Trading Without Capital or Risk? The Truth About Prop Trading (the Real Success Rates)

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Today's question is the million-dollar question. Can you start trading without any capital and even without risk?

As you might guess, the answer is complex and involves something called "prop trading."

This is when a firm entrusts its capital to a trader or an aspiring one to manage.

What are the benefits?
-You don't need to start by investing your own capital, yet you can still earn a profit percentage;
-You don't personally take on risks.

Spoiler alert: all that glitters is not gold.

Indeed, it seems like the perfect opportunity. However, it's not that simple.

Watch the video now to find out why and how many traders actually manage to profit from Prop Trading!

Enjoy the watch!


What Prop Trading is

Hello and welcome back to this brand-new video! Can you trade without any capital and keep all the profits for yourselves while leaving the risks and losses to others?

Wouldn't it be nice if this were possible? Stay with me today, and you'll discover something new!

I'm Giuseppe, one of the coaches at Unger Academy, and for those of you who are wondering if trading without any capital and keeping the profits is possible, today we're going to explore a technique that's often presented as the solution.

We’ll talk about Prop Trading, a technique some of you might already be familiar with. In this video, we'll quickly go over what it is, analyze the pros and cons, and reveal a really interesting statistic that shows how many trades actually manage to make money with Prop Trading. Alright, let's get started!

Alright, so, what is Prop Trading? We all more or less know what trading is.

The word Prop stands for Proprietary, meaning trading with the capital owned by someone. But owned by whom, you might ask?

The capital owned by a firm, not the trader. And this is the major difference from the usual trading we all know.

So, there's a firm with its own capital that entrusts a certain amount of money to a trader, who’s called a Prop Trader, tasked with investing the money and making a profit.

As we'll see later in this video, if the Prop Trader can make a profit when investing this capital, they’ll also get a slice of the earnings, which is already a first benefit of this trading technique.

The second benefit, which I would say is greater than the first, is that the Prop Trader can actually avoid any kind of risk since the capital they’re using is not their own. This means that any potential losses – and we know that losses are always a part of a trader's experience – will not be borne by the Prop Trader, but by the firm that provided the capital.

This is no small advantage, since we'll be trading with someone else's capital, and the firm will assume all the resulting risks.

So, up to this point, I'd say there are certainly some compelling benefits to the technique of Prop Trading.

Now, some of you might be wondering why am I still here, doing systematic trading, if this technique was really as interesting as it seems.

The fact is that Prop Trading firms don't just hand over their capital to anyone off the street. They want to find the best traders out there and only entrust their money to them.

How to become a Prop Trader

So how do they find them? They select traders through competitions, or qualifications, or contests, or whatever, in which the trader must prove to be the very best.

These contests are called Challenges and serve precisely this purpose. So to become a real Prop trader, we’ll have to go through several tests to assess our skills.

It often happens that during these challenges, a trader encounters losses greater than allowed. In this case, they’re disqualified and must start over from scratch.

This continues until all the Challenges and verification steps are passed, and finally, the trader becomes a Prop Trader and can begin working with the firm's capital.

Good, you might say. So after overcoming this preliminary phase, there will come a time when we can finally become a Prop Trader and fully trade with the firm’s capital.

And at that point, we can also start generating the first profits… To see how likely this is, we made a small survey on two of the most famous Prop Firms, and the data we collected is not at all encouraging.

Statistics on who actually becomes a Prop Trader

100% obviously sign up for the first phase, the Challenge. Only 15% of those who signed up pass this phase. So 85% of traders are not capable of passing the first tests, which means that aspiring traders with an average training can’t make it.

This 15% is reduced to 6% after the second verification phase because the Challenge alone is not enough for the firm to certify someone as a good trader. So, an additional verification step follows, reducing this 15% to 6%, meaning from 100 traders, we're down to having 6 viable ones.

This 6% then starts trading with the assigned capital.

The firm obviously imposes rules on maximum risk and minimum profit that Prop Traders have to respect over time in order to continue their operations.

Now, over 80% of these traders, thus this 6%, fail to respect these rules and, after a few months, are expelled from the firm and are no longer allowed to trade unless they start the Challenges over from scratch.

So, based on these statistics, only 1.2% of the traders who apply manage to actually trade after a few months with real money provided by the firm.

Becoming a Prop Trader is almost impossible

This is an alarming figure because it means that 99% of all aspiring Prop Traders didn't make it. They stop either at the challenges, hence before even starting to trade with the firm’s money, or immediately after beginning their operations.

What we've just seen tells us that becoming a Prop Trader is extremely difficult, but it's also frustrating because while it's true that the Prop Traders don't have risks related to trading their own money, on the other hand, they have costs related to participating in these challenges.

In fact, every time the aspiring trader wants to undergo these verifications, they must pay a fee of a few hundred dollars, which they will obviously have to spend again if they have to start over.

So, imagine a trader who tries to be chosen and is thrown out. He starts all over again, and again is thrown out. Going through such a process for months must be deeply frustrating because you never see the light at the end of the tunnel.

So, to answer the initial question where we wondered if it was possible to trade without initial capital and leave the risks of trading to others, the answer is yes, because Prop Trading would allow it, but only works for a very few traders.

Training is always necessary

For those who have had the patience to listen to me so far, we've understood that trading and prop trading are two completely different things. However, they share a common trait, that is, the need for adequate training.

Training is indeed fundamental to succeed as a trader, because we’re risking our own money, but it’s essential also to succeed in Prop trading, where adequate training would really be advisable to not end up in this endless carousel without even seeing the goal getting closer.

If among you there is someone interested in the world of systematic trading, I suggest clicking on the link in the description.

From there, you can watch a free presentation by Andrea Unger, get our best-selling book "The Unger Method" by only covering the shipping costs, or even book a free strategic consultation with a member of our team.

That's really all for today, goodbye and I’ll see you next time!

Need More Help? Book Your FREE Strategy Session With Our Team Today!

We'll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.

Andrea Unger

Andrea Unger

Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.

I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems. 

In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.

Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.

Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.