The trading world is in constant evolution, and prop trading represents one of its most fascinating facets. Let me tell you all about this exciting trading modality!

What is Prop Trading?

Prop Trading is a practice where a trading firm uses its own capital to conduct operations in the financial markets.

What does prop mean in trading?

‘Prop’ comes from ‘proprietary,’ which means owner in English. In the context of trading, it refers to trading conducted with a company's capital, not with external clients' money.

How does prop trading work?

Imagine having access to institutional capital to trade in the financial markets. Prop trading firms select traders, evaluate them, and provide them with capital to trade, sharing the profits. It’s like being a Formula 1 driver, but in the financial markets.

What is a prop trading firm?

They are specialized companies seeking to generate profits through trading. They hire traders or train them from scratch, providing them with capital and tools to operate in various markets.

Prop trading vs Hedge funds

Prop Trading and Hedge Funds are two distinct approaches within the financial world. Although both seek to generate profits, they do so with different methods, objectives, and structures. The main differences are:

1. Where does the money come from?
   In Prop Trading, companies risk their own money, which motivates them to maximize their profits without relying on third parties. On the other hand, Hedge Funds act as managers, investing the capital entrusted to them by clients.

2. How do they manage risks?
   Prop Trading risks are entirely assumed by the company. In contrast, Hedge Funds share both risks and profits with clients, which forces them to be more cautious.

3. Timeframes and strategies:
   While Prop Trading is based on taking advantage of fast market movements, Hedge Funds typically have long-term goals, employing diversified strategies.

4. Control and flexibility:
   Prop Trading companies have the freedom to make quick decisions and adapt to market conditions. In Hedge Funds, strategies must adhere to mandates established by clients.

5. Regulation and transparency:
   Hedge Funds face stricter oversight due to the responsibility of managing other people's money, while Prop Trading has more flexible regulations depending on the jurisdiction.

Risk Management in Prop Trading

Rules and Loss Limits

Prop firms set clear daily and maximum loss limits. It’s like having a financial airbag that protects you from large losses. At Noctorial, we have daily and total loss limits on the capital we are testing. Typically, a daily loss limit of 4% to 5% is set, and a total loss limit of 10%. Want to try it? Discover our funding accounts.

Daily Trading Goals

Realistic and achievable goals are set. It’s not about hitting home runs every day, but maintaining consistency.

Management of Provided Capital

Capital is allocated gradually based on performance. You start with a modest amount and can scale based on your results.

At Noctorial, we have accounts available for testing ranging from 1,000 euros to even 250,000 euros. Each trader selects the capital they wish to receive once they have passed the test and pays a corresponding fee. We offer a range of options, from 1,000-euro accounts costing 99 euros to 250,000-euro allocations costing 1,250 euros. Once the trader has passed the test and made their first withdrawal, the paid fee is reimbursed.

Advantages of Prop Trading

Trading with Institutional Capital

Say goodbye to the limitation of personal capital! You trade with significant funds from the start.

Scalability and Progression

Your account can grow exponentially based on your performance. It’s like climbing a ladder where each rung brings you closer to your financial goals.

Tools and Resources Available

In the market, various platforms exist that funding companies can offer us. Depending on the broker they work with and commercial agreements, they will offer us various options. Noctorial offers the most recognized and widely-used platforms in the industry worldwide since it works with regulated brokers. The MT4 and MT5 platforms are preferred by traders around the globe for executing their operations.

Markets and Tradable Assets

• Forex and Commodities.

  Markets with high liquidity and 24/5 opportunities.

• Futures and Stocks.

  Traditional instruments with multiple trading opportunities.

• Cryptocurrencies.

  Some modern firms include cryptos, adapting to new trends.

Frequently Asked Questions about Prop Trading

How are prop traders paid?

Typically, through profit sharing. Percentages range from 50-80% for the trader.

Is prop trading risky?

Like everything in trading, it carries risks. The key is in risk management and following established rules.

Do I need to be an experienced trader to join?

Not necessarily. Many firms offer evaluation and training programs. The important thing is to demonstrate consistency and discipline.

Prop trading represents a unique opportunity for traders looking to scale their careers. With the right tools, training, and discipline, it can be a viable path to financial independence.