Individual Capital vs. Using a Prop Firm’s Capital

Individual Capital vs. Using a Prop Firm’s Capital: Which is Right for You?

When it comes to trading, one of the biggest decisions you’ll face is whether to use your own capital or trade with a proprietary trading firm’s funds. We are here to help you in making the decision.

Both options have their pros and cons, and the right choice depends on your goals, experience, and risk tolerance.

 In this article, we’ll break down the key differences between trading with individual capital and using a prop firm’s capital, so you can make that informed decision.

Trading with Individual Capital

This means using your own money to fund your trading account. You have full control over your funds, trading decisions, and profits but you also bear all the risks.

Pros:

1. You have full control: You decide how much to trade, when to trade, and which strategies to use.
2. No Profit Sharing: You keep 100% of the profits you make.
3. Flexibility: There are no rules or restrictions imposed by a third party.
4. No Evaluation Fees: You don’t need to pay for challenges or evaluations to start trading.

Cons:

1. Limited Capital: Your trading size is limited by the amount of money you have available.
2. High Risk: You bear all the losses, which can be financially and emotionally taxing.
3. No Support: You’re on your own when it comes to learning, strategy development, and risk management.
4. Slower Growth: Building a large account from scratch can take years, especially if you start with limited funds.

Trading with a Prop Firm’s Capital

This means using the firm’s money to trade. In return, you share a percentage of the profits with the firm. At FundedBits,  we offer up to 90% of their profits. Allow me to put that into perspective for you. Imagine a trader called Sarah uses $109 to buy a $10,000 account and she makes a withdrawable  $1000, we give Sarah up to 90% of her overall profits which is $900 [a whooping 8.9× on her investments]

Pros:

1. Access to Large Capital:  The more funds you have in trading,  the more capacity you have to make more. Prop firms provide significant funding, allowing you to trade large positions and potentially earn higher profits. 
   
   In Sarah’s case, instead of making 10% on $109 [which is the cost of her investment for getting her FundedBits account] , she made 10% on a $10,000 account. 
2. Reduced Personal Risk: You’re trading with the firm’s money, so your personal savings are not at risk.
   
   To put this into perspective, if Sarah loses her account, she doesn’t lose $10,000 of her personal funds but instead,  the firm’s funds.
3. Professional Resources and Community: Many prop firms offer training, mentorship, and advanced trading tools to help you succeed.
4. Faster Growth: With access to larger capital, you can scale your trading faster than you could on your own.

Cons:

1. Profit Sharing: You don’t keep 100% of the profits. Prop firms typically take a cut, ranging from 10% to 50% [this is usually for instant funding accounts]
2. Strict Rules: Prop firms impose risk management rules, such as daily loss limits and maximum drawdowns, which can limit your trading flexibility.
3. Evaluation Fees: Most prop firms charge a fee to take their evaluation challenges, which can be a barrier for some traders.

Key Differences at a Glance

Aspect	Individual Capital	Prop Firm’s Capital
Capital Source	Your own money	Firm’s money
Risk	You bear all losses	Firm bears losses

Profit Sharing	Keep 100% of profits	Split profits with the firm
Flexibility	No restrictions	Must follow firm’s rules
Support	None	Training, tools, mentorship
Cost	No fees	Evaluation fees may apply

Which Option is Right for You?

Choose Individual Capital If:

1. You have enough savings to fund your trading account.
2.  You prefer full control over your trading decisions
3.  You’re comfortable bearing all the risks and losses.
4.  You’re confident in your trading skills and don’t need additional support.

Choose a Prop Firm’s Capital If:

1. You want access to larger capital without risking your own money.
2. You’re willing to share profits in exchange for reduced personal risk.
3.  You’re a beginner or intermediate trader looking for mentorship and resources.
4. You’re ready to follow strict rules and pass an evaluation process.

Conclusion

The choice between trading with individual capital and using a prop firm’s capital ultimately depends on your financial situation, trading experience, and goals. If you’re just starting out or want to minimize personal risk, a prop firm can provide the capital and support you need to grow. If you are someone like this,  you can start here with FundedBits [fundedbits.com]

On the other hand, if you have the funds and confidence to trade independently, using your own capital offers unmatched freedom and control.