Prop Trading Firms and How Bank Traders Think

Prop trading has changed. Alongside the traditional firms that hire and train traders, a large industry now sells evaluations: pass a trading test under strict rules and trade the firm’s capital for a share of the profit. Most people who attempt these evaluations fail, and the rules are a large part of the reason. This course shows you how the rules work and how to judge your chances honestly.

How do prop trading firms work?

A funded-trader firm charges a fee for an evaluation with a profit target, a daily loss limit and an overall drawdown limit. Traders who pass trade a funded account and keep a share of the profit. The firm earns from fees as well as from successful traders. The course explains the economics so you understand what you are buying.

Why do most traders fail prop firm evaluations?

Because a profit target and a tight drawdown limit together reward large size and punish ordinary losing runs. A trailing drawdown rule can end an attempt after a profitable start. The course has you simulate the rules against your own record to see how often you would pass, before you pay.

How do professional traders manage risk?

Proprietary trading firms and bank desks give their traders capital, and in return they impose rules that most independent traders never apply to themselves. Every position has a limit, every day has a profit and loss that someone else reads, and every bad week has to be explained in writing. Those rules are a large part of why professionals survive. This course teaches them to traders who work alone.

With limits set before trading and enforced by someone other than the trader. A desk trader has a maximum loss per day and per month, limits on position size and exposure, and a manager who reduces their capital after a drawdown. The course has you write the same framework for yourself and report against it.

Who is this course for?

Traders considering a funded account, and funded traders who want to keep theirs. No programming is needed.

What you will be able to do

• Explain the business model of funded-trader firms and where their revenue comes from.
• Read an evaluation's rules and calculate the effect of profit targets and trailing drawdowns.
• Estimate your probability of passing from your own trading record, with a spreadsheet simulation.
• Plan an evaluation attempt with sizing and daily limits suited to the firm's rules.
• Describe how bank and proprietary trading desks are organized, paid and limited.

Syllabus, module by module

1. The funded-trader industry

   Evaluation fees, funded accounts, profit splits and how the firms make money.

2. Reading the rules

   Profit targets, daily loss limits, static and trailing drawdown, and consistency rules.

3. Your odds

   Simulating an evaluation from your own trade record to estimate the chance of passing.

4. Inside a trading desk

   Market making, flow trading and proprietary trading, and how each desk earns its money.

What every course contains

Every paid course comes with the first seven and the certificate, whichever level it sits at. The proctored exam and the credential come when the course is taken as part of a Certificate, Diploma or Fellowship. Everything is self-paced: the material is yours to study in any order, at any hour, for the whole of the license.

1. Workbooks. Written to train the thinking patterns and the important concepts of the course, with worked problems and the reasoning behind each answer, so that you learn to think the way the subject is thought.
2. Audio edition. Focused, well-presented recordings with explainers and examples of the material, made to be interesting, relevant and entertaining, so that the general subject can be learned away from the desk.
3. Notes. Pre-produced notes with every fact the course relies on, written out in full, so that nothing has to be transcribed from the films or the audio.
4. Cheat sheet. One sheet with every important learning concept of the course on it, to keep beside you during the work and to revise from before the exam.
5. Named sources. Every fact in the notes names its source, the paper, the book or the dataset, for anyone who wants to dig in further.
6. Explainer films. Focused films, in the style of the sample films on the catalog page, that walk through the most difficult concepts of the course with visual explanations of a high standard.
7. Transcript. A full transcript of every film and every audio recording, searchable and quotable.
8. Proctored exam. Taken as part of a Certificate, Diploma or Fellowship, the course ends in a proctored multiple-choice questionnaire, with a pass mark of 60% and three retakes included. A course taken on its own is assessed by its coursework and has no exam.
9. Verifiable certificate. A certificate of completion that a third party can verify: an employer sends the code on it to the credentials office and receives written confirmation of the course, the date and the result.
10. Credential of the program. The Certificate, Diploma or Fellowship of the program, track or path the course belongs to, awarded when every course in it is passed. Which one depends on the program you choose.

How the certificate is earned

Weekly exercises and two graded problem sets: a comparison of four firms' rules and costs, and a simulated evaluation run on your own record with a written plan. On a pass you receive the Course certificate in Prop Trading Firms and How Bank Traders Think, issued by the Institute with a verification code. A course taken as part of a Certificate, Diploma or Fellowship ends in a proctored online exam with a pass mark of 60%. The fee includes three retakes; each attempt after that carries a reduced proctored exam fee. A course taken on its own is assessed by its coursework and has no exam. Read how certification works.

Before you start

The Trading Plan and Evidence-Based Trading.

• The Trading Plan and Evidence-Based Trading