Investors may not know about some of the most popular proprietary trading myths that circulate the industry. Leaving these myths unaddressed leads to the spread of misinformation, but we aim to spread the truth about proprietary trading, including the various risks and benefits a trader can experience. Knowing the advantages and potential downsides can help you determine if you’re a good fit for proprietary trading.

At Black Eagle Financial Group, we are a proprietary trading firm that helps traders across the globe who want to increase their profits. Whether you’re a group or an individual, we can help. After learning the truth about common prop trading myths, contact our helpful team to discuss trading. 

1. All Prop Trading Is High-Risk at All Times

While traders take a risk when investing and participating in a prop firm, every situation is not always high risk. A firm can have a varying degree of risk, depending on what type of strategies to use and plans they’ve crafted. While some focus on high-risk, aggressive methods, others are more cautious and work on market price discrepancies.

Proprietary trading firms should have a strong form of risk management to protect themselves from great losses. It also helps everyone involved keep some of their money, such as if limits are in place about how much one can trade. Those who are hesitant about joining a prop firm should research their prospective group’s risk strategies to avoid future concern. 

2. Only Experienced Traders Participate in Prop Trading

It’s possible to achieve profitable trading without tons of experience. However, it’s good to go into proprietary trading after gaining some research, knowledge, and mentorship to support your trading plan. Prop trading firms often provide teaching opportunities and guidance for new traders to learn about concepts like time frame strategies and demo accounts.

It’s still good to consider whether you’re ready to take on prop trading, as it requires focus, discipline, determination, and skill. Interested traders may want to have some experience under their belts before diving. You can get your feet wet before making a leap into the world of prop trading.

3. Proprietary Traders Have Endless Capital at Their Disposals

Another one of the most popular proprietary trading myths is that proprietary traders can use a limitless resource of capital to trade or invest. While large amounts of money to trade and use are present at prop trade firms, they aren’t typically without some limitations. The firm and the traders are using their money to gain profit, unlike hedge funds who manage client money, but must determine which strategies will yield the best results.

Many parties want stricter proprietary trading restrictions and prohibitions, but time will tell regarding what changes will occur over the next few years. Some proprietary trade firms limit the amount of a capital a trader can utilize to avoid high risk situations or high losses. Traders and investors should use their capital responsibly to achieve more profit and maximize their success.

4. The Market Is Always in Favor of Proprietary Traders 

Many believe that prop traders are always at an advantage with how the market functions and constantly successful. This couldn’t be further from the truth, as the situation varies from day to day. Yes, proprietary trading firms have advantages of running and participating in the firm, but they experience fluctuating gains and losses like other traders or organizations.

Proprietary traders combine their skills, technologies, tools, and expertise to try to gain an advantage and make money. Some days, they achieve and exceed their goals, while on other days, they experience losses. They also are in constant competition with other firms and anyone else who employs a similar trading tactic to them.

5. Prop Firms Only Move Stocks

One of the most unfortunate prop trading myths is that these organizations just trade stocks, when it involves much more than that. Numerous types of asset movements occur with proprietary trading, such as for gold, silver, crude oil, bonds, currencies (like crypto), commodity markets, and more.

Some prop firms may focus on a specific type of asset, so you may need to explore others if the one you found is limited. These firms may trade multiple types of financial instruments, employing different strategies for each. 

A firm could tailor their strategies to less riskier instruments and for more certainty of a profit. Other groups might feel comfortable taking higher risks if they feel their work could pay off and yield better results than if they played it safe. It all depends on the market, a firm’s profit strategy, and their feelings on risk.

6. Only Larger Institutions Make Up Proprietary Firms

While you may commonly see large financial organizations make up a proprietary firm, not all of them boast a multitude of participants. You’ll find pros and cons of both small and large proprietary firms, as smaller groups may not have to deal with setbacks of a large group. They could have increased flexibility and less conflict about which techniques to use for trading.

You’ll find multiple types of proprietary trading firms and situations, such as:

• Large Prop Trading Firms – We usually think of proprietary firms as larger organizations, and many are. They may have access to a larger amount of resources and potentially can risk more.
• Small Prop Trading Firms – Less people are involved, and these firms could quickly strategize to benefit market change in ways a larger firm may not have the ability to complete.
• Individuals in Prop Trading – Individuals can use their money for proprietary trading without necessarily joining a firm. They might have access to online accounts and can take a more personalized approach to trading, investing, and strategizing for profits. Some limits still are in place for some of these accounts, so you’ll find some downsides and advantages of this prop firm method.

Learn More About Proprietary Trading with Black Eagle Financial Group

At Black Eagle Financial Group, we help investors that are a cut above start trading with plenty of resources to guide them, including custom reports, mentorship programs, capital security, and more. A financial service company, hedge fund, and proprietary trade fund come together to make the most out of combined resources and to assist dedicated traders with their profit-turning efforts.

Some reasons to work with our trusted and professional business include the following:

• We work with traders all around the world.
• Our traders can access 140+ routes.
• We offer teaching and learning opportunities through our mentorship program.
• Our traders can access support through our custom website.

Now that we’ve debunked six of the most common proprietary trading myths, reach out to our team with any comments or questions. You can call Black Eagle Financial Group at (833) 253-2453 (toll-free) or (514) 532-0520 to discuss trading with a representative.