Trading Tips & Prop Firm Strategies | Cointracts Learning Hub

Proprietary trading firms generate revenue primarily through two main channels: evaluation fees paid by traders seeking to qualify for a funded account, and a share of the profits made by their successful funded traders. A firm's total earnings can vary dramatically, ranging from hundreds of thousands to tens of millions of dollars annually, influenced by its size, the number of traders it attracts, its fee structure, and the overall success rate of its funded traders.

Generally, proprietary trading firms do not have external investors in the way public companies or hedge funds do. Traditional prop firms trade their own capital, belonging to the firm's partners or private owners. Modern online prop firms operate on a different business model, primarily generating revenue and funding from trader evaluation fees rather than soliciting outside investment capital to trade.

The vast majority of traders, estimated to be between 90% and 95%, fail their prop firm challenges. This high failure rate stems from a combination of stringent trading rules, intense psychological pressure, and inadequate risk management. To succeed, traders must not only possess a profitable strategy but also master emotional discipline and understand the specific constraints of the evaluation, such as daily and maximum drawdown limits.

Yes, some proprietary trading firms allow options trading, but it is not common and is almost exclusively limited to futures options rather than stock options. Firms like Topstep and Apex Trader Funding provide access to options on futures contracts through specific platforms, but traders must operate under stringent rules, including restrictions on selling naked options and strict risk management parameters. Finding a prop firm that supports a wide range of stock options strategies remains a significant challenge for traders.

Apex Trader Funding is widely regarded as a good prop firm, particularly for traders who are disciplined enough to manage its specific trailing drawdown rule. Its primary appeal lies in offering large capital accounts through a straightforward one-step evaluation process, often available at significant discounts. This makes it an accessible option for traders seeking to leverage their skills without risking substantial personal capital.

Matt Kohrs trades multiple prop firm accounts by using specialized trade copier software to simultaneously execute a single trade across all his funded accounts. This allows him to scale his strategy, primarily focused on NQ futures scalping, while compartmentalizing risk within each individual account, a method that maximizes profit potential from a single, well-executed trading idea.

Several leading proprietary trading firms provide free trials, allowing traders to test their skills and strategies in a risk-free environment. Notable firms offering these opportunities include FTMO, Topstep, The Funded Trader, and Fidelcrest. These trials are designed to simulate the conditions of a paid evaluation, giving you a realistic preview of the rules, trading parameters, and platform you would use as a funded trader. They are an invaluable tool for preparation and skill assessment before committing capital.

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