Top 7 Factors to Choose the Right Prop Trading Firm

1. Profit Split & Funding Size

The profit split arrangement is often the first thing traders look at, and for good reason—it directly impacts your earning potential. Most reputable prop firms offer profit splits ranging from 50% to 90%, with the trader's percentage typically increasing based on performance and account scaling.

However, don't focus solely on the highest percentage. Consider the maximum funding available—a 70% split on $200,000 might be more valuable than 90% on $50,000. Look for firms that offer clear scaling paths, allowing you to grow your account size as you demonstrate consistent profitability.

Red flags: Firms offering unrealistic splits (95%+) or unclear scaling criteria often have hidden catches in their terms.

2. Evaluation Process

The evaluation or challenge process varies dramatically between firms, and understanding these requirements is crucial for success. Most prop firms use multi-step challenges designed to assess your trading skills, risk management, and consistency.

Common Evaluation Structures:

• Two-Step Challenge: Phase 1 (profit target) + Phase 2 (consistency test)
• One-Step Challenge: Single phase with profit target and time limit
• Instant Funding: No challenge, but stricter ongoing rules
• Assessment Programs: Longer evaluation periods with lower targets

Evaluate the profit targets, maximum drawdown limits, time constraints, and minimum trading days. Some firms require 5% profit in 30 days, while others allow 8% over 120 days. Choose a structure that matches your trading frequency and risk tolerance.

3. Trading Rules & Risk Limits

Risk management rules can make or break your funded trading experience. These rules are designed to protect the firm's capital, but overly restrictive policies can hinder profitable trading strategies.

Key Risk Parameters to Evaluate:

• Maximum Daily Loss: Typically 3-5% of account balance
• Maximum Total Drawdown: Usually 6-10% from account high
• Position Sizing Limits: Maximum risk per trade (often 1-2%)
• Overnight and Weekend Holdings: Some firms restrict these
• News Trading Restrictions: Limitations during high-impact events

Consider how these rules align with your trading strategy. Scalpers need firms with minimal restrictions, while swing traders should focus on overnight holding policies. Always read the fine print—some firms have additional rules that only appear in detailed terms and conditions.

4. Technology & Platforms

In trading, technology can be the difference between profit and loss. Evaluate the firm's trading platforms, execution speed, and technical infrastructure before making your decision.

Platform Considerations:

• Supported Platforms: MetaTrader 4/5, cTrader, NinjaTrader, TradingView
• Execution Speed: Average order execution times
• Spreads and Commissions: Raw spreads vs. markup models
• Server Locations: Proximity to major exchanges for low latency
• VPS Services: Virtual private servers for automated trading

Test the platform during peak trading hours if possible. Some firms offer demo accounts that simulate their live trading environment, giving you a feel for execution quality and platform stability.

5. Fees & Scaling

Understanding the complete fee structure is essential for calculating your true return on investment. Look beyond the obvious challenge fees to uncover potential hidden costs.

Calculate the break-even point based on total fees and your expected trading performance. Some firms offer fee rebates after reaching funded status, while others maintain ongoing charges that can erode profitability.

Scaling opportunities are equally important. Look for firms that offer clear paths to larger accounts, multiple account funding, and reduced fees for consistent performers.

6. Educational Support & Community

The quality of educational resources and community support can significantly impact your trading development, especially for newer traders transitioning to funded accounts.

Valuable Support Features:

• Trading Education: Courses, webinars, and strategy guides
• Mentorship Programs: Access to experienced traders
• Community Forums: Peer interaction and strategy sharing
• Performance Analytics: Detailed trading statistics and feedback
• Customer Support: Responsive help desk and technical assistance

Firms with strong educational components often have higher trader success rates. Look for programs that offer ongoing support rather than just initial training materials. Active communities can provide valuable insights and motivation during challenging periods.

7. Reputation & Regulation

In an industry with limited regulation, a firm's reputation and transparency become crucial factors for protecting your investment and ensuring fair treatment.

Due Diligence Checklist:

• Company Registration: Verify legal business registration
• Track Record: Years in operation and trader testimonials
• Payout History: Consistent, timely profit distributions
• Regulatory Compliance: Adherence to relevant financial regulations
• Transparency: Clear terms, conditions, and communication
• Third-party Reviews: Independent evaluations and ratings

Research the firm's management team, read independent reviews, and check trader forums for authentic experiences. Be wary of firms with frequent rule changes, delayed payouts, or limited contact information.