Understanding Prop Trading Success Rates

Prop Trading Success Rates Explained

Prop firms, or proprietary trading firms, offer a unique opportunity for traders to trade using the firm’s capital instead of their own—something that can be a game-changer.

However, the reality is that not every trader will thrive in this environment.

In this post, let’s dive into some cold, hard truths about the success rates in prop firm trading. This arena isn’t for the faint of heart (or the thin of wallet).

If you’re considering prop firm trading, understanding the statistics behind it is crucial.

If I could go back and talk to myself five years ago, I would tell myself: slow down and start small—and these numbers should show you exactly why.

Since prop firms are private, data can be limited. However, the studies below offer valuable insights into the realities of success in this field.

First Study: FPFX Tech Data

This study, conducted by FPFX Tech—a U.S.-based company providing software for prop trading firms—analyzed over 300,000 accounts belonging to 100,000 traders across 10 different prop trading companies.

According to Justin Hertzberg, the Founder and CEO of FPFX Tech, these key findings emerged:

• 14% of traders pass the challenge and obtain a funded account.

• Of those who are funded, 45% achieve a payout, which means only 7% of all traders earn payouts.

• The average payout is around 4% of the account value.

Second Study: PipFarm Client Data

A second study, published by Finance Magnates, analyzed data from 500 active clients of PipFarm, a trader-funded firm offering proprietary trading on accounts ranging from $5,000 to $200,000.

Here’s what they discovered:

• The average trader invests $4,270 in prop firm challenges.

• Nearly 50% of clients never receive any payout, and almost 60% lose capital.

• 41% of traders become profitable.

• For every $1.9 million invested in challenges, traders earned $7.6 million in payouts—resulting in a 300% return.

Key Takeaways:

Prop Trading is Highly Challenging:

• Only a small percentage (7-14%) of traders pass evaluations and get funded.

• Even fewer (around 41%) achieve consistent profitability, underlining the difficulty of succeeding in prop trading.

Profitability is Modest:

• The average payout is often only 4% of the account value, reflecting the high-risk nature of the business and modest rewards for those who succeed.

Can Become Expensive:

• Traders invest significant amounts in challenges, with an average of $4,270 spent per trader. Yet, nearly 60% of clients lose capital, showing that while success is possible, it can become expensive as you learn the ropes of prop trading.

These studies underscore the challenges and potential rewards of prop trading.

Prop trading may just be the most exciting and humbling hustle you’ll ever tackle. While success rates are low, those who do succeed can experience significant returns. The key is understanding that the path to profitability is long and full of obstacles—and success requires a combination of skill, patience, and discipline.

Final Thoughts: