Are Prop Firms Good for Beginners? | Forexlive (2024)

Proprietary trading firms have become increasingly popularover the last few years, with retail traders all looking to increase theirtrading capital and become funded traders.

This begs the question, are prop firms good for beginners?The short answer is yes, prop firms are great for beginner traders to learnrisk management, discipline and grow their trading capital.

So, let’s find out more…

Prop Firms - Are They Good for Beginners?

Prop firms are often thought of by new traders as somethingthat is only reserved for traders with a huge amount of experience and yearsunder their belts. The reality is, this isn’t true!

The barrier of entry to becoming a funded forex trader islower than ever and this is providing a huge amount of opportunities fortraders, both new and experienced.

In fact, there are more benefits of prop firm trading fornewbie traders and beginners, due to the strict risk management and disciplinethat is pushed upon you by the rules set out by prop firms.

The Benefits of Prop Firm Trading For Beginners

So, what are the benefits of prop firm trading for newbietraders?

TeachesRisk Management

All prop firms have rules that limit traders with respectto losses, drawdown, risk and trading performance. This forces traders to learnand consider risk management in their trading strategy - something that mosttraders do not consider when trading their own capital.

LimitsPotential Losses

When traders are trading their own capital, there are nodrawdown rules or limits - meaning an inexperienced trader can easily blowthrough their whole account in just weeks. With prop firms, your losses arelimited to just the money you spend on the prop firm challenge - meaning youcannot get into a position whereby you lose your whole trading account.


Prop firms usually provide education resources andmaterials for traders to upskill in their craft and further developthemselves.

AccessTo Higher Levels of Capital

The majority of newbie traders are coming into the industrywith a few thousand dollars. With conservative risk management, it’s notpossible to earn a considerable income with this money. Therefore, prop firmsallow traders to have access to much larger volumes of capital than they wouldbe able to deposit - increasing their potential earnings if profitable.

AvoidGetting Scammed By B-Book Brokers

Newbie traders struggle to differentiate a reputabletrading broker from a scam trading broker, of which there are many! By using areputable prop firm, you can avoid the risk of being scammed by one of theseunreputable brokers, whilst still finding your feet in the industry.

The Drawbacks of Prop Firm Trading for Beginners

Although there are a huge amount of benefits, you must alsobe aware of the potential drawbacks for new traders looking to trade with aprop firm:

TradersCan Lose Their Funded Accounts

If traders violate the rules, for example, maximumdrawdown, they will lose access to the funded trading account. This would meana trader looking to be funded again would need to pay for another tradingchallenge. Obviously, this can prove costly if you are not a profitable traderand lose many accounts.

It MayBe Challenging to Hit the Profit Targets

If you’re an inexperienced trader, it can be hard to hitthe profit targets required by the prop firm. However, firms like The5Ers donot have a maximum timeframe, meaning you can take your time and focus on goodquality trades - without the stress of trying to get funded in 20 days.

It MayBe Stressful

New traders might find trading a prop firm account morestressful and emotionally challenging. Although, I would say that it should beless stressful as it’s not all of your money on the line, as it would be if youwere just trading a brokerage account!

What Should You Check Before Starting to Trade With A PropFirm?

Although prop firms are clearly very beneficial for newbietraders, you should still check a number of factors before you jump in anddecide to pay for a trading account challenge!

Firstly, you should understand the rules set out by theprop firm as some prop firms will be better suited for you than others. It’seasy to violate the rules and lose your trading account if you don’t fullyunderstand them - so ensure you take time to sit down and familiarize yourselfwith the rules of engagement.

Secondly, you should have a trading strategy in place. Propfirm trading will be very stressful if you don’t have a trading strategyfigured out. We’d recommend taking your time to research, backtest and build atrading strategy before you pay for your trading account challenge.

These two steps may take a little while but they’re veryworth doing prior to becoming a funded trader!

Tips To Trade with Prop Firms

Although trading with prop firms is a great idea - it’s notalways easy! Here are some tips for trading with a prop firm…


Ensure you brush up on the risk management rules offered bythe prop firm you’re looking at working with. Once you understand the rules,you can set your risk per trade at an appropriate level for the prop firm -meaning you stand a good chance at managing your risk properly and notviolating any rules!

Price OfChallenge

Ensure you shop around and take a look at the price of thechallenge account too. Some prop firms are charging extremely steep prices forprop firm challenges, whilst the offering is no better than some otherfirms!


Make sure that you put a solid trading plan in place, withas many rules as you can - to avoid subjectivity. You want the trading plan tobe easy to follow and allow you to focus on just executing the trades, ratherthan stressing about whether a trade fits your strategy or not.

Reliable Prop Firms for Beginners

Whether a beginner or experienced, it’s crucial to workwith a reputable prop firm.

ForexProp Firms -


The5ers is one of the most reputable prop firms in theindustry, with over 1600 reviews on Trustpilot, up to $4,000,000 in realtrading capital for traders and one of the most complete offerings in themarket for traders!

Out of the numerous offerings, the best option for newbietraders will be the Bootcamp program. Thebootcamp program is extremely cheap and offers traders the opportunity to starton a lower amount of funded capital, whilst scaling up to a much larger amountin a relatively short time frame.

StockProp Firms -


Trade The Pool is themost reputable stock trading prop firm in the industry, with over 12,000stocks, ETF’s and penny stocks to trade. They’re a relatively new firm but havea great reputation and are leading the way for stock trading prop firms!

FuturesProp Firms -


TopStep is the most reputable Futures trading prop firm inthe world, offering traders funded capital to trade the Futures markets.TopStep have a glowing reputation and have long been known in the industry asthe best prop firm for traders that use NinjaTrader to trade Futures.

Alongside capital, they offer some educational materialsfor traders looking to upskill and take their trading to the next level.

In Summary - Are Prop Firms a Good Idea For BeginnerTraders?

In conclusion, prop firms are a great option for beginnertraders looking to grow their skillset and reduce their potential risk in themarkets.

Prop firms force risk management and discipline upon newbietraders, whilst giving them the potential to increase their capital undermanagement.

If you’re looking to become a funded trader, work withThe5Ers now!

Are Prop Firms Good for Beginners? | Forexlive (2024)


Are Prop Firms Good for Beginners? | Forexlive? ›

The short answer is yes, prop firms are great for beginner traders to learn risk management, discipline and grow their trading capital.

Are prop firms good for beginners? ›

Conclusion. In conclusion, proprietary trading firms can be a great option for beginner traders looking to gain access to capital and resources. However, it is important to do thorough research and consider the potential risks before joining a PTF.

How hard is it to pass prop firm? ›

With the Prop Firm challenges, it's not just about failing or winning. You must be profitable and fulfill certain trading objectives which makes it even harder. Less than 1% of traders who attempt the challenge pass and get funded.

What is the pass rate for prop firms? ›

According to it, 4% of traders, on average, pass prop firm challenges. But only 1% of traders kept their funded accounts for a reasonable amount of time. While this result is not nearly as bad as the one discussed earlier, it still looks bleak for prospective prop traders. But why is the percentage of failure so high?

Is it worth working for a prop firm? ›

Prop trading is one of the most lucrative activities as the money you earn is determined by a profit-sharing ratio. Unlike brokers, for instance, which generate money from commissions or spreads, the prop firm benefits from directly trading or investing in the market.

Do prop firms really pay out? ›

Statistics on Average Trader Payouts

Profit Split: The average prop firm will offer a 80-20 profit split once you become a funded trader. TFT, on the other hand, gives up to a 90% split, — even as high as 95% in some promotions — the highest in the industry.

How many people fail prop firms? ›

Historically, retail prop firm challenges have been designed to set traders up to fail. They're given harsh targets, limited time, no support, and huge leverage – a perfect storm! It's not surprising that 95% of traders fail their challenges!

What is the failure rate for FTMO? ›

According to FTMO statistics, only about 10% of traders are able to pass the funded account challenge at any account level. This means approximately 90% of aspiring funded traders fail the evaluation and are unable to gain access to the firm's capital.

Which is the cheapest prop firm? ›

Best cheap forex prop firms
  • FTMO: evaluations starting at $399.
  • TopStepTrader: Challenges starting at $375.
  • T4tCapital: Flexible evaluation options starting at $299.
  • Funded Trading Plus: Starting at $25.
  • Earn2Trade: $99 Mini challenge.
  • True Trading Group: $49 evaluation with a $25,000 virtual account.
Feb 27, 2024

How to pass prop firm fast? ›

Follow Your Strategy 100%

One of the most crucial aspects of passing a prop firm challenge is having a well-defined trading strategy. A trading strategy is a set of rules that guide your decision-making process in the market. It includes entry and exit criteria, risk management rules, and trade management techniques.

How many people pass FTMO? ›

There is estimated to be a 90% fail rate of traders that take the FTMO challenge. The reason behind this is due to traders chasing the profit target with a time restriction in place. A trader doesnt know when a winning streak might occur, or when they may take a string of drawdowns.

Why do people fail prop firm challenges? ›

At Lux Trading Firm, our Elite Traders Club has the highest pass rate in the industry – so we know what we're talking about! The most common reasons traders fail prop firm challenges are simply overleveraging their trades, not understanding the rules, and not having a profitable trading strategy.

What is the failure rate of traders? ›

Key Takeaways. Profitable trading is difficult and successful traders share specific rare characteristics. It is estimated that more than 80% of traders fail and quit.

What are the negatives of prop firms? ›

Foreign Exchange Specialist at FTMO.
  • Strict Risk Management Rules and Trading Guidelines: ...
  • Profit Sharing: ...
  • Profit Targets During the Evaluation Period: ...
  • Limited Control Over Capital and Payouts: ...
  • Lack of Regulatory Oversight: ...
  • High Leverage and Margin Requirements: ...
  • Financial Risk and Capital Exposure:
Feb 11, 2024

Can you make a living with prop firms? ›

Prop trading can be lucrative, with earnings tied to a profit-sharing ratio. Unlike traditional brokers relying on commissions, prop traders' income directly links to generated profits. Ratios vary, often ranging from 75/100 to 90/100, offering flexibility based on experience and strategy.

Which is the most trusted prop firm? ›

Overview: Apex Trader Funding is the best futures prop trading firm on this list for a variety of reasons, but most notably because it boasts the highest pass rate for its evaluation program out of all the futures prop firms on this list. It is also by far the most friendly option for beginner futures traders.

What are the disadvantages of prop firms? ›

But there are aspects you need to be aware of (cons)
  • The rules – they need to be clear and easy to understand. ...
  • Minimum trading Days – the prop firm doesn't want you to be a 1-trade-wonder. ...
  • Maximum trading Days – be careful that your trading style will reach the target in the allocated amount of time.

Can you make a living with prop trading? ›

Also known as “prop trading,” it offers higher earnings potential much earlier in your career than jobs like investment banking or private equity. It's arguably the most merit-based industry within finance: if you make millions of dollars for your firm, you'll earn some percentage of it.

Do prop firms teach you how do you trade? ›

Prop trading firms trade with their own capital, aligning firm success with market performance. These firms enhance market liquidity and efficiency while offering traders capital and advanced technology. Traders at prop firms may receive support including mentorship, training, and a network of industry peers.

Top Articles
Latest Posts
Article information

Author: Madonna Wisozk

Last Updated:

Views: 5918

Rating: 4.8 / 5 (48 voted)

Reviews: 95% of readers found this page helpful

Author information

Name: Madonna Wisozk

Birthday: 2001-02-23

Address: 656 Gerhold Summit, Sidneyberg, FL 78179-2512

Phone: +6742282696652

Job: Customer Banking Liaison

Hobby: Flower arranging, Yo-yoing, Tai chi, Rowing, Macrame, Urban exploration, Knife making

Introduction: My name is Madonna Wisozk, I am a attractive, healthy, thoughtful, faithful, open, vivacious, zany person who loves writing and wants to share my knowledge and understanding with you.