Every trader out there, especially beginners, think that everyone is trading the same conditions. When they enter a position on EUR/USD, someone else just sold their position, both sides of the trade are just doing the same thing, clicking buy and sell buttons. But on the deeper level, the conditions are so different that even if you are trading the same volume on the same assets as another trader, you both could be trading in conditions that are polar opposites.
So, what are the conditions that I am referring to? For starters, we have the basics; spread, slippage and commissions. After that, there are things like risk managing tools, higher speed executions, better withdrawals, more access to different asset classes etc…
Let’s take a look at the average conditions of a trader who is trading his own Personal Capital with a normal, trusted broker.
For most traders, they are finding an average of 0.6-1.1 pips in live trading conditions when trading something like EUR/USD. A $3-$4 commission per standard lot is also very common. A typical withdrawal takes just a few days for most brokers if you are doing bank transfers. Crypto withdrawals are of course much faster and can happen within the same day. Lastly, they have almost every sector available to trade on most brokers, so whether you want stocks, crypto or forex, it doesn’t matter they have it all.
Next up we have the average conditions for a trader who is using Funded Capital a.k.a prop firms.
A very common thing to look at is profit split, which definitely falls in the category of commissions. A typical prop firm has a profit split of 80%, meaning that if you withdraw $100, you only take $80. That’s on top of the standard commissions which are high at the $7 range. Withdrawals are the same as brokers, and some prop firms only do crypto withdrawals, so you will almost always get a same day payout.
Lastly, we have institutional trading conditions.
On trading conditions like these, it’s very common to have spread maxing out on 0.2 pips, because they want to keep costs as low as possible. Commissions do however stay relatively the same at $7. They also have every asset class available.
So, to conclude, you won’t find more favourable conditions than with prop firms. If all 3 traders had $1,000 then the prop firm trader would be able to trade up to $200,000 in capital while the other two are stuck with the $1,000. The commissions and fees are high yes, but it makes it worth it considering just how much you can leverage your money. Only when you get to capital above 7 figures, then the institutional conditions are more worth it.
(Just my opinion, not financial advice)