So, what’s the real difference between prop trading and traditional market trading? While both involve buying and selling financial instruments, they operate in completely different ways — especially when it comes to capital, risk, and potential rewards.
If you’ve ever wondered whether trading with a prop firm is better than using your own account, this article will break down the key differences and help you decide which path suits you best.
What is Proprietary Trading (Prop Trading)?
Proprietary trading, or prop trading, is when firms trade financial assets using their own money instead of handling client funds. These firms aim to generate profits directly from market movements rather than earning commissions from customers. Since they use internal capital, they take on all the risk but also keep all the rewards.
Prop firms operate with advanced technology, algorithmic strategies, and access to deep liquidity. Many focus on high-frequency trading, arbitrage, and other specialized tactics that require speed and precision. Traders at prop firms typically don’t invest their own money — they are funded by the firm in exchange for a share of the profits. Some firms train new traders, while others recruit experienced professionals. Large hedge funds and investment banks may also engage in prop trading as a part of their overall strategy.
The biggest advantage of prop trading is access to large amounts of capital and high leverage, allowing traders to scale their positions beyond what retail traders could afford. However, it comes with high expectations — traders must consistently deliver results, and risk management is strict. Many firms impose limits on drawdowns, and underperforming traders may lose access to the firm's capital.
What is Traditional Market Trading?
Traditional market trading refers to individuals or institutions trading with their own funds through brokerage accounts. Retail traders invest their personal money in stocks, forex, crypto, or other markets, while institutional investors, such as mutual funds and pension funds, manage portfolios on behalf of clients. Unlike prop traders, traditional traders keep 100% of their profits but also bear the full risk of losses.
To participate, traders open accounts with brokers, who provide access to exchanges, leverage, and trading tools. Some traders use direct market access (DMA) for faster execution, while most retail traders rely on brokerage platforms with standard order processing.
The advantage of traditional trading is flexibility — traders can choose their own strategies, timeframes, and risk levels. There are no profit-sharing agreements, and they have full control over their trades. However, capital limitations and lower leverage compared to prop firms can restrict growth. Additionally, retail traders must cover commissions, spreads, and margin costs, which can impact profitability.
Key Differences Between Prop Trading and Traditional Trading
While both prop traders and traditional traders aim to profit from the markets, the way they operate is fundamentally different. The biggest contrasts lie in how they access capital, manage risk, and approach trading strategies.
Capital Source & Risk Exposure
Prop traders don’t use their own money — they trade with the firm’s capital. This means they don’t risk personal funds, but they also don’t have full control over account management. If they hit loss limits, their trading privileges may be revoked. Traditional traders, on the other hand, trade with their own money or manage client funds. They bear all the risk, which can lead to both significant gains and painful losses.
Profit Distribution & Compensation
In prop trading, profits are split between the trader and the firm. The exact percentage depends on the firm’s model, but traders typically keep anywhere from 50% to 90% of what they earn. Traditional traders, whether retail or institutional, keep 100% of their profits after paying brokerage fees, spreads, and taxes.
Trading Strategies & Flexibility
Prop firms often focus on strategies that require speed and precision, such as high-frequency trading (HFT), arbitrage, and scalping. These firms rely on technology and access to deep liquidity to execute trades in milliseconds. Traditional traders, especially retail investors, have more flexibility in choosing their approach. Some prefer long-term investing in stocks, while others engage in swing trading or day trading.
Leverage & Buying Power
Prop traders have access to significantly higher leverage than traditional traders. Since they are using the firm’s capital, they can take larger positions, sometimes trading with 10x or more leverage. Traditional traders are limited by brokerage regulations and personal account size, meaning they often have to grow their portfolios gradually.
Regulation & Compliance
Prop trading firms operate under different regulatory structures than traditional brokerage accounts. Many prop firms are not required to follow the same strict regulations as retail brokers, allowing them to offer higher leverage and unique trading conditions. Traditional traders, however, must comply with regulations related to margin, taxation, and reporting, which vary by country and broker.
Training & Support
Most prop firms offer structured training programs, mentorship, and risk management oversight. Since firms want their traders to succeed, they invest in education and provide real-time support. Traditional traders, on the other hand, are largely on their own. They must rely on self-education, mentorship programs, or paid courses to develop their skills and strategies.
Which Type of Trading is Right for You?
Choosing between prop trading and traditional trading depends on your experience, risk tolerance, and preferred trading style. Each approach has its own benefits and limitations, so it’s important to align your decision with your goals.
Who Benefits from Prop Trading?
- Have experience in short-term or high-frequency trading – Prop firms often favor scalping, arbitrage, and algorithmic trading.
- Want access to more leverage – Since traders use firm capital, they can trade larger positions than they could with personal funds.
- Are disciplined and consistent – Prop firms enforce strict risk management rules, and traders must meet performance expectations.
- Prefer a team-oriented environment – Many firms provide mentorship, structured training, and performance tracking.
Who Benefits from Traditional Trading?
- Want to trade at their own pace – No firm-imposed pressure, rules, or profit targets.
- Prefer long-term investing – Ideal for those who focus on stocks, ETFs, or passive investment strategies.
- Don’t want to share profits – All earnings stay with the trader after fees and taxes.
- Are comfortable managing their own risk – No external restrictions, but also no safety net if things go wrong.
Conclusion
Both proprietary trading and traditional trading have their own advantages, but if you're looking for higher capital access, better leverage, and structured growth opportunities, prop trading could be the smarter choice. With Supertrade, you can start trading with up to $100K in firm capital, keep up to 80% of your profits, and leverage professional-grade trading conditions — all without risking your personal funds. Whether you're an experienced trader looking to scale or a skilled trader ready to prove your edge, our flexible funding options — 2-Phase Challenge or Instant Funding — give you the fastest route to real capital. Ready to trade on your terms? Start your journey with Supertrade today.
