Prop Firm 101
Understanding the differences between proprietary trading firms and personal capital trading
Why Prop Firms
| Prop Trading Firms | Personal Capital Trading | |
|---|---|---|
| Initial Capital Requirement | Low (typically evaluation fee) | High (must meet trading scale and potential regulatory requirements, e.g., PDT rule) |
| Trading Capital Scale | Large (provided by company) | Limited by personal finances |
| Loss Risk Bearer | Company bears main trading losses | Individual bears all losses |
| Profit Distribution | Shared with company | Individual keeps 100% of profits |
| Trading Tools & Platform | Usually provides professional-grade, low-cost or free use | Individual bears all costs, choices may be limited |
| Training & Support | Often provides systematic training, mentorship, and community support | Usually self-sought, resources scattered and costly |
| Risk Management | Company enforces risk control rules (e.g., max drawdown) | Relies entirely on personal discipline |
| PDT Rule Impact (US) | Usually can be avoided | Limited if capital below $25,000 |
| Psychological Pressure | Relatively low (small personal capital risk) | Higher (personal capital directly at risk) |