Prop trading companies provide a pool of money for retail traders willing to take bigger swings in the market.
For an upfront cost and a cut of the profits, companies offer up to hundreds of thousands of dollars to trade with.
It’s an attractive prospect, but traders told Business Insider it can be difficult to pull off.
Ricky Saldana, a 29-year-old trader based in New York, first heard rumors about prop trading in 2021. A contact told him what, at the time, seemed like a well-kept secret: If he paid a small fee to a prop trading company and passed an assessment test, he could get thousands in fresh capital with which to trade, an amount that could easily multiply a trader’s profits if the market moved in the right direction.
Saldana, who dreams of one day becoming financially independent, thought this sounded like a fantastic opportunity.
“Look, if you make $40,000 a year and you get your two vacations a year and you love it and you’re happy, God bless you. But that’s just not me. I want to be free more than 300 days a year at least,” he said.
It’s a common sentiment shared by a growing number of traders who now trade with a prop company, companies that, for fees ranging from $50 to several hundred, offer people reserves of money to deploy in the market.
There are, however, several pitfalls to be aware of.
First, you will need to pass an assessment through a series of small challenges that prove your abilities as a trader. After being successful, you will get a funded account, which could have anywhere from $5,000 to several hundred thousand dollars available for you to trade.
Second, if you make a winning trade, the company will take a cut of your profits, usually around 20%.
Another solution is that if you lose a substantial amount in the market, the account is closed and your funding is withdrawn.
But, for a growing group of Gen Z and millennial traders looking to take riskier, more aggressive bets, the prospect of making more money is worth it, and many say they won’t stop opening new accounts even if it means paying thousands in fees and often ending up at a loss.
Prop trading – not to be confused with proprietary trading carried out by Wall Street firms – has exploded in popularity this year as US stocks have hit new record highs. Google search interest in “accessories companies” has increased 85% over the past year, while search interest in “accessories business” has soared 139%, according to Google Trends analytics tool Glimpse.
The number of active prop traders worldwide has increased by 25% over the past three years, according to a report from ZipDo. The analytics firm estimates that the prop trading industry is worth around $12 billion.
The average prop trader is only 29 years old. According to ZipDo’s analysis, approximately three in four businesses do not see sustainable profitability over a six-month period.
Topstep, a popular prop trading company, states on its website that 12.4% of traders were able to obtain funding in 2024, meaning they passed their assessment and received a pool of capital to trade.
Of those who received funding, 28.3% received a payment, which is when a trader actually receives a portion of the profits from the trades they executed. Business Insider was unable to reach TopStep for comment.
FTMO, another popular prop trading firm that does not disclose its trading statistics, did not respond to an interview request from Business Insider.
Prop trading firm Apex Trader Funding declined to share results from its traders, but said it has seen explosive growth over the past three years. The amount the company paid out to traders increased sixfold in the past year alone, Dan Cook, chief strategy officer at Apex Trader Funding, told Business Insider in an interview.
The speed at which the company brought on new traders began to accelerate during the pandemic, Cook said, which the company attributes to factors such as increased interest in retail investing and the ability for people to explore trading as working from home became the norm.
“The reason I think it’s really blowing up is word of mouth is spreading,” Cook said. “‘Hey, I don’t have to be intimidated. I don’t need to spend thousands of my own money.’
Asked about common criticism of prop companies for their fee structure and low profitability rates for traders, Cook said there needs to be some “responsibility” on the part of traders signing up with a prop company.
“All the terms, conditions and rules are set up front. So it’s really an open book. There are no surprises,” he said.
When Saldana received his first funded prop trading account, he was thrilled. After passing his assessment, he was so happy that he cried, played Frank Sinatra’s “My Way” and woke up his girlfriend, who was sleeping even though it was the middle of the night.
Things deteriorated quickly. Saldana, who wanted to trade full time while balancing an internship, said he made several bad bets and “blow up” the account, a term used among prop traders to describe when the account is closed after suffering losses.
Saldana estimates he’s paid about $10,000 to open new prop accounts over the years. He describes himself as both unable and unwilling to give up prop trading, believing that the prospect of financial freedom is within his reach.
“When $2,000 comes into your account and you just press a button,” he said of the thrill of making money in the market. “Then my girlfriend said to me, ‘Hey, my car payment is $500.’ And you give it to him without problem.”
Traders who enter the prop trading ecosystem often say they don’t want to leave. Part of the reason is that the potential return of trading with more money – and achieving financial independence – is too good for many to pass up, even if it means dealing with more stress and, sometimes, being in the red compared to the amount they paid in fees to trading companies, according to traders who spoke with Business Insider.
Daniel Inskeep, a 37-year-old trader based in Chicago, said he became interested in prop trading several years ago because he thought trading with capital from a prop trading company was a good way to cap his potential losses in the market.
Since then, he says he’s gone through “countless” accounts and estimates he’s spent about $10,000 on prop agency fees over the past few years. Overall, he is in the red when it comes to prop trading.
Daniel Inskeep, a 37-year-old trader based in Chicago, said he believes trading with a prop company is a good way to limit his downside risk.Courtesy of Daniel Inskeep
Prop trading is an emotional roller coaster and much more stressful than trading alone, Inskeep said. Indeed, in addition to an initial assessment, prop traders must regularly complete challenges to get paid, for example reaching a certain profit target on a transaction.
One wrong move can cause the account to explode, meaning a trader will have to open a new account or pay for a new challenge to try to recover a funded account.
“It’s a cold water blow for a lot of people,” he said of the difficulty of prop trading.
Still, Inskeep says he’s stuck with it. There’s simply “nothing better” than sitting in sweatpants at home and making money with just a few clicks, he said.
“Even today I blow up accounts and that’s part of the game,” he said. “I just think there’s freedom to trade once you’ve learned that skill. It’s not something your boss can fire you from.”
Courtesy of Joseph Katumba
Joseph Katamba, a 32-year-old trader based in the United Arab Emirates, said he got into prop trading several years ago when he noticed videos on the subject appearing on his YouTube feed.
“It promised a lot and I decided to learn it myself,” he said, adding that he studied the markets for up to seven hours a day on top of his full-time job to pass his initial assessment.
Katumba blew up two funded accounts. He said he spent about $7,000 on fees for a accessories company over the past few years, although he made a profit, according to payment certificates he showed to Business Insider.
Katumba, who is in the process of securing funds to open a new account, says he wants to be successful enough as a trader that he can one day improve his own life, such as by investing in a car or a house, and also engage in philanthropic work in Uganda, his home country.
“It’s an opportunity, and it’s very difficult for people to find opportunities like that,” Katumba said of why he continued to trade. “When you achieve this, it will change your life.”
