In this week’s episode of Money Mondays we will be discussing the differences between self funding your own trading account vs trading for a prop firm.
The reason this is such a serious topic is due to the fact that trading is 100% a capital based business. You need money to trade otherwise you can’t participate. Some are fortunate to have the funds, while others are required to see access to capital via industry firms that offer prop funding.
Let’s discuss each here:
Self Funding is where a trader learns how to trade, uses a strategy or system to trade with and then starts in SIMULATION to prove they are consistently profitable in a simulated account. Once they are ready to trade LIVE, they can trade their own money.
The pros to self funding is that you can create your own risk models depending on your risk tolerance and skill level.
The cons to self funding is that most people don’t have a plan, or they don’t build a proper risk model and they blow out their own accounts before realizing they need help.
Prop Funding is where traders use a proprietary trading firm to access their capital. This comes with specific requirements. A professional firm isn’t just going to hand over their capital to just anyone…WHY SHOULD THEY? All Prop firms have a trial phase (some call this a “COMBINE”) where they have a trading try out sort of speak…Once you pass the COMBINE, you can gain access to firm capital. This is equally beneficial to those that don’t have their own money and want to trade.
The Pros to prop funding is that it gives you access to a trading career without pledging your own capital. It also helps you build better risk mgmt rules and discipline because their COMBINES are much more restrictive than the way most retail traders trade their own money.
The Cons are that trading for a prop firm is very tough. Their rules are very restrictive and it can be difficult for traders to get funded and more importantly stay funded.
In a nutshell, it all depends on if you have access to money or not and what your goals are. The main thing to consider here is that no matter if trading for yourself or for a firm, you need the following:
Education – Strategy – Software
With NSTA we give you all this and more. We have 1000’s of traders who trade both their own money and also who trade for prop firms. Join our Live Trade Room and learn our proven system and software.
Watch this week’s episode of Money Mondays and Learn more about funding your trading account!