Frequently Asked Questions
Frequently asked questions about prop firms and prop trading
General Questions
What is a prop firm in simple terms?
A prop firm is a company that provides traders with trading capital. Traders operate under the firm's rules, and when profits are generated, they are shared between the trader and the firm (split ratios vary by company). Participation in evaluation programs requires a fee, which is typically non-refundable if the trader does not pass.
How does the profit-sharing structure work?
Profit-sharing ratios vary by firm and plan, typically ranging from 50% to 95%. However, receiving any profit share requires passing an evaluation program first — industry-wide pass rates are estimated at 21%-30%. Trading involves significant risk including potential loss of evaluation fees, and past performance does not guarantee future results.
Is prop trading a scam?
Legitimate prop firms are not scams. However, some fraudulent operations exist. Always verify years in operation (2+ minimum), user reviews and testimonials, regulatory partnerships, payout track record, and transparent terms and conditions.
Do I need prior trading experience?
While not always required, 6-12 months of consistent trading experience significantly increases success probability. The 21%-30% pass rate indicates evaluation difficulty.
Evaluation Questions
How long does the evaluation take?
Varies by firm. Most firms allow unlimited time per stage. Some firms impose 30-60 day limits. Average completion is 2-8 weeks for two-stage evaluation.
What happens if I fail the evaluation?
You lose the evaluation fee (typically non-refundable). You can purchase a new evaluation and retry. Some firms offer discounted retry attempts. No limit on retry attempts if willing to pay fees.
Can I use Expert Advisors (EAs) or trading bots?
Depends on the firm. Many firms ban automated trading. Some permit EAs with approval. Few firms permit unrestricted EA use. Always confirm with specific firm.
What are the most common reasons for failing evaluations?
In order of frequency: violating daily loss limits (35-40%), exceeding maximum drawdown (25-30%), insufficient consistency (15-20%), not meeting minimum trading days (10-15%), and rule violations such as news trading or prohibited strategies (5-10%).
Financial Questions
How much does it cost to start prop trading?
Initial costs include evaluation fee (one-time, varies by capital tier), recommended 6-12 months of living expenses saved, and no trading capital required as the firm provides all trading capital.
When can I withdraw my profits?
Withdrawal terms vary. First withdrawal is typically after first profitable period (2 weeks to 1 month). Minimum amounts and frequency (daily, bi-weekly, monthly, or on-demand) vary by firm. Processing time ranges from same-day to 14 business days.
Are there any hidden fees?
Potential additional fees include monthly platform fees, inactivity fees, withdrawal fees, and data feed fees. Always read complete terms before purchasing.
Is the evaluation fee refundable?
Depends on firm. Best practice is fee refunded on first payout. Some credit fee to account balance. Most firms have non-refundable fees. Verify before purchase.
Trading Rules Questions
Can I hold positions overnight?
Varies by firm. Most firms permit overnight holding. Some require all positions closed daily. Many firms prohibit holding over weekends. Check specific firm rules.
Can I trade during news events?
Typically restricted. Standard restriction is plus or minus 2 minutes around high-impact news like NFP, FOMC, GDP, and inflation reports. Violation consequence is account termination. Some firms allow news trading (rare).
What happens if I violate a rule?
Minor violations result in warning and rule clarification. Major violations result in immediate account termination. Evaluation fees typically not refunded. Must purchase new evaluation to reapply.
Are there daily profit limits?
Some firms impose daily profit caps (5%-10% maximum daily gain) to prevent excessive risk. Many firms have no profit ceiling. Consistency rules may restrict single-trade profit concentration. Confirm with specific firm.
Career Questions
Do some people do prop trading full-time?
Some traders engage in prop trading as their primary activity, but this requires extensive trading experience over a long period, strict risk management discipline, and sufficient financial reserves. The majority of participants do not reach this level — evaluation pass rates of 21%-30% indicate that consistently generating profits is itself a significant challenge. Relying solely on prop trading for living expenses carries substantial risk.
How long does it take to achieve consistent results in prop trading?
This varies greatly depending on individual experience, trading skill, and market conditions — it is difficult to provide a general timeline. It is not uncommon for evaluation programs alone to take several months, and there is no guarantee of maintaining stable results even after passing. Adequate preparation time and financial reserves for periods without results are essential.
What happens if I have a losing month?
If no rule violations, continue trading with no penalties. No profits means no payout that month. Firm typically allows recovery period. Extended losses (3-6+ months) may trigger review or termination. As long as rules followed, account remains active.
Can I work for multiple prop firms simultaneously?
Generally yes, with considerations. Verify no non-compete clauses. Ensure can manage multiple accounts. Don't correlate strategies across accounts. Follow each firm's distinct rules. Some firms require disclosure of other relationships.
Japanese Market Questions
Which prop firms offer Japanese language support?
Primary options include Fintokei with native Japanese support as largest in Japan, international firms with limited Japanese support (verify individually), and more firms adding Japanese support in 2025.
Do I need to pay taxes on prop trading income in Japan?
Yes. Income is typically classified as miscellaneous income. Tax rate is progressive income tax (5%-45%) plus residence tax (approximately 10%). Annual tax return required. Maintain detailed income records. Seek professional tax advice for compliance.
Are prop firms regulated in Japan?
Currently no specific regulation for prop firm industry. Partnered brokers may be FSA-licensed. Limited specific consumer protections. Extra caution required - verify firm legitimacy. Regulatory framework may develop as industry grows.