Prop Trading vs. Retail Trading - Compare Proprietary Trading Firms

Understanding Prop Trading vs. Retail Trading

Prop trading and retail trading are two distinct approaches to trading financial markets, each with its own advantages and challenges. Proprietary (prop) trading involves trading with a firm’s capital, while retail trading uses personal funds through a brokerage account. This article compares the two to help you decide which aligns with your trading goals.

What is Prop Trading?

Proprietary trading involves trading financial instruments—such as stocks, forex, futures, or cryptocurrencies—using a prop firm’s capital. Traders must pass an evaluation process to access funded accounts, sharing profits with the firm (typically 70/30 to 90/10 splits). Firms like Apex Trader Funding and My Funded Futures provide access to significant capital, advanced platforms, and mentorship, minimizing personal financial risk.

What is Retail Trading?

Retail trading involves individuals trading their own money through brokerage accounts, such as those offered by platforms like Interactive Brokers or TD Ameritrade. Retail traders have full control over their strategies and keep all profits but bear all losses and face higher capital requirements to scale.

Key Differences Between Prop Trading and Retail Trading

Here’s a breakdown of the main differences to help you compare prop trading vs. retail trading:

Capital Source: Prop trading uses the firm’s capital, while retail trading relies on personal funds.
Financial Risk: Prop traders risk the firm’s money, with losses absorbed by the firm, whereas retail traders risk their own capital.
Profit Sharing: Prop traders share profits with the firm, while retail traders keep 100% of their gains.
Access to Tools: Prop firms often provide professional platforms (e.g., NinjaTrader, TradingView) and data feeds, while retail traders may need to pay for these separately.
Evaluation Process: Prop trading requires passing a challenge, like those offered by TradeDay, while retail trading has no such requirement.
Scalability: Prop traders can access larger accounts (e.g., $10,000 to $500,000) after passing evaluations, while retail traders are limited by their personal capital.
Risk Management Rules: Prop firms enforce strict rules, such as daily loss limits, whereas retail traders set their own risk parameters.
Support and Mentorship: Prop firms often offer training and communities, like our free mentorship program, while retail traders typically rely on self-learning or paid courses.

Pros and Cons of Prop Trading

Pros:

Access to significant capital without personal risk.
Professional tools and platforms at no or low cost.
Support from mentorship and trading communities.
Ability to scale accounts quickly with strong performance.

Cons:

Profit sharing reduces earnings compared to retail trading.
Strict risk rules can limit trading flexibility.
Evaluation fees or subscription costs for some firms.

Pros and Cons of Retail Trading

Pros:

Full control over trading strategies and decisions.
Keep 100% of profits without sharing.
No evaluation process or firm restrictions.

Cons:

High personal financial risk with potential for significant losses.
Limited capital restricts scalability and leverage.
Costs for premium tools, data feeds, or education can add up.

Which is Right for You?

Choosing between prop trading and retail trading depends on your goals, risk tolerance, and resources:

Choose Prop Trading if: You want to trade large capital without risking personal funds, prefer access to professional tools, and value mentorship. Prop trading suits disciplined traders comfortable with firm rules, such as those at FundedNext Futures or Take Profit Trader.
Choose Retail Trading if: You prefer full control, want to keep all profits, and have sufficient capital to trade independently. Retail trading is ideal for traders who value flexibility over firm support.

Not sure where to start? Our free live training with a 7-figure trader can help you decide and develop a strategy that works for you.

Get Started with Your Trading Journey

Both prop trading and retail trading offer unique opportunities to profit in the financial markets. By understanding their differences, you can choose the path that aligns with your skills and goals. Prop trading provides a low-risk way to scale, while retail trading offers full autonomy.

Ready to explore your options? Compare top prop firms or join our free mentorship program to master trading and achieve financial success!