What is Prop Trading and How Does it Work?

29.05.2025

Education

In Alan Glynn's novel Limitless, the main character Eddie Spinola asks investment banker Kevin Doyle about online trading. The arrogant investment banker says it's a bubble. Online traders are "pathetic freaks." And that they won't be able to democratize the markets.

A few minutes later, Eddie shocks Doyle with his $250,000 profit while trading from home. And 25 years after the events of the novel, it turns out that online trading has taken over the entire financial world. And changed it forever. Limitless became the manifesto of a new wave.

Scattered around the world, "freaks in baseball caps" have become a big force on Wall Street. They are professionals. They trade with their own money. They gather large teams around them. One of the names of their activity is prop trading.

Chance to Take Off

When Eddie Spinola "accelerated" his brain, he was looking for a "financial springboard". At the turn of the 20th and 21st centuries, the choice fell on online trading. Dotcom stocks were the hottest asset. But if Alan Glynn were writing his novel now, Eddie's choice would not just be trading, but prop trading. And most likely, he would trade cryptocurrency.

As soon as the main character tested his trading strategy. Got his first profit. He began to look for additional capital. Eddie turned to the mafia for a loan. A bad decision. It brought him a lot of problems in the future. But the idea is clear. With a profitable trading system, the starting amount becomes too critical a factor for future results. The larger it is, the faster the trader will rise to a high level of income.

Prop trading solved this problem. Upon successful completion of the exam (challenge), the trader may end up with an account with five zeros under his control. $100,000, $150,000, $300,000 is not the limit. If you complete several challenges simultaneously, you can reach a sum with six zeros in a couple of weeks.

Financing is provided by a prop trading company. It also receives a percentage of the profit. The applicant must only confirm positive trading skills. Comply with risk management requirements. And achieve the profit goal. The challenge period is practically unlimited.

If such services had existed 25 years ago, Eddie Spinola would have been able to form a million-dollar fund in just a few weeks. Avoid problems with mafia creditors. And enter American politics without a criminal background.

Closer to the point

The smart pill "MDT-48" or its cinematic analogue "NZT-48" does not yet exist. So the path to the major league to a million-dollar fund will take more than 2 weeks. But the general sequence of steps is correct. A future prop trader needs:

a positive trading strategy;
a reliable prop company with good challenge conditions;
discipline.

Choosing a prop company is not difficult. You shouldn't get hung up on this. The prop trader's area of responsibility is strategy and discipline. Without discipline, there is no point in a positive strategy. And without a positive strategy, there is no point in discipline. Only synthesis leads to success. We will talk about it in the following articles.

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