What is prop trading?

Prop trading – or to give its full title, proprietary trading – is where a firm such as OANDA invests its own funds for profit rather than using a client’s money. The primary goal is profit – rather than earn a commission from processing trades, the firm earns full profits (and losses) from any trades placed in the market.

OANDA’s approach to proprietary trading opens up this model for external traders to participate. Traders access virtual capital and trade it in real market conditions. OANDA uses this virtual trading to generate trading signals for our proprietary trading models to follow. When a trader’s virtual trades generate positive P&L in the trader’s virtual account, OANDA pays a share of this P&L to the participating trader as a real (not virtual) payout. This is because OANDA’s proprietary trading benefits from accessing these trading signals in our own trading decisions. 

As well as the opportunity to earn a profit share, prop traders also typically have access to the firm’s technologies and market data, which can help them navigate the challenges of trading.