Updated: 04/24/2024

Choosing the Right Proprietary Trading Firm for Forex: Factors for South African Traders 

Proprietary Trading South Africa
.08 Jan 2024
author avatar image Chad Smith

Table of Contents

Prop firms are financial companies that trade with their capital on financial markets. They often allow experienced traders to use the firm’s capital to maximize their profit potential and take a tiny portion of profits in return.

Traders usually use funded accounts to trade on much larger accounts than their budget would allow them. Prop firms typically offer 75-90% profit share with traders, making prop trading very attractive. However, it is crucial to select a proper prop firm depending on several factors. South Africans can enjoy an abundance of prop firms operating and offering services within the country, and selecting a suitable firm might come with challenges. Let’s solve this challenge in this guide.  

Understanding Proprietary Trading Firms 

Proprietary firms, sometimes called prop firms, are financial companies that trade with their capital on financial markets. They typically offer funded accounts for experienced traders and have various competitions and challenges to find the most profitable and successful traders. Forex proprietary trading firms in South Africa operate similarly, enabling local traders to operate large trading accounts and increase their profit potential manyfold.

The good thing is, that traders can get up to 90% of the profits made in their accounts. The downsides include the need to read all the rules and restrictions of the firm to ensure success. Proprietary trading firms have these rules to protect themselves from financial losses if a trader is risking too much on each trading position. They also restrict maximum drawdown to protect their capital. South African traders who have tested strategies have the potential to make lots of money by signing up with legit and reliable prop firms. The basic scheme is like this: 

Prop trading firms offer funded accounts that are larger than what traders can normally afford. For example, a standard prop firm may offer 50,000 or even 100,000 USD trading accounts for traders. They charge a fee for participating in a trading challenge where traders have to show their trading performance.  Traders have to operate within specific risk parameters to ensure they can trade with storing risk management practices.  

The trader withdraws a certain percentage of profits, leaving the rest to the firm. This profit share is typically between 75-90%. Operating a 100,000 USD account and getting 90% of profits can be a great way to make a living in South Africa without the need to worry about trading capital.  

Factors to Consider for South African Traders 

There are several key factors to consider when selecting a prop firm in South Africa. The most important one is to check if the prop firm is legit and reliable. This can be done by researching online comments on popular platforms to see what other traders’ experiences are. Another way is to read reviews and define if the prop firm’s rules and terms are suitable to your trading strategy.  

Trading rules are a crucial part of prop trading, and every trader opting for funded accounts must read all the rules beforehand.  

Rules and Restrictions 

Prop firms require traders to follow strict risk management rules, including daily loss and maximum drawdown levels. The most popular daily loss percentage is around 4-5% meaning traders are only allowed to lose 4-5% of the funded account on any single day.  

Hidden Rules 

Some prop firms may have hidden rules that are not immediately visible on their website. These rules are usually part of client agreement and can disrupt the trading experience. Traders must ensure and check twice that the firm does not have any hidden rules to avoid frustration.  

Regulatory oversight 

Prop firms are not typically required to be regulated like the brokers do. This is because they do not directly offer trading services and do not have to manage client funds. This enables them to be much more flexible than brokers. However, with this flexibility also comes high risks, and it is a must to ensure the firm you are trading with is legit and has a track record of fair practices. 

The one method for ensuring the firm’s experience is to check if they have been around for at least 3 years.  

Trading assets 

The firm might be legit and super reliable, but if it does not offer the asset class you are trading, you won’t be able to make profits. This is why South African-funded traders must also check about the offered trading assets from the prop firms and ensure they offer the preferred trading asset.  

author avatar image
Chad Smith

Chad Smith is the Director of Research & Analysis here at ForexBrokerListing.com. Chad previously served as an Editor for a number of websites related to finance and trading, where he authored a significant number of published articles about trading and the impact of technology in transforming investing as we know it. Overall, Chad is an active fintech and crypto industry researcher with more than 15 years of trading experience, and you can find him teaching his dog how to trade in his free time.