With prop trading on the rise recently, many forex traders are stuck deciding whether to become a funded or sole trader. This decision can affect your trader’s journey in the financial market. Both the prop firm and personal account have their share of pros and cons, and deciding which one to go for can be pretty daunting.
Before making that decision, we have scoured the minds of different trading experts and brought you what you need to know about prop firm vs. personal account. Let’s dive in.
Personal account trading, also known as solo trading, is when traders fully control their trading accounts and run them individually. This is an option taken by most forex and stock traders. To become a successful solo trader, you must find a suitable platform offering many trading options.
You can either start with demo trading if you do not have experience in prop trading, or you can make a deposit in your account and start trading. Some factors to consider for solo trading are:
- Continuous learning is essential for growth; it helps you increase capital and opportunities.
- A solo trader is responsible for risk management, so it is necessary to do extensive research for your preferred risk management tools.
- A solo trader is also responsible for the amount of capital invested and the type of trading strategy needed.
Prop Firm Account
A prop firm account trading, also called funded trading, is a form of prop trading that requires you to trade on behalf of a company. The company provides the trader capital, purchasing power, and other significant leverage to give you a major advantage in the financial market.
There are limited risks to the trader, who can accrue more significant profits in the world’s most profitable financial market. Different types of funded accounts depend on the financial instrument you’re handling. Some factors to consider before managing a prop firm account are:
- There must be an opportunity to scale up and access more capital after consistently making profits.
- Although some prop firms do not offer a monthly stipend, some do. This makes the trader focus on their trading
Prop Firm vs. Personal Account
To differentiate the major differences between prop firm and personal account, we need to know the criteria for differentiation. Below are some of the main criteria forex experts use to judge the differences between a prop firm and a personal account:
1. Freedom To Trade
Solo traders aren’t answerable to anyone but themselves; they are responsible for developing strategy and managing every aspect of their accounts. On the other hand, funded traders are accountable to the organization they trade for. Therefore, they must follow specific rules and regulations set by the prop firm.
Some firms can change the company directives at their discretion, so the prop trader should be constantly aware of these changes.
2. Access To Funds
Solo traders are primarily limited in the capital they invest using their funds. They might also find it somewhat difficult to get extra capital for investment. This is especially true when starting as a trader. As they become more experienced, they use that leverage to increase their position and profits in the market.
On the other hand, funded traders do not have to worry about capital because they get all they need via the prop firm. The available capital also enables the prop trader to experience growth differently than trading with their money.
Trading with your capital as a solo trader means you bear the entire risk in the event of a loss. This makes it essential for solo traders to have a bit of experience before taking on trading. On the other hand, funded traders protect the trader from losses, but it is limited. Funded traders are expected to be experienced traders who can make steady profits.
4. Monthly Costs and Profits
Solo traders often have to pay a commission enabling them to execute trades; this will allow the trader not to remit any profit to the trading platform. Similarly, most prop firms will charge a monthly fee for their traders using their capital, and the firm and trader will split the profits.
The criteria for differentiating the significant differences in prop firm vs. personal account has been listed above, and it is up to you to pick the right fit for you. No matter your choice, there is always a platform for you. A major example is Trader Support Funds; this platform gives leverage to experienced traders who do not have the capital to trade.
They offer a grueling evaluation period of 2 months with 2 phases to determine how experienced you are. Having done this, you will be given a live account and a profit share of 70%, which will increase to 90% as your performance level increases. To discover more exciting offers, visit their official website.