Funding Trading Firm versus Traditional Prop Firm... Which is Best for You?
Understanding the difference is the key to what may work best for you as an aspiring trader
While both offer funding for traders, there are some key differences between a trading funding firm and a traditional Wall Street prop firm:
Capital Source:
Trading funding firms: Typically funded by external investors seeking returns from skilled traders. They collect fees from successful traders and return some profits to investors.
Wall Street prop firms: Use their own capital, often from investment banks or hedge funds, to fund traders and capture profits for the firm itself.
Trader Focus:
Trading funding firms: Cater to a wider range of traders, from beginners to experienced professionals. They often offer evaluation programs and educational resources to help traders improve their skills.
Wall Street prop firms: Generally seek highly experienced and skilled traders with proven track records. They offer competitive salaries and bonuses but expect consistent performance and may have stricter risk management measures.
Profit Sharing:
Trading funding firms: Typically have performance-based fee structures. Traders pay a share of their profits, usually a percentage, to the firm in exchange for funding and resources.
Wall Street prop firms: May offer a combination of salary, bonuses, and profit-sharing arrangements. However, traders often keep a smaller percentage of profits compared to funding firms.
Risk Management:
Trading funding firms: May have less stringent risk management protocols due to the diverse experience levels of their traders. They rely on traders to manage their own risk within certain parameters.
Wall Street prop firms: Often have stricter risk management systems and technology to limit potential losses. This can include stop-loss orders, position sizing limitations, and close monitoring of trader activity.
Regulations:
Trading funding firms: May not be subject to the same level of regulation as Wall Street firms, depending on their location and business model.
Wall Street prop firms: Are often subject to stricter regulations and compliance requirements due to their larger size and impact on the financial system.
Overall:
Trading funding firms: Offer a more accessible entry point for aspiring traders, with the potential for higher profit sharing but less financial stability and support.
Wall Street prop firms: Provide experienced traders with a high-pressure environment, potentially higher salaries and bonuses, but stricter risk management and less control over trading strategies.
The choice between a funding firm and a prop firm depends on your individual experience, risk tolerance, and career goals. Carefully consider your options and research specific firms before making a decision.
To learn more about how you can join either a Funding Trading Firm or a Prop company, visit Microefutures Trading where 20 year institutional market maker JJ @vwaptrader1 goes into detail. Including training individuals to fulfil their trading goals and aspirations.