As someone who is wanting to become a full-time trader, obtaining the start-up capital can be a near impossible task. Proprietary (Prop) firm challenges are majority of traders first step in becoming full time as after they deem you profitable through their assessments, you are given access to capital in exchange for a share of the profits. The following is a list of our top pros and cons:

• One of the best things about trading a prop firms’ capital is the fact it isn’t your money. Although you do have to pay for the challenge that money isn’t a risk, after passing the capital you are risking isn’t at your expense. You can reap the rewards from your hard work and take the partial profits without fear of losing a massive portion of personal capital. The other side of this however is if you continue to lose the account is taken off you to minimise loss on the prop firms end but again that is better because you can learn from your mistakes at their expense and come back an even better trader.

• As we all know it takes money to make money in every industry you work in, whether it’s buying stock for drop shipping or putting money into a personal account. Having a bigger account size from the get-go means you can make more money faster providing you are a profitable trader. Not many traders have £10,000 – £100,00 to start a trading account so prop firms make it accessible for all.

• A lot of prop firms offer a scale up scheme meaning you can maximise your profits on the one account and then move onto others. Prop firms are a great tool in generating more capital as you can have multiple accounts and scale them up while using the profit to compound your own.

• We know prop firms are excellent for an already profitable trader, but they can cater to all types. Some prop firms having courses and market education programmes meaning you can learn straight from the source and then move on to trade with that specific firms capital. As a beginner this can be very comforting as the platform will feel more natrural therefore increasing your confidence.

• The biggest downside to trading prop firm capital comes from a bad stigma which surrounds this industry. There are lots of firms with an extremely good reputation and financial security. But there are many, especially new ones, which do not have the capital to support the volume of traders using them. Recently a proprietary firm called First Class Forex Funds began to slow their payments to traders of their share of the profit and many traders were left unpaid thousands due to the firm does not have the accessible capital. Before beginning a challenge, it is essential to do your due diligence and research the firm to a great extent.

• Of course, these firms have rules on the type of trading you can do and how much you can risk/lose. This is to be expected as it is logical on their part. This may not give some traders the freedom to trade how they would with their own capital such as bigger lot sizes, more risk, larger drawdown percentages and larger overall loses.

In summary the benefits outweigh the downsides in our opinion, the best way to navigate the downsides all comes to your own research as you can avoid a lot of the negatives through this. Make sure you read through the prop firms rules before even purchasing a challenge and read them again before trading with them. Don’t leave yourself short on the great opportunity they provide.