How Much Do Prop Firm Traders Make in 2024?

Are you curious about the salaries of prop firm traders? Or perhaps you're already a prop trader and want to know how your compensation compares to others in the industry? Whatever your reason, understanding the compensation structure of prop trading firms and the average earnings of their traders is crucial for anyone interested in this field.

In this article, we'll delve into the world of prop trading salaries and explore the various factors that determine the income of prop firm traders. We'll also examine the profitability of prop trading firms and how it affects the compensation of their traders. So, let's dive in and find out just how much prop firm traders make.

Before we dive into the specifics of prop trading firm salaries, let's first understand what prop trading is all about. Prop trading, short for proprietary trading, is a form of trading where individuals trade with a firms capital instead of their own funds or a clients' funds. This means that prop traders have more flexibility and autonomy in their trading decisions compared to traditional traders who manage clients' money.

The salary of a prop trader can vary greatly depending on several factors such as experience, performance, and the overall market conditions. On average, a junior prop trader (less than 2 years of experience) can expect to earn anywhere between $50,000 to $100,000 per year, while a senior trader (2+ years of experience) can make upwards of $500,000 annually. However, these numbers are not set in stone and can vary significantly based on individual skill set and knowledge and overall circumstances.

Now that we have a general idea of the salary range for prop traders, let's take a closer look at the earnings of prop trading firms. Prop trading firms generate revenue through various sources such as commissions, fees, challenges, and profits from their traders' activities. These revenue source amounts vary greatly depending on which prop firm you go with. These earnings are then distributed among the firm's partners and traders according to a predetermined profit split model.

The profitability of prop trading firms can vary greatly depending on market conditions, their ability to capture new traders, and the performance of their traders. In some cases, firms may have a bad year or get hit with regulations, which can negatively impact their profitability. (As in case of My Forex Funds - see here) On the other hand, a successful year can lead to higher profits for the firm and consequently, higher compensation for their traders by offering them incentives and better profit splits.

Now that we have a better understanding of how prop trading firms make money, let's take a closer look at the income of prop traders. As mentioned earlier, the salary of a prop trader can vary greatly based on several factors. Let's explore these factors in more detail.

The profit split compensation structure for prop firm traders can vary greatly depending on the firm's policies and the individual trader's performance. The main factor is the Profit Share model that the prop firm offers.

How do profit share compensations work? It’s simple. Once you’ve purchased an account from a firm, there is usually a set profit split assigned with that account. Once you have reached the funding stage, you are now eligible to withdraw the profits that you have made from that account that you have purchased. Most prop firms operate on an average of 80% profit split model. So if you made $10,000 on your account in profit, you’d receive an $8,000 payout to your bank account or crypto wallet. Now depending on the account size that you have purchased and the style of trading that you do, you can easily see the numbers start to add up for a yearly salary of the amounts described above.

Let's try to answer the burning question - how much do prop firm traders make? As mentioned earlier, the salary of a prop trader can vary greatly depending on several factors. However, according to Glassdoor, the average salary for a prop trader in the United States is $89,131 per year. This salary should be across the board globally as most prop firms allow different countries to sign up for their plans and the financial markets can be traded globally.

It's important to note that this number is an average and can vary greatly based on individual circumstances. For example, if you are just new to trading, it will be hard for you to understand all the various factors that could go into play of a financial instrument and the market as a whole. Another statistic that you can look at is the average payout size of each firm and then estimate how long it would take you to receive that amount.

One of the most common questions asked by those interested in prop trading is whether or not prop traders actually make money. The short answer is yes, they do. However, it's important to understand that prop trading, like any other form of trading, comes with its own set of risks. Not all traders will be successful, and some may even end up losing money. Moreover, the income of prop traders is not guaranteed and can vary greatly depending on market conditions and individual performance. It takes skill, discipline, and hard work to be a successful prop trader and make a sustainable income from it. If you are willing to put in the time and effort then these numbers of annual salary are realistic and can be achieved, it's all up to you.

In conclusion, on average, a junior prop trader (0-2 years of experience) can expect to earn anywhere between $50,000 to $100,000 per year, while a senior trader (2+ years of experience) can make upwards of $500,000 annually. However, these numbers are to be seen with a clear eye and know that people's backgrounds and overall understanding of financial trading can be wildly different.

While prop trading can be a lucrative career, it comes with its own set of risks and requires skill, discipline, and hard work to be successful. We hope this article has provided you with a better understanding of the compensation structure for prop firm traders and the potential earnings in this field.