Forex prop firms are getting more attention from traders and the reason behind this is the benefits that prop firms provide. People never thought of this type of trading before. Forex prop firms provide people with the amount of capital to start their trading journey. Now traders do not need to restrict due to the capital as they have the option of prop firms where they even do not need to take any personal financial risk. Forex proprietary firms or prop firms provide traders the ability to trade multiple assets especially foreign exchange (forex), under a structured capital allocation model. Now cryptocurrency is also getting more popularity that’s why most traders ask whether they can trade crypto with a forex prop firm or not. So let’s get the answer.
Understanding Forex Prop Firms
Forex prop firms provide traders with funded accounts after they pass an evaluation process. This process consists of a demo trading phase with predefined risk and profit targets. These firms make money either through profit splits where the trader shares profits with the firm or via fees charged for participation in their programs. Some of the best forex prop firms include FTMO, My Forex Funds, The5ers, and FundingPips. The majority of these companies have historically concentrated on forex trading, although some have begun to provide other asset classes as well, such as stocks, indices, commodities, and cryptocurrencies.
Can You Trade Crypto with a Forex Prop Firm?
The answer is yes but with certain conditions. Forex prop firms mainly focus on forex pairs but some have expanded their offerings to include crypto trading. However, the availability of cryptocurrencies and trading conditions always change from firm to firm.
Factors to Consider When Trading Crypto with a Forex Prop Firm
Crypto availability because not all forex prop firms provide cryptocurrency trading. Major cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) are usually accessible through those that do.
- Trading conditions as crypto trading with a prop firm differs from retail crypto exchanges. Different factors like leverage, spreads, commissions, and liquidity affect the profitability of trading digital assets.
- Leverage restrictions also apply. Unlike forex which often has a high leverage of 50:1 or more, cryptocurrencies typically have lower leverage like 2:1 to 10:1 due to their volatility.
- Market hours also really matter. Unlike forex which follows a 24/5 trading schedule, cryptocurrencies trade 24/7. Some forex prop firms restrict crypto trading to weekdays and align it with forex market hours.
- Profit splits and fees as prop firms allocate capital to traders with profit-sharing structures applied. Most firms provide 70%-90% profit splits in favor of the trader.
Advantages of Trading Crypto with a Forex Prop Firm
- Access to Large Capital: Traders can access large amounts of capital as compared to those that they can personally afford and also increase potential profits.
- Risk-Free Personal Investment: As traders use the firm’s capital then their personal risk is limited to the evaluation fee rather than their entire account balance.
- Institutional-Grade Spreads and Execution: Many prop firms provide access to institutional liquidity providers that lead to better spreads and faster execution compared to retail exchanges.
- Structured Risk Management: Prop firms apply very strict risk management rules that help traders develop disciplined trading strategies.
- Diversification: Traders can engage in both forex and crypto trading within the same platform and help in diversified trading strategies.
Disadvantages of Trading Crypto with a Forex Prop Firm
- Restricted leverage as most firms limits crypto leverage and reduces potential profits for high-risk traders.
- A profit split reduces earnings if it is lower. Unlike trading on a personal account where traders keep 100% of their profits, prop firms require traders to share a portion of their earnings.
- Evaluation phase requirements are different in each firm. To access funded accounts traders must pass an evaluation which can be challenging especially in swing trading due to strict trading parameters.
- Limited asset selection as some forex prop firms provide crypto but the selection is often limited to major cryptocurrencies.
- Weekend trading restrictions also restrict traders. Some firms do not allow weekend trading even though cryptocurrencies are available 24/7 in retail markets.
How to Get Started with Crypto Trading in a Forex Prop Firm
- Research the right firm and choose a forex prop firm that supports crypto trading and meets your risk and profit expectations.
- Understand the rules because each firm has different policies on leverage, spreads, risk management, and profit splits. Make sure you understand these before starting.
- Pass the evaluation as most firms require traders to complete a challenge or evaluation phase to qualify for a funded account.
- Develop a trading strategy because crypto markets are highly volatile and a strong strategy based on technical and fundamental analysis is essential.
- Manage risk effectively as prop firms impose drawdown limits so managing risk is crucial to maintaining your funded account.
