Proprietary trading. News trading. Singapore. “FNG has learned that a number of leading (and not-so-leading) retail prop trading firms have begun to implement rules for their clients that restrict the trades that can be made (or, profit that can be booked) by traders immediately around major news events. The practice, known as News Trading, is a risky strategy whereby a trader takes a significant position in a security immediately before (or after) relevant economic or company/industry specific news is announced, that is likely to affect the price of the security. ” — FNG.
Unemployment. United States. The unemployment rate for the United States came in at 3.9% for the month of April 2024, slightly higher than the forecasted rate of 3.8%. Non-farm payrolls came in at 175,000, significantly less than the forecasted 240,000. The average monthly gain over the last twelve months was 242,000. Average hourly gains were estimated at 0.2% or an annualized amount of 2.4%. This is down from the previous 0.3% monthly average hourly gain or 3.6% annualized hourly gain. — U.S. Bureau of Labor Statistics.
What is a prop trade challenge?
As investors digest current challenges to their investment portfolios, some are considering engaging in proprietary trading. According to SmartPropTrader.com, proprietary trading or prop trading involves a firm using its own capital to trade securities, derivatives, or currencies versus trading on behalf of a client and earning a commission on that trade or sharing in the profits from the trade.
Not anyone can walk into a prop trade firm and start trading. Potential traders are evaluated by the prop firm during an evaluation period referred to as a prop firm challenge. According to SmartPropTrader.com, “A prop firm challenge is a structured evaluation process designed to identify skilled traders who can potentially join the prop trading firm and trade the firm’s capital.”
There are a number of benefits to prop trading. Among them are improvement in trading abilities, the availability of more funds, the opportunity to increase earnings, and the opportunity to engage a community of expert traders.
Smart Prop Trader advises that you be mindful of the terms and conditions of any challenge that you enter. Among potential terms and conditions you may face are drawdown limits, which refer to the maximum amount of losses allowed to a trader; the use of automated trading algorithms; awareness of the winning criteria for a challenge; and the practice of risk management.
Challenges vary among prop trading firms. For example, Traders With Edge offers three prop trade challenge account types: Turtle, Hare, and Instant. Traders can choose between two capital levels: Standard and Aggressive. There are trading rules for profit targets, drawdown limits, maximum drawdowns, maximum time, minimum time, and no manipulation.
Whichever prop trading firm and its accompanying challenge you choose, review the challenge’s rules closely and get advice on the rules and the terms and conditions defining your relationship with the prop firm. You will likely have substantial skin in the game that, given the risks in trading, you could lose.
Alton Drew
3 May 2024
Disclaimer. The above information is provided for informational purposes and should not be viewed as legal or investment advice. Please contact your investment advisor or attorney before making any investment decision.
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