What Is Proprietary Trading? How It Works & Top Firms To Consider

Many traders dream of trading with high capital, but only a few can do the same. While others go for different types of margin trading, which allow them to increase the value of trade by using less amount of capital. But again, there are some restrictions and rules associated with this.

While this is true, there is one more way of trading that allows you to trade better. This is known as proprietary trading. It is a space where skilled traders handle a firm’s capital, share profits, and focus only on one thing: smart trading.

But when you are doing so, you need to manage the investments and risks well. So, the bigger question here is: what is proprietary trading? Well, if you are curious to know the same, then read this guide. 

What Is Proprietary Trading?

Proprietary trading means a firm trades financial instruments. The firm does this by using its own capital instead of client money. The goal is simple: to earn direct profits from market movements. 

These trades can include equities, derivatives, currencies, commodities, or bonds. When firms take positions, they rely on in-house research, strategies, and risk controls.

In India, many traders join proprietary desks because they get access to higher capital, better tools, and a structured trading environment without risking their personal savings.

Features of Proprietary Trading

Now that you know the proprietary trading meaning, it is important to know its features as well. This is clear that this is a type of trading where the firms trade on behalf of the client.

But prop trading comes with a set of clear features that define how these firms operate. Traders work with the firm’s capital, and so following plans based on backtesting strategies becomes important. 

Some of the key features of proprietary trading are as follows:

• Use of advanced analytical tools and software to make the right call.

• Application of the firm’s funds to trading and not personal investment.

• In-depth research and proper analysis to ensure you are working right.

• Strict limits are set to avoid high-value losses.

• Profit-sharing model between the trader and the firm.

• Focus on specific strategies like arbitrage, derivatives, and scalping.

Pros of Proprietary Trading

Prop trading offers strong benefits for skilled traders. Not just that, if you are a beginner in trading, this can be a great way to trade with the help of the expert firms. You get access to more capital, which helps take larger positions. This way, you can avoid the common mistakes that traders make.

Additionally, you have the opportunity to trade in a structured setup with guidance and improved technology. Based on this, the key benefits of proprietary trading are as follows:

• No need to risk your personal capital.

• Higher profit potential with more trading capital.

• Real-time mentoring and risk support.

• Staring strategies for faster growth.

• Exposure to advanced trading environments.

Cons of Proprietary Trading

Prop trading also has limitations. Traders must follow strict rules and cannot take trades at will. Profit sharing reduces take-home income, and at times, you might feel uncertain. But there are some other cons as well, which include:

• Profit sharing reduces total earnings.

• Strict rules limit personal trading style.

• Higher performance pressure.

• Loss of access if rules are not followed.

• Not suitable for beginners without discipline.

Is Proprietary Trading SEBI Recognised?

Yes, proprietary trading is recognised in India. But it is important to note that it works differently from broker-client trading. SEBI does not issue separate licenses for prop trading firms.

But the prop trading is allowed under a broker’s own account. This means registered stockbrokers can trade using their own capital. Also, there are certain rules for the proprietary trading firms that fund the trade, which include:

• Proper profit sharing follows the rules.

• Maintaining a balance of risk to avoid high losses.

• Trading through registered brokers only.

• Following the guidelines set by financial regulatory bodies.

However, SEBI does not certify or regulate individual prop traders. So, you need to be sure when you select a proprietary trader for you. 

Top 10 Proprietary Trading Firms in India

Knowing the proprietary trading meaning is one thing. But if you are looking to have effective trades, you must find the top firms. These are the ones with years of experience and resources that can ensure you have effective trades.

While you may find multiple prop trading firms in India, there are only a few of them that stand out. This is mainly due to the results that they have delivered over the years. 

So, here are the top 10 proprietary trading firms in India that you must know of:

Conclusion

Proprietary trading gives traders a chance to work with higher capital, better tools, and structured strategies. They offer you the unique benefits with the help of the skill, discipline, and risk mindset of the firm's experts. 

But if you are looking to grow your trading and earn well, proprietary trading is a great option. And if you are a beginner looking for guidance, connect with Rupeezy. Get access to all the tools, calculators, and experts to trade well and earn profits. 

FAQs

How do prop firms choose traders?

The prop trading firms select traders who show discipline, steady performance, and strong risk control skills.

Do prop firms offer training?

Many Indian desks provide structured training. But if it is the funding firms, then the focus is mainly on evaluations.

Can traders use their own style?

Yes, if their style fits the firm’s approved risk rules and strategy guidelines.

How much capital do funded firms provide?

There is no limit, but the funding is based on the type of prop trading account that you select.

Do prop traders follow fixed hours?

India desks follow exchange timings, while global funded firms allow flexible trading hours.