Make money. That’s what you plan to do through proprietary trading, but you want to understand more about profit splits offered by prop trading firms first. That’s a good call.
No matter your trading style or financial goals, you’re looking forward to trading to generate and bank profits. While visions of dollar signs dance in the heads of many new traders, slowing down and understanding all that goes into prop firms developing profit-sharing ratios can influence your success.
Dive into this guide to profit splits to lay the foundation for a great start in prop trading.
What Are Profit Splits in Prop Trading?
Profit splits are the agreement between you and proprietary trading companies to divvy up the profits you earn trading on a funded account with the firm’s money. Where that split takes place varies from prop firm to prop firm. However, profit splits typically range from 50% to 80%, with some funded trading companies offering profit-sharing up to 90%, 95% and even 100%.
The prop firm is giving you the money to risk on trades, and you are sharing a percentage of the profits in return for receiving the capital funding.
While you might target the highest profit split to decide which proprietary trading firm to use, check the prop firm rules first. Those higher profit splits may come with conditions that could impact your returns, trading method or payouts. High-payout trading firms might charge higher fees.
>> Compare top prop trading firms
Factors Influencing Profit-Sharing Ratios
To get the most from your trading, it helps to understand how prop firms determine the trader payout structure to arrive at their profit splits. Risk management, scaling, evaluation structures and market focus and conditions all play a role in influencing profit splits.
Risk Management Policies
A prop firm’s approach to risk can affect the profit split agreement between you and a funded trading company. Prop trading presents opportunities to earn profits. However, it also involves risk.
Many companies require evaluations or present challenges before funding your account to trade. The evaluations test your ability to hit profit targets, but they also test your risk management skills. A more stringent evaluation might accompany a high-profit split. The tighter requirements help minimize the company’s risk.
Your risk management skills – consistently demonstrating the use of stop-loss orders and managing position sizing – could also influence a prop firm to offer you a more favorable split as its trust in you increases.
Scaling and Growth Models
Some prop firms offer an opportunity for traders to scale to higher profit splits over time. As you prove you can consistently earn profits, some high-payout trading firms may increase your profit split.
You might begin trading at an 80% profit share and scale up to 90% or 95% as your performance proves you can consistently return profits. Even if you begin at a relatively low split, consider that a portion of a prop firm’s income comes from traders’ profits, so the scaling can be an incentive for you to improve and earn more, earning the company more.
Evaluation and Assessment Processes
The evaluation or assessment process can also influence the trader payout structure and profit splits that prop firms offer. You must meet certain targets before earning a funded account to prove your trading and risk management skills. You may be required to hit a profit target, avoid hitting the maximum drawdown limit and avoid violating any prop firm rules.
The number of steps in the evaluation or assessment may impact the profit-sharing percentage the company offers. Some prop firms offer a one-stage evaluation, and others present you with a two- or three-phase challenge. Longer evaluations might come with higher profit splits.
Market Specialization and Conditions
Profit splits may be influenced by market conditions or the specialization required to deal with the complexity of certain markets. Niche or high-risk markets might shape the profit-sharing percentage because of the higher risk or costs of handling a particular asset class.
Trading in forex or futures might require more specialized knowledge than trading stocks. You might find forex trading at a prop firm with an 80% profit split, while a company allowing trading in futures might offer a 90% profit split.
Companies also might adjust profit splits based on market volatility and opportunities. During times of low volatility or few opportunities, prop firms might change their profit splits to keep their talented traders on board.
How to Identify Firms With Favorable Profit Splits
Choosing a prop firm with a favorable profit split takes more than selecting the one with the highest percentage in your favor. You certainly want to identify companies with the best profit splits. However, you must also follow up by researching the company and comparing it to other prop firms.
Consider focusing on the profit-sharing percentage, amount of trading capital and several key factors, including reputation, transparency, trading platforms, assets, customer support, education resources and the trader payout structure. Review fee structures and read and understand all the prop firm rules on trading styles, risk management and drawdown limits.
You can search for websites that compare profit splits to get a side-by-side comparison of the profit-sharing percentages, trading capital and other key factors.
Prop Firm Payout Comparison
| Firm | Profit Split | Tradable Assets |
|---|---|---|
| Apex Trader Funding | 100% of the first $25,000 profit, 90% after that | Futures |
| FXIFY | 80% with an option at checkout to upgrade to 90% | Commodities, cryptocurrency, forex, futures, indices, stocks |
| My Funded Futures | 100% of the first $10,000 profit, 90% after that | Futures |
| For Traders | 80% | Commodities, energies, forex, metals and more |
| Trade the Pool | 70% | Stocks |
Find Prop Firms With Profit Splits That Fit You
If you’re about to start prop trading, you’ll want to consider looking for prop firms with profit splits that fit your trading style and financial goals. This guide lets you know more about how prop companies develop profit splits. This insight can help you make an informed decision about which profit-sharing percentage might suit you best.
Frequently Asked Questions
What percentage do prop traders make?
Across the proprietary trading industry, the percentage of profits a trader can take home ranges from 50% to 90%. FPFX Tech, a fintech offering solutions to prop trading firms, says 7% of traders earn a profit, which often is about 4% of the funded account size.
What does an 80% profit split mean?
An 80% profit split means you can take home 80% of any profits you earn trading – $8 out of every $10 – leaving 20% for the prop firm that provides the capital funding. The profit prop trading companies allow traders to keep varies from 50% to 90%, and 80% is a standard profit split agreement, especially among companies that offer trading in foreign exchange (forex).
How do prop firms stay profitable?
Prop firms earn money by cutting the profits that successful traders generate and charging a fee for an evaluation or challenge traders must pass to get funded. They also earn money from traders paying a monthly subscription to maintain an account with the firm. Fees for challenges and subscriptions drive the majority of most prop firms’ income.
About Sarah Edwards
Sarah Edwards is a finance writer passionate about helping people learn more about what’s needed to achieve their financial goals. She has nearly a decade of writing experience focused on budgeting, investment strategies, retirement and industry trends. Her work has been published on NerdWallet and FinImpact.
