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New to Trading? Prop Firms Explained
- Proprietary trading firms, often called “prop firms,” are companies that fund traders to make investments on their behalf, using the firm’s capital rather than the trader’s money.
- Forex prop firms only function in currency markets and deliver capital to the trading account of a trader for Forex trading.
- Access to high capital levels is a major advantage in trading with a prop firm and can enable modest traders to trade in greater positions and earn more money.
- Good prop firms should clearly have defined fee rules and should offer training opportunities, access to advanced trading tools and mentorship from experienced traders.
- Most prop firms subject new traders to evaluation or trading challenges before they access real money.
- Prop firms can be the access point for novice traders to come aboard with much-needed capital, resources, and a structured trading environment.
- It's important to ensure that the values of a prop firm align with your goals and that it has a track record of being supportive of its traders before investing in it.
- Forex prop firms have strict rules such as maximum daily loss and maximum drawdowns to minimize risk.
- Mentoring from experienced traders is a valuable resource offered by some prop firms, allowing traders to learn strategies and avoid mistakes faster.
- Tests and assessments filter out traders with limited strategy or performance levels and are carried out in practice trading accounts before real money is accessed.
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