Prop firms are a special breed in the finance world. They give you access to big pools of capital and advanced trading tools.
If you become a prop firm trader you operate within the firm’s infrastructure and leverage the firm’s capital to scale your profits.
Your earnings as a prop firm trader will depend on your risk management, trading decisions and the profit sharing terms of your firm.
A prop firm trader’s income isn’t fixed or salary based; it’s performance based. Traders profit from the markets by using their skills in trading stocks, Forex, options, futures and other financial instruments.
How much you can earn is directly related to the firm’s profit sharing ratio which is usually 75/100 to 90/100. For example if you make $10,000 profit and the firm is 75/100 you’ll take home $7,500.
Traders with a proven track record can earn $100,000 to $500,000 per year. Some firms report millions in payouts over a few months.
The level of experience you bring can play a big role in your earnings. As a prop firm trader the learning curve is steep. But with experience and consistent performance you can earn a good income although as with any trading there are no guarantees of profit.
Prop Trader Earnings
When you enter the world of proprietary trading you need to understand the earnings.
Your income as a proprietary trader can vary greatly due to many factors, market conditions, your trading strategy’s performance and your level of experience.
- Average Base Salary: According to Glassdoor the average base salary for a proprietary trader is at various levels. This is a starting point but your actual earnings will vary depending on the firm’s compensation structure and your win rate.
- Profit Sharing: Many prop firms use a profit sharing model where you as a trader get a percentage of the profits made from trading. Usually this is 75/100 to 90/100 in your favor so if you’re profitable you can earn a lot.
- Median Wage: Data shows the median wage for proprietary traders is $203,679. This is a more representative number of earnings, less skewed by extreme values.
Keep in mind these are just rough estimates. Your actual earnings will be tied to the prop firm’s performance and broader economic conditions.
Check the prop firm’s payout reports and revenue. This will give you an idea of how their traders are doing and by extension your potential earnings.
Prop Firm Trader Salaries
Proprietary, or prop, firm traders salaries vary greatly due to many factors. As you enter the prop trading industry understand these components to gauge earnings.
Experience and Skill Level
Your experience and skill level will play a big role in your earnings. Newbies to the industry will start with lower earnings while experienced traders who are profitable will get much higher payouts.
It’s not uncommon for experienced traders with a good track record to negotiate better terms and higher percentage of the profits they make.
Firm’s Capital and Risk Parameters
Firm size and capital at your disposal will impact your salary potential. Firms with more capital will allow for bigger trades and potentially more profit.
Plus each firm has its own risk parameters that will limit or enhance your ability to earn based on how aggressively you can trade.
Market Conditions
Current market conditions will impact your income. Volatile markets will present more opportunities to profit but also more risk.
A stagnant market will limit your trading and therefore your earnings.
Location
Your physical location or the economic conditions of the region where the firm is based will impact your salary.
Traders in major financial hubs like New York or London will have more resources and opportunities. This can mean higher earnings than those in smaller or less developed areas.
Compared to Traditional Traders
When looking at prop firm trader earnings it’s good to compare to traditional traders.
As a traditional trader you manage your own capital and make your own trading decisions. This is different from a prop firm trader who uses the firm’s capital and risk parameters.
AspectProp Firm TraderTraditional TraderCapitalUse firm’s capitalUse personal capitalRiskFirm absorbs lossesYou absorb lossesProfit SharingShare profits with firmKeep 100% of profitsIndependenceFollow firm’s strategiesFull trading autonomySupportAccess to training/supportSelf-reliant
Prop traders share profits with their firm. It’s common for a prop trader to keep only a portion of the profits based on their agreement with the prop firm.
You’ll see high earners in prop trading because of access to large firm provided capital and wouldn’t have to worry about losing personal assets.
As a traditional trader you have the freedom to choose any trading strategy and aren’t bound by a firm’s rules. Plus all the returns on your investments are yours.
However you’re directly exposed to financial risk and need to have the capital to trade.
Bonuses and Additional Compensation
Bonuses and additional compensation are common in prop trading but are heavily dependent on your performance, the firm’s policies and market conditions.
Here’s a breakdown:
- Profit Sharing: You keep a big portion of the profits. Common splits are 60-80%.
- Performance Bonuses: High performing traders get additional bonuses. These bonuses vary among firms and based on profitability.
Annual Salary Range
Your performance can add to your total compensation. For example:
Performance LevelEstimated Compensation RangeAverage$100,000 – $200,000Top Performers$200,000 – $500,000+
Note the high end includes profit sharing. In some cases top performers can earn over $1 million.
- Partnership or Equity: Top traders may be offered a partnership or equity in the firm.
You may also get additional benefits. These benefits will add to your overall trader success. They include access to advanced trading tools, training programs and networking opportunities.
Remember these are estimates and can vary based on many factors. Factors like the firm’s success and market volatility.
If you see limited opportunities in trading for a prop firm you may want to start your own proprietary trading firm and hire a team of great prop traders.
| Aspect | Prop Firm Trader | Traditional Trader |
|---|---|---|
| Capital | Use firm’s capital | Use personal capital |
| Risk | Firm absorbs losses | You absorb losses |
| Profit Sharing | Share profits with firm | Keep 100% of profits |
| Independence | Follow firm’s strategies | Full trading autonomy |
| Support | Access to training/support | Self-reliant |
| Performance Level | Estimated Compensation Range |
|---|---|
| Average | $100,000 – $200,000 |
| Top Performers | $200,000 – $500,000+ |