How prop trading models are giving traditional brokers a run for their money

A capital allocation program, which is all-inclusive, transparent and has trader-centric policies is what every trader seeks. Clearly, traditional brokers are failing to understand this. 

But that’s not all.  They are also failing to understand that it’s not the free rewards that traders look for, but it’s the inclusive environment that platforms can create to win over traders so that traders can win too! 

And that’s where new-age proprietary trading, or 'prop trading' models are coming into the picture. 

What is Prop Trading? 

For the unversed, prop trading simply refers to an investment model wherein financial institutions trade their own money, instead of using clients' funds. 

These institutions, which could be either a bank, a Broker, or a fund, make money from taking the market exposure and not relying on commissions or other trading fees brokers or asset managers usually charge from their customers. It’s indeed a win-win for both traders and prop trading firms. 

But while looking for the best prop trading fund, a trader needs to analyze the features offered by such platforms. If you’re not sure what features you should explore, here are some that a leading prop model should have in 2024. 

Maximizing Opportunities 

The heart of any program lies in the generous investment that a prop trading firm makes in its traders and the profits that traders can make for themselves. Some prop trading models are offering up to millions of dollars to traders, with the top performers retaining 90% of their profits. The lucrative profit-sharing model incentivizes traders to perform at their best, knowing that their hard-earned gains will primarily benefit them.

But these new-age models offer much more than just funding. It provides a suite of tools essential for trading success, including a comprehensive dashboard, a leaderboard, and a trading room where they can connect with other traders.  

These resources let traders monitor their performance, compare with peers, and engage with a community of professional traders. However, sharing the EAs (Expert Advisors), which are basically programs which help traders engage in forex trading via automated trading, isn’t allowed on most models. 

Breaking the Mold: No Fees, No Evaluations

Unlike traditional brokers as well as a few prop models, which typically require traders to pay registration fees and pass evaluations, some programs charge no fees at all. It’s 100% free for traders to join, eliminating the financial barrier to entry that often deters talented individuals. 

Traders are not required to deposit their own funds into their accounts, although they can if they choose. These funds can be withdrawn at any time to provide them with flexibility and peace of mind.

The models involve the broker’s funds being traded alongside the trader’s funds in a single account to reflect that the broker’s interests are aligned with those of the traders. 

A Fairer, More Transparent Model

Such programs use the broker’s size and resources to create a fairer and more transparent trading environment. By offering realistic opportunities for traders to profit and build professional careers, the program shifts the focus from speculative ventures to genuine trader development.

Such platforms also provide traders with an option to choose between a Pro account or a Standard account, both of which offer the same internal controls as regular brokerage accounts to make sure that traders receive a consistent and professional trading experience regardless of their account type.

Understanding the Challenges of Trading

Finally, these prop trading models acknowledge the inherent difficulties of trading and don’t make unrealistic promises of quick and easy profits. Instead, traders are given three attempts to succeed in the program. This is for times when there is a tough period because everyone faces bad weeks or even months.

A unique feature called "quarantine" allows traders who have hit a rough patch to pause, reset, and return to the program without immediate penalties. After a two-week break without access to the broker’s funds, traders can resume trading at lower levels. So, the model gives them a second chance without the pressure of immediate success.

Flexible Trading Conditions

Such programs impose minimal restrictions as they focus instead on creating an environment where traders can make money. The only significant restriction is a 10% loss limit per stage designed to manage risk without stifling the trader’s potential. But there are no restrictions on trading around news events, high watermark levels, or holding positions over weekends.

One such platform which packs all the features in one is the Axi Select prop trading model, which claims to be the first free-funded trader program with up to $1 million in funding for traders. It’s completely free with zero registration and no monthly charges.