Proprietary trading (or “prop trading”) is booming, thanks to a new generation of tech-forward platforms, global trader access, and the rise of funded trader programs. Whether you’re a solo trader scaling into business or an entrepreneur exploring the prop market, the below will give you food for thought as you get started.
Start up prop solutions, for even the most challenging cases
Launching a proprietary trading firm means taking on two core responsibilities; managing risk and recruiting high-performance traders. To help put things in perspective, will be looking at:
Defining your business model
First things first, define your business model.
Will you be running a funded trader program with challenges and simulated accounts, or managing in-house capital with salaried or profit-share traders? Clarity here affects everything, including your tech stack, legal structure, compliance needs, and marketing.
Most prop firms use a challenge fee model. Others monetize via subscription (monthly evaluation) with payout splits (50-90%).
FUNDED TRADED MODEL
Charge an entry fee to complete a simulated challenge. If they pass, you fund them for a profit split.
INTERNAL CAPITAL
Hire traders directly and manage the firm’s capital. This is more traditional but riskier without experience
Although the prop space, for the most part is considered “unregulated”, depending on the location that you want to setup in, you will still need to comply with local business laws, as well as still maintain a good understanding of any regulation that may impact your marketing initiatives.
Technology
Your choice of technology will have a massive impact on the overall trader experience as well as scalability of your prop firm. With massive growth in the space there are various models and options when it comes to selecting technology and services.
Some follow a turnkey “grey label” direction where you choose a provider that essentially gives you the infrastructure to run your traffic through. This is ideal for individuals who do not have a strong tech background or tech team, but who have marketing reach and traffic to drive the business.
If you have experience and grasp tech/development projects for the the backend and technology, you may be looking at a more robust setup that gives you more control but also more risk accordingly.
Elements you will want to consider when it comes to building up your own tech stack are:
Trading Platforms to address trader preferences & their trading experience
Credible liquidity providers & brokers for realistic price stability and execution
Evaluation & Challenges for custom challenge builders or third-party platforms
Risk Management Software for visibility and to avert disaster
CRM & client areas for you and your clients to manage users and KYC
Banking & Payment Gateways for business inflows and outflows
From the experts:
We Asked: What are the biggest financial or operational challenges prop firms face as they look to scale or grow, and how can they prepare for them early on?
“It’s really 3 things:
1. Starting out under capitalized. To launch your own firm now, you likely will need $500K-$1M in reserve capital at launch to cover a slower than expected launch, surprising payouts or other foreseeable, yet often overlooked costs
2. Embrace risk. This is no longer about tech or ‘creative’ plans. This is a risk business. Understand the risk. Quantify it. Act accordingly.
3. Maintain ever growing reserves of capital as your business scales. There is a proper way to retaining earnings to cover your tail risk. Treating this as a cash flow business is fundamentally flawed and will get you in trouble.”
Justin D. Hertzberg, Esq.
Best practices for early stage prop firms
6 common mistakes to avoid if you don’t want your “Prop to Pop”
Shifting the goal posts is neither fair nor transparent. Tweaks to T&Cs or payout policies will erode your base faster than you anticipate.
Increased ad spend with overestimation on expected results. Flaws and/or weak community will burn budget. Stress test and use smart spend. More on marketing and user acquisition here.
Many underestimate the costs of running an effective prop business and start out under-capitalised and do not retain enough to ride the waves associated with a risk business.
Underestimating exposure can bankrupt a firm. Use real-time monitoring and hard limits if you are managing capital.
Even great traders churn if support is slow or unclear. Learn more about our performance training and build your base strong, whatever stage you are at.
Misunderstanding compliance & insufficient “know your client / business” practices are a major liability. Have a clear understanding partner track records.
Is starting a prop firm the right choice for your business?
Lets find out together
Best Practices for Building Prop Trading Challenges
Sometimes building a challenge, can well, be a challenge…
Your prop challenge is your product. It needs to be exciting, fair, and commercially viable. Here are some points to consider when building prop trading challenges geared towards both attracting and retaining traders:
Balance difficulty and reward: Make it challenging, not discouraging.
Nobody likes red tape, limit rules and edge-case disqualifications: Avoid “gotcha” clauses. No hidden slippage, spread traps, or unjust resets.
Clearly define daily and max drawdown: And use tech to monitor it in real time.
Automate progression and verification: Instant results build trader confidence.
Offer consistency-based evaluation tiers: Recognizing steady, long term traders encourages loyalty and supports growth.
Different types of challenge structures
One-Step: These types of challenges typically are geared towards experienced traders and carry with them a higher cost of entry.
Two-Step: More common, and offer more credibility. These challenges typically take into consideration consistency.
Instant Funding: Entry costs are usually highest here and these challenges are geared to experienced traders. Scalpers may be attracted to this format.
The nitty gritty of it often boils down to: Risk
Your firm lives or dies by risk.
A few fundamental elements to be aware of:
• Use aggregated dashboards to view firm-wide exposure at a glance (there are also solutions out there that can monitor cross broker/firm exposure)
• Set trader-specific limits based on challenge size and behaviour.
• Watch for correlated strategies, too many copycats can sink your book.
• Have automated risk flags that pause or restrict accounts if thresholds breach.
• Use external data (volatility, economic calendars) to manage trading conditions dynamically.
Many leading tech providers are integrating “AI-powered” risk modules to stay ahead. The best in class have designed their systems with the prop scene in mind and cater to the profiles attracted to proprietary trading offerings.
Marketing tips for Prop Firms
Stay transparent and responsive
Reputation is everything. Read that again. Fast payouts are top of mind for traders and if you are not up to scratch they will leave with the speed they expected to be paid at.
Clarify your value proposition
There are 100’s of Prop Trading firms operating worldwide and this number is only set to grow. Why should traders choose your firm?
Showcase real success stories
Social proof is the name of the game for many traders, since proof builds credibility. “Case Studies Over Claims”. Show real traders succeeding. Use video, testimonials, or leaderboard highlights.
Leverage Discord, Telegram & other channels
Build trader communities. There is massive potential on these channels and if managed correctly, they can be a main source of traffic and exposure for your brand. Remember its not just about the number of community members, but engagement.
Run referral programs
A good word can go very far, and it’s why word-of-mouth is still king. Build relationships with your users that make them want to stay and grow their business with you.
Invest in SEO and organic content
If you are thinking months into years, content still pays off both in traffic and in building authority. It builds long-term, low-cost leads. Think evergreen topics that will serve not only your needs but also get favour from AI search. Here’s a great article from SEMRush on this topic.
Collaborate with trading influencers
But vet them well, be aware of local regulations (more and more regulatory bodies are moving to have finfluencers and IBs to be licensed).
Offer frequent promotions or giveaways
They can create urgency, but don’t rely on discounts alone. Be conscious of offering value not just perks and back up any offer with an equally valuable conversation
Create educational content
This is a no-brainer but is often overlooked. For qualified traders their success is your success. Help your traders succeed by providing robust educational content and opportunities to interact with leaders in the field. Use seminars, webinars or live Q&A’s to build trust and a healthy relationship with the markets via your prop.
Use retargeting
Bring back visitors who don’t convert right away. If you are tracking everything you can harness this data and build alerts, notifications, prompts for abandoned cart, milestone emails, and trader tips which all nurture leads as well as already committed traders.
Most importantly, take all the hard work put into marketing and activate it through efficient and effective dialogue with your prospective clients. Positive outcomes for conversion and retention are not the result of luck, but of diligent planning, effective preparation, training and consistent practice, learn more about our performance training solutions here.
Grey Label Prop – Yes / No?
Many new prop trading firms choose to partner with a broker for a faster, turnkey launch. Industry leaders offer dedicated services for prop trading companies, including grey-labeled trading platforms, integrated liquidity, CRM, and even risk management tools. On the downside… If you are considering going into this form of “grey label” to direct your business, there are some costs that you may or may not run into.
Yayyyyy 🙂
Nayyyyy 🙁
Speed to Market
Broker-backed solutions can get your prop firm live in weeks, not months. With a ready-to-go tech stack and infrastructure, there’s no need to custom-build, search for and integrate the various elements required to run your business.
Integrated Liquidity & Execution
You don’t have to manage relationships with LP’s or build aggregation tools. Execution quality and spreads are already optimized by the broker and their own LPs.
Turnkey Tech Solutions
Many brokers offer access to their full ecosystem, including platform servers, dashboards, trading terminals, and trader CRMs.
Shared Risk Tools
Market leaders in this space provide internal risk dashboards, enabling you to monitor trader performance and exposure without needing a dedicated tech team.
Licensing Umbrella (in some cases)
Some brokers operate under regulated entities, which may lend to credibility. This limits credit risk, default risk, operastion risk to a large extent.
Less Control
Since you’re relying on third-party infrastructure, you’re limited in how much you can customize trader experiences, especially on the backend (e.g., latency, rule engines, or payout processing).
Higher Costs or Rev-Share
Broker packages usually come with ongoing costs and/or profit splits. They will definitely cut into your margins, especially early on when you need them the most.
Risk of Platform Restrictions
Some brokers enforce limits on trading strategies (e.g., scalping, arbitrage, or copy trading). This may frustrate your trader base.
Dependence on Broker Reputation
If your broker partner faces regulatory issues, reputational harm, or downtime, your firm inherits that risk, even if you operate independently.
Compliance Gaps
You still need to do your own due diligence and set your own AML/KYC framework. Being “under a broker” doesn’t automatically make you compliant with all local laws.
A grey label solution may be suitable if you fall into one of the categories below:
- “Traders and (f)influencers”. You are looking to monetize your audience quickly
- “Educators or communities”. You have a goal of scaling your reach and turning into a business owner.
- “Small teams or solopreneurs”. You have the base but have limited technical or capital resources
Launching a prop firm can be as straight forward or as confusing as you let it become. With the right plan, tech, and community, it can be incredibly rewarding. Whether you’re looking to build the next major funded trader platform or start with 100 accounts and scale organically, through our vetted partners, we’re here to help.
Let’s talk Prop. Connect with us and start turning your trading expertise into a scalable business today.
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