What Is Prop Firm Trading and How Does It Work?
Proprietary trading is a form of trading in which a firm uses its funds to trade, rather than a client's funds. In terms of risk, the firm’s capital is directly on the line, rather than just being a middleman to someone else’s trade. So, how does a trading firm do this? It takes the help of hundreds of individual traders who use their individual strategies to navigate the market, and in turn, share a percentage of the profit made.
Modern prop firms like Seacrest Funded have refined this model, giving traders access to real capital under clear, transparent conditions.
As an individual trader, one of the biggest bottlenecks in retail trading is scale. One’s own savings are often limited, which restricts the kind of moves that can be made and the extent to which certain strategies can be executed. But when you are trading for a prop trading firm, the backing of the firm helps you gain access to significant capital, more tools, and better opportunities.
Of course, firms don’t go around giving funds randomly to prop traders. They use evaluation processes to identify people who can demonstrate solid trading skills before allowing access to live capital. Traders who show consistency, discipline, and good trading capabilities can trade in the market using the firm's capital.
Why are Prop Firms Growing in Popularity?
When traders use the resources of the firm instead of their own funds, they get access to professional tools, more capital, and often, access to support networks.
One of the biggest reasons why prop traders go this route is the benefit of not having to use a substantial amount of their own funds for the actual trading—although there are still costs involved, in the form of evaluation fees.
The firm takes majority of the capital risk and lets you execute smart strategies within a rules-based and structured environment where risk is mitigated to the maximum extent possible, and shares the profits. However, traders still carry performance risk and may lose access if they breach the rules.
Another benefit to prop traders is access to leverage. Leverage comes from scale, and a firm can often provide the kind of leverage that one’s individual savings cannot. Leverage provides the opportunity to test new strategies and generate profits that might otherwise be completely out of reach.
Of course, the larger scale also tests the trader’s skill level. With such benefits come bigger responsibilities. Funded traders need to be very careful of the limitations put on their trading activities; otherwise, they could lose their accounts in a single instant.
Still, not every firm offers this level of openness or flexibility, which is why traders often gravitate toward trusted options like Seacrest Funded.
Overall, prop trading is a good option to try for both new and experienced traders.
