If you have been interested in becoming a trader for a while already, but you have realized that risking your own money is not the very best idea, or that you basically don’t really have that much money that you could invest into your trading career and thus earn some profit along the way, there is absolutely no denying the fact that you will, well, want to find a different type of solution that could perhaps help you join this world without all that risk. And, if you’ve been doing any kind of research, then you must have found an option. Forex prop trading it is called, and it can undeniably be a great option for a lot of people.
This could perhaps give you a better idea about it in general, and about the types of firms that can make that happen for you: https://www.investing.com/brokers/guides/firm-prop-trading/forex-prop-trading/
So, to cut right to the chase, prop trading consists of you partnering up with a prop firm and then using their capital to trade on the forex market. This means that you won’t be assuming any kind of risk, since you won’t be trading with your money, but with the money of the company that you have partnered up with. Of course, in the end, you share the profits with that company, which is probably already perfectly logical to you.
In case you have done any reading on prop trading in general, then you have also most likely understood that these firms won’t be ready to partner up with just any trader out there. Instead, they will have you complete evaluation challenges that will help them test your consistency, discipline, and risk management, as well as profit potential, and then decide which traders are good enough to allow them to trade with their money. This is completely normal, since it is the companies that are assuming all of the risk, so they have to find a way to protect themselves, and they want to do that by carefully evaluating and choosing the traders.
On the other hand, as the trader, you also want to choose the right prop firm for you. Because, there is absolutely no doubt that not all of those are the same, and that you, therefore, need to find a way to choose the one that will be best for you. So, what you are now most likely wondering is how to find and choose a forex prop firm for you as a US trader, and that is precisely what we are going to be discussing below in more details. Keep on reading, thus, to get a better idea about what it is that you need to know here.
Define Your Trading Style First
Okay, the very first thing you have to do here is evaluate your actual trading style, because you want to find and choose a prop firm that will be suitable for it. Think about how often you want to trade per week, whether you scalp, day trade, or swing trade, what your typical drawdown is and similar things. Answering those questions for yourself will help you choose a prop firm that will suit your style and your goals.
Make a List of Potential Firms
Once you get a better idea about what it is that you actually need and want, you’ll be ready to make a list. Clearly, I am talking about a list of the best forex prop firms for US traders that you can make by searching for potential ones online. As well as by talking to some other traders in an effort to get some recommendations from them. And, when the list is made, you’ll be ready to dig deeper for details on the different potential companies.
Evaluate the Evaluation Model
You know that the company you choose will have to evaluate you as the trader. But, what you should do as well before choosing is evaluate the actual evaluation model, to put it that way. Most prop firms use one-phase evaluation, two-phase evaluation or instant funding. And, you should look into those and then choose the structure that matches your confidence level and your patience.
Analyze the Profit Targets and Drawdown Rules
Moving on, you should also analyze the profit targets and drawdown rules. Look into some key metrics, such as the profit target and the daily drawdown, as well as the maximum drawdowns. This will help you find and choose a prop firm with a realistic drawdown relative to those profit targets.
Check the Trading Rules and Restrictions
Unsurprisingly, you should also take the time to check the actual trading rules and restrictions, as those can differ from one company to another. We are talking about the rules and restrictions related to scalping, hedging, weekend holding, and pretty much anything else that you are using as a part of your trading strategy. And, if your strategy violates any of those rules, then you haven’t yet found the right prop firm for you. Read more on prop firms.
Review the Fees and the Overall Costs
It goes without saying that you will also have to review the actual fees, as well as the overall costs of partnering up with one prop firm or another. Compare the challenge cost and the account size, check if the fees are perhaps refundable after you pass the challenge, check if there are any reset fees, as well as monthly platform fees. And, of course, remember to evaluate the actual profit split as well, and the payout conditions before partnering up with any of these companies.
