Proprietary trading is when a firms and traders invest with its own money instead of investing on the behalf of a client.

The prop trading firm provides a trader with capital to trade with, also known as a nostro account, specific daily risk parameters, position sizes, and other caps to protect the firm from undue risk.

Generally, proprietary trading is a day trading activity, so the daily risk parameter tends to be more relevant than the total funding itself. Proprietary trading also involves a profit split, in which the firm keeps a small percentage of the profits and the trader keeps the bulk of the proceeds.

To look at it another way, there are two ways an individual trader can trade: either with a retail account or a prop account. A retail account involves trading one’s own money, while a prop trader trades using someone else’s funds. Retail accounts involve costs for trading, and those costs must be paid for every single trade. Prop trading, on the other hand, allows the trader to trade on the prop firm’s entire account balance, granting access to phenomenal trading discounts that eventually result in higher profits.

Prop trading firms employ traders on an independent contractor basis to trade on the firm’s behalf. There are typically set criteria to become a prop trader, as well as additional training and development that trading hopefuls undergo before being released to trade on their own.

For someone seeking a career in the financial sector, prop trading offers numerous benefits, including:

Capital – A prop trading firm gives traders a larger amount of initial capital which they otherwise may not have. It is a cumulative effect, as traders acquire more skills and experience, and as they begin to provide earnings, the more money traders will have access to.

Technology – The prop shop has cutting edge technology with all the tools you need, including advanced industry networks, software and trading platforms.

Training – A prop firm will give you onboarding training on risk management, execution, and strategy with ongoing support.

Automated Tools – Get up to the minute information about trades that are worth trading. Proprietary algorithms serve to give you alerts and tips on when and what to trade.

Deeper Pockets – With a retail account, risk management is higher and greater loss of profits; but with a prop trading firm, traders can feel confident with a firm can absorb the loss as part of their overall risk strategy.

Coaching – While the initial training involves rising to a specific skill level, especially if you’re brand new with no experience, a prop trading firm provides continued support beyond the training period. This coaching is consistent and ongoing. It keeps you at a level of high performance and encourages constant growth and improvement.

Team Trading – Trading can be a lonely endeavor. When you’re at a prop trading firm, you benefit from comradery, help, and the thrill of trading as a team. Everyone gets better together.

Prop trading can encompass nearly any type of trade, including Forex, securities, futures, and more.

Forex - Short for Foreign Exchange Market, this market trades on the price fluctuations that shift the value of one currency compared to another. Though a relatively simple and straightforward concept, forex traders often struggle due to the sheer volume of transactions, especially large corporations or governments who can shift a market with a single trade.

The average retail forex trader loses $12,500 annually, but traders who work with a prop firm can reverse that trend, and forex prop trading specialists can potentially earn 10 to 50 times that amount. As part of your ongoing training and support, you’ll receive a steady stream of data and resources to keep you in front of the markets and ready to seize every opportunity.

Securities - Securities include any stock, bond, note, debenture, certificate of interest, profit sharing agreement participation, options, indexes, and more. By definition, securities include anything that shows proof of ownership or debt that has an assigned value and can be sold or liquidated. Prop traders, like any trader, will typically use arbitrage strategies to realize a profit, including:

- Index
- Statistical
- Merger
- Volatility

They may also employ advanced technical analyzes. The traders profit based on the difference of the buy and sell price of the securities instead of a brokerage commission.

Futures - In futures trading, there is a contracted agreement to buy or sell an asset on a specified future date at a previously agreed upon price. The first futures market existed for farmers and other agricultural producers who wanted to hedge the risk they faced in the fluctuation of crop prices between when they planted and harvested seed or when livestock would be available for purchase.

Today, the futures market encompasses anything imaginable. The value of a futures trade is not based on the inherent or intrinsic value of the asset, but instead on the change in value.

With the advent of high-speed internet and advanced computing power, remote trading is now an option for almost anyone. If you can’t make it to a proprietary trading firm’s office, then you may be eligible to work as a remote day trader from home.

This option is appealing to many, and with distributed workforces becoming the norm, remote prop trading is on the rise. Here’s what you can expect from a remote proprietary trading gig:

Your Own Home Office - Working from home in your pajamas might sound like a dream come true, and it definitely can be as long as you’re disciplined enough to avoid distractions and stay focused. To perform at your best and see the highest returns, make sure you’re watching the markets during trading hours, or you could miss a valuable opportunity.

Pro Tip: Set up a dedicated home office where you can focus and concentrate.

Independence - Instead of being forced to make small talk with coworkers or tolerating terrible coffee, you’ll be working by yourself and you can talk to whomever you wish (as well as choose your own coffee). To avoid feeling isolated, we recommend that you build and maintain a network of other traders. It can be helpful to communicate with other traders so that you have a support system, or at least colleagues who understand what you do.

Daily Support - We encourage daily meetings and ongoing coaching to keep improving or prevent loss of momentum that comes with a bad day or two. Most of this access can be done remotely, so you’re not missing much by not being in the office.

Immediate Access - Firms has access to state-of-the-art trading platforms and software, including Application Programming Interface (API) that can connect you to market information directly. Additionally, with today's technology, computing power and lightning fast Internet speeds, firms can offer you faster trade times to immediately buy and sell without losing out on market conditions.