The FXNN Challenge is a smart way to enter the world of prop trading, with tiers to suit traders at every level. But what exactly is prop trading, and how is it different from standard trading?
Prop trading – or to give its full title, proprietary trading – is where a firm such as FXNN invests its own funds for profit rather than using a client’s money. The primary goal is profit – rather than earn a commission from processing trades, the firm earns full profits (and losses) from any trades placed in the market.
FXNN’s approach to proprietary trading opens up this model for external traders to participate. Traders access virtual capital and trade it in real market conditions. FXNN uses this virtual trading to generate trading signals for our proprietary trading models to follow. When a trader’s virtual trades generate positive P&L in the trader’s virtual account, FXNN pays a share of this P&L to the participating trader as a real (not virtual) payout. This is FXNN's proprietary trading, a platform that provides traders with real capital and seeks truly capable traders.
FXNN allocates an agreed amount of capital to a trader to trade with. Prop traders generally have autonomy over how they then trade – they face the same challenges as standard traders. Prop traders use a number of different strategies for trading, including approaches such as arbitrage (including index, volatility and merger arbitrage), global macro trading, swing trading and day trading.
Risk management is a vital factor in any form of trading and prop trading is no exception. Because a firm’s own capital may be at risk, there will often be higher levels of scrutiny with regards to the activities of prop traders, and stringent conditions will usually apply.
One of those is the maximum drawdown limit that the firm imposes on prop traders – if their trading account drops below a predetermined threshold, it’ll be suspended.
In a standard trading setup, a firm would derive its income on a commission or percentage basis from acting as a broker on behalf of its clients. The client is using their own funds to place trades – and that’s a major difference between a brokerage model and prop trading.
In the case of prop trading, the firm is using its own funds, so it earns 100% of any profits or losses that it makes.
The trader makes their money from an agreed share of any profits that they make. In the case of the FXNN Challenge, traders will receive an account with virtual funds. After passing two phases of Challenge, traders will receive a real-capital funded account, and get a genuine share of up to 90% any profits they make.
Prop trading usually gives traders access to a higher level of capital than they would normally have available for trading. This offers the opportunity for higher levels of profit.
Prop trading firms normally include access to their tools, technology and market data as part of their programs, and there is no cost to using these for many potential traders.
Trading can be challenging. Prop trading can offer learning opportunities for traders of any level as the cost for participating is limited to the fee the participant pays to take the challenge.
FXNN wants to make sure that all skilled traders are qualified for the program, for which risk limits and rules are in place. For such traders, FXNN will provide full support to them with substantial funds in their accounts, and will fairly distribute their deserved profits
Successful trading at any level depends on the skill of the trader. A prop trading firm may supply you with the tools and tech to help you build your strategies, but you have to evolve them and make them work.
Not everyone is cut out for trading. It’s a competitive environment and there’s a lot to learn.
FXNN allocates an agreed amount of capital to a trader to trade with. Prop traders generally have autonomy over how they then trade – they face the same challenges as standard traders. Prop traders use a number of different strategies for trading, including approaches such as arbitrage (including index, volatility and merger arbitrage), global macro trading, swing trading and day trading.
Risk management is a vital factor in any form of trading and prop trading is no exception. Because a firm’s own capital may be at risk, there will often be higher levels of scrutiny with regards to the activities of prop traders, and stringent conditions will usually apply.
One of those is the maximum drawdown limit that the firm imposes on prop traders – if their trading account drops below a predetermined threshold, it’ll be suspended.