If you want to make your trading career without having large investments then you must know the proprietary trading firms or prop firms. These firms provide traders with access to capital that allows them to trade with more money than they’d have on their own. But not all traders are the same. Some prefer the quick and 24-hour world of forex while others like the structured and company-driven stock market. The big question is: how do prop firms stack up for forex traders versus stock traders? Let’s discuss
Access to Capital: A Bigger Edge for Forex Traders?
Capital is one of the main factors luring traders to prop businesses. Not everyone possesses tens or hundreds of thousands of dollars to exchange. By allowing traders to use their funds while keeping a portion of the earnings, prop businesses address this issue.
Forex Traders
Forex traders arguably benefit the most from prop firm funding. Why? Because forex trading doesn’t require massive capital to generate decent returns. The forex market is highly leveraged meaning you can control larger positions with a small amount of money. Many prop firms provide leverage as high as 1:100 or even more which can significantly boost profits. With the low cost of entry and high leverage, forex traders can scale their accounts faster than stock traders.
Stock Traders
Stock traders also get access to firm capital but they don’t usually get the same crazy leverage as forex traders. The stock market is more regulated and prop firms are often limited in how much leverage they can provide. Plus, buying shares of solid companies like Apple or Tesla requires more money per trade than buying a few lots of EUR/USD. So, while stock traders still benefit from prop firms, they need more starting capital than forex traders to see substantial returns.
Market Hours: The 24/5 Advantage for Forex Traders
One massive advantage forex traders have when working with a prop firm is the ability to trade nearly all the time. Forex markets run 24 hours a day and five days a week. Whether you’re a night owl or an early riser, there’s always an opportunity to trade.
Stock traders, on the other hand, are limited to standard market hours—usually from 9:30 AM to 4:00 PM Eastern Time in the U.S. There’s after-hours trading but liquidity is often low and spreads can get nasty. This means forex traders get way more flexibility when trading with a prop firm while stock traders are stuck within a fixed window.
Cost of Trading: Lower for Forex Traders
Forex Traders
The decreased cost of trading is another significant benefit for forex traders. The majority of forex prop providers don’t impose trading commissions. Rather, they profit on the spread, which is the difference between the asking and bid prices. This keeps trading expenses down, which is quite important when you’re trading several times a day. Additionally, there is no pattern day trading (PDT) regulation in forex, so you may make several transactions each day without having to have a minimum balance.
Stock Traders
Stock trading can be more expensive. Many brokers charge commissions and even if you’re using a commission-free platform then you might still face hidden fees like payment for order flow (PFOF) or high spreads. Also, if you’re trading U.S. stocks then the PDT rule requires you to maintain a $25,000 balance to day trade freely. Prop firms can help bypass this but it’s still an extra hurdle that forex traders don’t have to worry about.
Profit Splits & Payouts: A More Level Playing Field
Prop firms make money by taking a cut of a trader’s profits typically anywhere from 10% to 50% depending on the firm and the trader’s experience level.
For both forex and stock traders, the profit split structures are pretty similar. Some firms provide better deals than others but generally, traders keep the majority of their earnings. Where forex traders might have a slight edge is in the frequency of payouts—some forex prop firms provide bi-weekly or even weekly withdrawals while stock trading firms may require monthly payouts.
Trading Strategies: Which Market Gives You More Freedom?
Different techniques are needed for stock and FX trading, and prop companies occasionally set limits that may make one market more profitable than the other.
Forex Traders
With regard to strategies, forex traders have a great deal of freedom. Forex prop businesses usually permit trading in any form including swing trading, day, and scalping. Forex markets are perfect for people who want rapid trades with lots of chances since they move quickly, allowing traders to profit from short-term movements.
Stock Traders
However, stock traders may be subject to some restrictions; some prop firms may forbid high-frequency strategies such as scalping or require traders to hold positions for a longer period of time. This is because stock markets are more impacted by economic news, earnings reports, and company fundamentals which can lead to unpredictable price swings that prop firms would prefer to avoid.