Inside the $12 billion prop trading industry that has Gen Z and millennial investors hooked

Prop trading firms offer a pool of money for retail traders hungry to take bigger swings in the market.

For an upfront cost and a cut of the profits, firms offer up to hundreds of thousands to trade with.

It’s an appealing prospect, but traders told Business Insider it can be tough to succeed.

Ricky Saldana, a 29-year-old trader based in New York, first heard murmurings about prop trading in 2021. A contact let him in on what, at the time, felt like a gatekept secret: If he paid a prop firm a small fee and passed an evaluation test, he could get thousands in fresh capital to trade with, an amount that could easily multiply a trader’s profits should the market swing in the right direction.

Saldana, who dreams of one day becoming financially independent, thought it sounded like a fantastic opportunity.

“Listen, if you make $40,000 a year and you enjoy your two vacations a year and love it and you’re happy, God bless. But that’s just not me. I want to be free 300+ plus days of the year at least,” he said.

That’s a common sentiment shared by a growing mass of traders who now trade with a prop firm, companies that, for a fee ranging from $50 to several hundred, offer people pools of money to deploy in the market.

There are several catches to be aware of, though.

First, you’ll need to pass an evaluation via a series of small challenges that prove your ability as a trader. After passing, you’ll get a funded account, which could have anywhere from $5,000 to several hundred thousand to trade at your disposal.

Second, if you make a winning trade, the firm will take a cut of your profit, typically around 20%.

Another is that, should you lose a substantial amount in the market, the account is closed and your funding is yanked.

But, for a growing crowd of Gen Z and millennial traders looking to take on riskier, more aggressive bets, the prospect of making more money makes jumping through the hoops worth it, and many say they won’t quit opening up new accounts even if it means paying thousands in fees and oftentimes ending up at a loss.

Prop trading — not to be confused with proprietary trading done by Wall Street firms — exploded in popularity this year as US stocks climbed to fresh records. Google search interest for “prop firms” grew 85% in the past year, while search interest for “prop trading” soared 139%, according to the Google Trends analytics tool Glimpse.

The number of global active prop traders has risen 25% in the last three years, according to a report from ZipDo. The analytics firm estimates that the prop trading industry is worth around $12 billion.

The average prop trader is just 29 years old. Around three in four don’t see sustained profitability over a six-month period, per ZipDo’s analysis.

Topstep, one popular prop trading firm, says on its website that 12.4% of traders were able to get funded in 2024, which means they passed their evaluation and received a pool of capital to trade.

Of those who received funding, 28.3% received a payout, which is when a trader actually receives some of the profits from the trades they’ve executed. Business Insider was unable to reach TopStep or comment.

FTMO, another popular prop trading firm that doesn’t disclose its trading statistics, did not respond to an interview request from Business Insider.

Prop trading firm Apex Trader Funding declined to share its traders’ results, but said it has seen explosive growth over the last three years. The amount the firm has paid out to traders grew around sixfold in the past year alone, Dan Cook, the chief strategy officer at Apex Trader Funding, told Business Insider in an interview.

The speed at which the firm amassed new traders began to accelerate during the pandemic, Cook said, which the firm attributes to factors like increased interest in retail investing and people being able to explore trading as work-from-home became the norm.

“Why I think it’s really exploding is the word of mouth is getting out,” Cook said. “‘Hey, I don’t have to be necessarily intimidated. I don’t have to put up thousands of my own money.”

When asked about the common criticism directed at prop firms for their fee structure and low profitability rates among traders, Cook said there needed to be some “accountability” on behalf of traders signing up for a prop firm.

“All the terms, conditions, rules are set up front. And so it’s really an open book. There are no surprises,” he said.

When Saldana received his first funded prop trading account, he was ecstatic. After passing his evaluation, he was so happy he cried, played “My Way” by Frank Sinatra, and woke up his girlfriend, who was sleeping as it was the middle of the night.

Things quickly soured. Saldana, who wanted to trade full-time while balancing an internship, said he made several bad bets and “blew” the account, a term used among prop traders to describe when the account is closed after taking losses

Saldana estimates that he’s paid around $10,000 opening up new prop accounts over the years. He describes himself as both unable and unwilling to quit prop trading, feeling that the prospect of financial freedom is within reach.

“When $2,000 hits your account and all you did was press a button,” he said, of the thrill of making money in the market. “Then my girlfriend’s like, ‘Hey, my car payment is $500.’ And you give it to her with no problem.”

Traders who enter the prop trading ecosystem frequently say they’re unwilling to step out of it. That’s partly because the potential return of trading with more money — and achieving financial independence — is too good for many to pass up, even if it means dealing with more stress and, at times, being in the red from how much they’ve paid in fees to the trading companies, according to traders who spoke with Business Insider.

Daniel Inskeep, a 37-year-old trader based in Chicago, said he became interested in prop trading several years ago because he believed trading with a prop firm’s capital was a good way to cap his potential losses in the market.

Since then, he says he’s blown through “countless” accounts and estimates he’s spent around $10,000 in prop firm fees over the last several years. All in all, he’s in the red from prop trading.

Prop trading is an emotional rollercoaster and far more stressful than trading on one’s own, Inskeep said. That’s because, in addition to an initial evaluation, prop traders are expected to regularly pass challenges to get paid out — things like hitting a certain profit target on a trade.

One wrong move can blow the account, meaning a trader will have to open up a new account or pay for a new challenge for a shot at getting a funded account again.

“It’s a splash of cold water for a lot of people,” he said of how difficult prop trading was.

Still, Inskeep says he’s stuck with it. There’s simply “nothing better” than sitting in sweatpants at home and making money from a few clicks, he said.

“I still blow accounts to this day and it’s just part of the game,” he said. “I just think there’s the freedom of trading once you learn this skill. It’s not something that your boss can fire you from.”

Joseph Katumba, a 32-year-old trader based in the United Arab Emirates, said he got into prop trading several years ago when he noticed videos about the topic coming up in his YouTube feed.

“It promised a lot of things and I decided to learn it myself,” he said, adding that he studied the markets for up to seven hours a day on top of his full-time job to pass his initial evaluation.

Katumba has blown two funded accounts. He said he spent around $7,000 in prop firm fees over the last several years, though he has made a profit, according to payout certificates he showed Business Insider.

Katumba, who’s in the process of obtaining funding for a new account, says he wishes to be successful enough as a trader to one day improve his own life, such as by investing in a car or a home, and also to engage in philanthropic work in Uganda, his home country.

“It is an opportunity, and it is very difficult for people to find opportunities like that,” Katumba said of why he continued to trade. “When you get it right, it is going to be life-changing.”

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