to withdrawals. A clear and favorable payout policy ensures you can reliably access your earnings and reinvest in your trading activities whenever you need to.
For example, retail prop trading firms like Apex and Topstep have their unique compensation methods, which are designed to reward your performance and monitor fair profit sharing.
Apex Trading
Profit Splits: Apex Trading typically offers competitive profit splits, often allowing you to keep a significant portion of their profits. This can range from 70% to 90%, depending on your performance and the specifics of the agreement
Payout Frequency: You can usually request payouts every month.
Scaling Plans: As you demonstrate consistent profitability, Apex may increase your capital allocation, allowing you to trade larger positions and potentially earn more.
Topstep
Profit Splits: Topstep offers a similar profit-sharing model, where you can keep up to 80% or more of your trading profits. This is an incentive for you to perform well while sharing the risk with the firm.
Evaluation Phase: Before accessing funded accounts, you must pass an evaluation phase that tests your trading skills and risk management. If you’re successful at trading, you’ll then receive a funded account and start earning payouts based on your performance.
Payout Process: Topstep allows you to request payouts once you have accumulated a minimum profit threshold. Payouts are usually processed monthly, but in some cases, you may qualify for more frequent payouts based on your performance.
Each of these elements plays a vital role in your overall satisfaction and success. Keep in mind how these factors align with your personal values and career goals. By thoroughly evaluating these aspects, you can make an informed decision that sets the foundation for a successful trading career.
The Vetting Process
Finally, to make things easier, you may want to develop an analytical framework for evaluating prop trading firms. Start with thorough research—look at performance history, speak with current and former employees, and understand the firm’s compensation model. Consider how each firm’s culture fits with your personality and work style. This methodical approach will help you make an informed decision that supports your long-term success.
You may also find it helpful to create a checklist of key factors to consider. This includes training opportunities, mentorship, technological infrastructure, and support systems. Use this checklist to guide your research and evaluate each prop trading firm objectively.
Key Consideration Checklist
- Training Programs: Look for firms offering comprehensive and ongoing training programs that cover a wide range of trading strategies.
- Technological Infrastructure: Evaluate the quality and reliability of the firm’s trading platforms and IT support.
- Support Systems: Consider the firm’s administrative and operational support, such as HR, compliance, and legal assistance.
- Innovation and Adaptability: Small firms often foster innovation and adaptability, encouraging traders to experiment with new strategies. Big firms might provide stability but could be less flexible in their approach.
Choosing the right retail prop trading firm is a strategic decision that can shape your entire career. By evaluating a range of factors—resources, training, financial considerations, technology, and support systems—you can make an informed choice that aligns with your career goals.
Take the Next Step To Become A Retail Prop Trader
Are you ready to take a deeper look at how to become a successful retail prop trader? Download YMM’s in-depth special report, “The 8-Step Guide to Becoming a Fully-Funded Prop Trader” for expert insights, professional tips, and detailed evaluations to help you make an informed decision. Start your path to successful trading today!