Proprietary trading (popularly known as “Prop Trading”) involves buying and selling assets using quantitative proprietary firms’ funds instead of the traders’. This type of trading must follow strict evaluation or the challenge phases to determine whether a trader can be a funded trader.
Read on this TRU Insight to discover the best factors to consider when choosing proprietary trading firms in South Africa. You will also learn here how a quantitative proprietary trading firm manages the market risk of its funded traders.
5 Factors to Consider When Choosing a Quantitative Proprietary Trading Firms
Your financial success with a quantitative proprietary firm doesn’t necessarily entail the provided capital you receive. You must look at several parameters to prop trade with a certain prop trading firm.
But really, it’s important to pick a proprietary trading firm that aligns with your risk appetite and overall financial objectives. Here are the key considerations that you must look at before taking up the challenge of prop trading.
Trading Platform
Whether you’re prop trading or not, a mastery of your trading platform is essential to achieving financial success.
Without mastering your trading platform, it’ll be impossible for you to monitor the chart, speculate on price fluctuations, and even place trade orders. Ultimately, without these trading capabilities, you wouldn’t be able to profit and be a successful prop trader.
When looking for a quantitative prop firm, consider what trading platform they allow their prop traders to place their trades. Opt for prop firms that offer beginner-friendly, easy-to-understand, and customizable trading platforms to help you succeed.
Read more: How to Find the Best Brokers in South Africa in 2025: How to Choose the Best Proprietary Trading Firms in South Africa in 2025?Training and Support
Enriching the trading knowledge and skills of their clients is one of the utmost priorities of quantitative proprietary firms. After all, the firms’ funds are being exposed to market risk, so they want to protect it by helping traders become profitable.
By providing exceptional training and educational resources to prop traders, the funds they provide are safe and are up to the chance of profiting from the market.
Profit Share
Remember, the quantitative proprietary trading firm functions as the “loaner” of a funded trading account to its prop traders. Essentially, a prop trader only needs to pay a small fee to access big accounts.
However, here’s the question: “Is the profit you generate from your funded trade for you to keep or for them?”
Well, it will be split between you and your prop firm. The primary revenue stream of prop firms is the percentage they get from the profits of their funded traders. Most of the time, they have a share of 30% to 10% of your trade profits—the rest is for you to keep.
When looking for a quantitative proprietary firm to trade with, make sure to scrutinize their profit share structure and the terms and conditions to see the legalities of sharing your hard-earned profits with the firm.
Challenge Process
Also known as the evaluation phase, the challenge process is the way for the quantitative proprietary firms to assess the profitability of the challenger (or the applicant). Once the challenger passes the evaluation, they will be entitled to receive a funded trading account.
Usually, the only fee a challenger needs to pay is the challenge fee. It increases as the amount of the funded account gets bigger.
The degree of difficulty depends on the amount in the funded account; the bigger the funded trading account, the harder the challenge is. Sure, the challenges for trading accounts with smaller funds are less hard; but these are still not easy to pass.
Remember, if the challenge process is too lenient or too easy, it may be a red flag signal. After all, it’s their money that’s at risk, so they will make sure that funded members can handle the market risk and their money.
Ultimately, your trading skill level and capital should be the primary consideration when you’re choosing which prop firm’s challenge suits you.
Regulatory Compliance
By law, all financial service providers must be under the financial regulation of a regulatory body.
Since quantitative proprietary trading firms fall under such sectors, it’s important to look at their regulatory adherence so you can have a safety net when your relationship with the prop trading firm goes south.
By transacting with a regulated prop firm, you’re entitled to escalate your firm disputes to its regulatory body.
In South Africa, the financial service providers shall be primarily regulated by the Financial Sector Conduct Authority (FSCA). Moreover, some proprietary trading firms in South Africa may also be under the regulation of other regulatory bodies globally, such as;
| Financial Service Conduct Authority (FSCA) of South Africa | https://www.fsca.co.za/ |
| Australian Securities and Investments Commission (ASIC) | https://asic.gov.au/ |
| Cyprus Securities and Exchange Commission (CYSEC) | https://www.cysec.gov.cy/ |
| Monetary Authority of Singapore (MAS) | https://www.mas.gov.sg/ |
| Danish Financial Supervisory Authority (Danish FSA) | https://www.dfsa.dk/ |
However, for prop firms not regulated by these regulators, it doesn’t necessarily mean they’re unregulated. They may be regulated by other financial regulatory agencies.
Want to learn more about financial regulators? Check this TradeGeek Lesson: Foreign Regulatory Agencies.
News and Proprietary Trading: News Trading Capacity
The majority of quantitative proprietary trading firms in South Africa acknowledge the high-stakes environment of the market during news releases. To mitigate risk, the firms restrict their prop traders from trading the news, especially the high-impact news releases.
This strategy is designed to prevent individual traders from being emotional, which may result in gambling-like trading and separation from their trading plan.
However, the capability of prop traders to trade the news really depends on the proprietary firm.
Frequently Asked Questions
Is prop trading profitable in South Africa?
Yes, proprietary trading is profitable—not only in South Africa but globally. With prop trading, you can have access to big trading accounts and profit from them by just paying a fee and passing the quantitative prop firm challenges.
What happens if you lose money in prop trading?
No, you don’t owe the prop firm their money from your losses from the prop trading. The only payment you will be asked for is through the challenge fee.
What is the common trading method employed by prop firms?
The common risk management techniques that quantitative prop trading firms require their prop traders to apply to their trading are the following;
- Maximum Drawdown
- Daily Stop-Loss
- Daily Drawdown
How long is the usual withdrawal process in quantitative proprietary firms?
Most of the time, the prop firm will allow funded traders to withdraw their profit share after 30 days of realizing the profits. However, there are other proprietary trading firms that let prop traders request withdrawal as early as seven days.
