Beginners must consider multiple factors to compare and choose between prop trading firms vs hedge funds. Notably, proprietary firms and hedge funds are two common approaches to begin trading financial markets. Many beginners struggle to choose between these two strategies – mainly due to different fee structures, compensation, and return potential. For instance, hedge funds source funding from external resources, whereas prop firms allow beginners to manage in-house capital. As a beginner looking to earn bigger, carefully compare prop trading firms with hedge funds to choose a strategy best suited for your style.
>> With bigger account sizes, affordable challenge fees, and streamlined evaluations – Funding Traders is among the best prop firms for beginners. Compared to hedge funds, FT allows beginners to secure forex funding and get paid faster with weekly payouts.
Read on to compare prop firms with hedge funds for beginner traders.
Upfront Capital Requirements And Fees
Consider upfront capital requirements and fees to compare prop firms vs hedge funds. Right off the bat, hedge funds are only accessible to sophisticated investors with huge wealth resources.
You may not access hedge funds if you don’t have large deposits already. Typically, hedge funds require you to invest personal assets – ranging between $200,000 to $5 million. Meanwhile, prop firms only require you to pay a nominal fee to secure funding, trade bigger, and earn consistent profits. Unlike hedge funds, you can trade freely without paying any management fees.
>> Funding Traders offers some of the cheapest prop firm accounts – starting from $50 for $5K capital in forex funding. Pay a smaller upfront fee and leverage our scaling programs to trade with up to $1M+ funded accounts.
For beginners, low upfront capital requirements create an easier entry point to get started with forex trading. Indeed, beginners may choose prop trading firms over hedge funds for lower upfront fees.
Funding Resources
In addition, review funding sources for hedge funds vs proprietary trading companies to choose a suitable model for beginners. Typically, hedge funds receive capital from a wide variety of high-net worth investors – including insurance companies, pensioners, and wealthy investors.
Then, a professional fund manager handles, invests, and protects these collective fund pools to maximize returns for each investor. On the other hand, prop trading companies allow beginners to utilize the firm’s own capital. Since there are no fund managers, you can directly handle the funded accounts and participate in financial markets.
With Funding Traders, beginners like yourself are eligible to secure bigger funded accounts and manage the entire trading capital by yourself. With exclusive accounts, you are flexible to employ varying strategies and maximize profits.
- $5K Beginner | $50
- $10K Mini | $100
- $25K Starter | $200
- $50K Basic | $300
- $100,000 Advanced | $550
- $200,000 Superior | $1,100
Indeed, hedge funds vs prop firms vary in terms of funding resources for new traders.
Risk Exposure For Traders
Choosing hedge funds vs prop trading firms also depends on risk exposure for new traders. Typically, hedge funds include riskier behavior due to external funding resources, leverage options, and limited market exposure. While funding firms also have inherent risks, you can take advantage of prop trading risk management strategies to minimize your exposure.
Prop firms actively design training resources, guidelines, and tools to mitigate risks and protect funded capital. Additionally, these funding firms also encourage beginners to avoid impulsive emotion-based decisions to avoid losses during high-risk volatile conditions.
To reduce risk exposure for new traders, FT employs multiple strategies that help avoid poor trading outcomes.
- All beginners, seasoned, and experienced traders are required to follow the 2% consistency rule for each trade. Particularly, you’re only allowed to risk <2% of your funded account on a single position
- Traders are encouraged to employ stop-loss limits to prevent major draw-downs
- As a prop firm that allows algo trading, FT still encourages everyone to use risk-focused EAs, bots, and automated tools
Indeed, choose prop firms over hedge funds to trade with low-risk exposure as a beginner.
Profits And Returns Potential
Consider profits and returns potential when choosing between hedge funds vs forex prop firms. While hedge funds offer a huge profit potential, many beginners with limited investment may not generate bigger returns. In fact, many hedge funds only promise up to 15% annual return – after deducting performance and fund management charges. If you’re a beginner, this smaller profit potential may not yield substantial returns.
Meanwhile, prop trading firms allow all traders to retain up to 80-90% of the earned profits. With bigger account sizes ($500,000), you can expect bigger returns on successful trades.
>> In addition to the default high paying prop trading profit split of 80%, you can also choose exclusive add-ons and retain 100% of your profits from all successful trades.
Indeed, take advantage of higher profit potential with prop trading firms compared to hedge funds.
Access To Multiple Financial Markets
Finally, compare proprietary trading firms and hedge funds based on supported financial markets. For entry-level traders like yourself, prop firms offer an easy, accessible, and convenient route to trade multiple financial assets. Compared to hedge funds, you can trade your preferred assets without any prior experience. Simply pass the funding evaluation and choose from a variety of prop trading instruments. In comparison, hedge funds may require certain qualifications, degrees, and minimum experience to diversify investments into different markets.
As a modern prop firm with high leverage, Funding Traders allows beginners to diversify their trading strategies across various markets, including:
- Forex
- Stocks
- Metals
- Cryptocurrencies
Indeed, choose prop firms over hedge funds to access a variety of financial markets.
There are several factors to choosing a suitable investment model between prop firms vs hedge funds. Particularly, beginners may prefer prop firms due to low entry barriers – requiring only $50 upfront fees to access $5K funded accounts. Of course, proprietary firms provide beginners with sophisticated risk mitigation tools to minimize losses on funded accounts and trade bigger. If you’re limited with initial capital, qualify for a prop firm account to take advantage of bigger profit potential. Follow the points above to learn more about prop trading firms vs hedge funds comparison for new traders.
