Unlocking the World of Crypto Prop Trading: A Beginner’s Guide
12 minutes read
5. 2. 2024
Are you looking for the best crypto prop trading firms but are feeling overwhelmed by your choices?
Are you still asking yourself the question…
Crypto prop trading firms grant high-level traders access to notional in exchange for a percentage of their trading gains.
Crypto prop trading offers traders unique opportunities that aren’t available in traditional markets.
Breakout Prop sources liquidity directly from Tier 1 centralized exchanges thus offering traders the best available liquidity.
In the ever-evolving space of crypto, those seeking to learn more about crypto prop trading are often bamboozled by a lack of information about specific firms and the difficulties of navigating the evaluation process.
Navigating a prop firm requires an understanding of market dynamics and risk management strategies. Without a guiding hand to help through the process, it can become unbearable.
Sit tight, we’ve got your questions answered. From deciphering the evaluation process to unraveling top-tier firms, we’ve got you covered.
Proprietary trading – or prop trading – refers to the practice where financial institutions allow high-level traders access to (notional) capital in return for a percentage of the gains they generate through their trades. Prop firm crypto plays a vital role in contributing to market liquidity and efficiency.
Prop trading has long been a feature of global markets, historically focusing on forex, commodities, and indices, but is now finding its way into the cryptocurrency market.
Technological advancements have met with regulatory clarity at just the right time to allow prop traders to delve into a digital asset market that recorded trade volumes of over $36 trillion in 2023.
With Bitcoin halving just a couple of months away and the beginnings of what may signal a crypto bull market, now is an opportune time to delve into crypto proprietary trading
Let’s take a look inside the workings of a crypto prop trading firm, and see how traders can benefit from increased access to capital, reduced counterparty risk, and more accountable risk management to help grow their
Crypto prop trading firms supply proven traders with trading capital and then arm them with cutting-edge technological tools that allow them to trade a range of crypto assets. From here, the trader executes trades using their time-tested strategies and receives payouts based on the gains they generate.
Crypto trading prop firm plays a pivotal role in providing seasoned traders with the resources they need to thrive. Acting as catalysts, supplying proven traders with essential trading capital and arming them with advanced trading tools.
A good proprietary trading firm will often offer support and mentorship to traders.
Seasoned traders benefit from the guidance of experienced professionals who offer insights into market trends,
proprietary trading software, and new trading techniques.
This helps traders navigate the complexities of the crypto market with confidence. With a combination of capital, technology, and mentorship at their disposal, prop trading firms create an environment conducive to trader success in the fast-paced world of crypto trading.
What sets prop trading crypto apart is its departure from the traditional fee-based revenue model of the prop trading space. Instead of relying on trading fees for profits, prop trading firms offer traders access to starting capital. This infusion of capital not only enhances traders’ potential for profitability but also allows them to implement their time-tested strategies with confidence.
The allure of prop trading lies in its unique proposition: access to third party capital and the ability to receive payouts based on their performance. This incentivizes crypto traders to maximize their trading prowess and capitalize on market opportunities. The non-stop nature of highly volatile 24/7 crypto markets presents traders with an abundance of trading opportunities that aren’t readily available in traditional markets. Additionally, crypto prop trading portfolio diversification allows traders to explore a wide range of digital assets, mitigating risk and enhancing their potential for consistent returns.
Typically, trading activities are only available between the hours of 9:30 am and 4 pm, when the market is open. Crypto enables new tradable assets, where the market never closes. The open, globally distributed nature of the market, along with its high volatility, results in trading opportunities like never before. Traders can start trading on their own time, not reliant on market hours. This can lead to better performance, trading capacity, and the ability to hold positions overnight, as traders can make their schedules.
However, traders must prove themselves capable of handling the responsibility of access to a crypto prop trading firm and capital. This entails adhering to clear, simple trading rules set by many crypto prop firm. Only traders who demonstrate proficiency in managing the funds and have great trading skills entrusted to them are granted access to trading capital.
In essence, crypto prop trading offers an alternative for skilled traders seeking to navigate the crypto market. By providing access to capital, advanced technological tools, and multi-asset trading, proprietary trading firms empower traders to unlock their full potential and achieve success in digital asset trading. However, this in-house capital is not given to anyone.
To benefit from access to substantial capital, advanced tools, trading strategies, and other financial instruments, you must go through an evaluation process.
An evaluation process for crypto prop trading firms like Breakout, for example, serves as the gateway for traders aiming to harness the opportunities of the crypto market. This evaluation procedure is similar to an entrance exam for admission to a prestigious university, designed to ensure that only the most proficient traders with great trading skills are granted access to trading capital.
The evaluation for crypto proprietary trading firms begins in a demo environment crafted to mirror the real-world trading experience. Traders are immersed in a simulated trading environment that closely resembles actual market conditions, providing successful traders with a platform to showcase their skills, expertise, and trading styles.
Traders can experiment with different trading strategies and trading instruments without risking their real money, allowing them to learn from their mistakes without financial consequences. Demo environments also present an opportunity for traders to become acquainted with trading platforms, helping them feel more comfortable and confident when transitioning to live trading.
The evaluation is a rigorous multi-stage process designed to assess traders skills. Traders must demonstrate their proficiency in meeting trading goals while adhering to predefined rules and terms. These rules include avoiding breaching the maximum daily loss limit, set at 5% of their starting balance. This limit is recalculated daily and ensures that risk management is a daily consideration when using a crypto prop trading firm. During this advanced crypto prop trading testing phase, traders are challenged to apply their trading strategy effectively, demonstrating their adaptability and resilience in dynamic market environments.
During this advanced testing phase, traders are challenged to apply their trading strategy effectively, demonstrating their adaptability and resilience in dynamic market environments. Traders undergo comprehensive performance evaluations, including analysis of their trading style, risk-adjusted account gains, and adherence to trading rules.
This thorough assessment ensures that traders possess the necessary skills and discipline to succeed in the competitive realm of proprietary trading firms.
Traders must steer clear of breaching their maximum drawdown limit, which signifies the loss limit in USD denoted by a percentage of the trader’s starting account balance. Both the maximum daily loss and maximum drawdown limits operate concurrently, emphasizing the importance of prudent risk management.
Successfully navigating each stage of the demo evaluation paves the way for traders to apply for a full Breakout Account.
The milestone proves their readiness to trade crypto in the live market environment with notional capital, where they can execute trades and receive payouts based on their performance.
With their demonstrated proficiency and adherence to KYC (Know Your Customer) procedures, traders are equipped to capitalize on opportunities at a prop crypto firm, applying their skills and strategies to pursue payouts.
The evaluation process within crypto prop trading firms serves as a litmus test for traders, ensuring that only those with the requisite skills and discipline are entrusted with trading capital.
It underscores the firm’s commitment to fostering a community of talented and proficient traders while upholding the principles of risk management and accountability. Through this evaluation process, prop trading firms like Breakout can pave the way for traders to unlock their full potential and maximize their crypto prop trading earnings.
Our crypto trading environment sources liquidity from one of the
best Tier 1 centralized exchanges. We believe this is a
first-of-its-kind implementation of Tier 1 exchange liquidity for an
evaluation-based crypto product.
In the crypto prop trading domain, implementation is important. At Breakout, this is marked by an integration with Tier 1 centralized exchanges. By sourcing liquidity directly from Tier 1 centralized exchanges, Breakout ensures that traders have access to robust market liquidity, enhancing their experience in the prop trading arena.
Position size limits and trading restrictions enforced by Tier 1 centralized exchanges are mirrored within Breakout’s platform, ensuring consistency and compliance.
Traders operate within clearly-defined parameters, including daily and total risk limits. This prudent risk management measure mitigates the potential for overexposure and helps safeguard traders’ capital.
Leverage trading, a hallmark feature of crypto markets is also a prominent feature of prop trading platforms like Breakout. Traders can use leverage of up to 5x for Bitcoin and Ethereum trades, and up to 2x for altcoin trades, both in the Breakout Evaluation and Breakout Account stages. Leverage amplifies trading potential, enabling traders to magnify their gains while managing risk. Leverage allows traders to open larger notional positions while also trading several positions concurrently.
However, it’s crucial to exercise caution and adhere to strict trading strategies to mitigate the inherent risks associated with leverage trading strategies. While leverage trading offers the potential for amplified gains, it also amplifies the potential for losses. Traders must remain disciplined, continuously monitor their positions, and employ effective risk management techniques to safeguard their capital and navigate the complexities of leveraged trading successfully.
One unique aspect of Breakout is its payout process. Funded traders have the freedom to receive payouts to their crypto wallets, which gives traders the flexibility to either withdraw the gains or swap to another crypto asset, all in a self-custodial manner.
Aligning with the core themes of decentralization and user empowerment in crypto, Breakout prioritizes users’ self-custody of funds. Unlike traditional trading platforms, it does not require traders to deposit any of their capital to initiate trading. This significantly reduces the risk of fund loss due to hacks or company insolvency, significantly reducing counterparty risk and enhancing trader confidence.
In cryptocurrency trading, this has become a valid concern for many prop trading firms, as centralized firms have been guilty of stolen or lost funds in recent years. The most famous being FTX and Alameda in 2022. Sam Bankman Fried was responsible for mishandling and stealing FTX users’ funds for his benefit and was convicted of fraud last year. Breakout ensures this won’t happen by prioritizing decentralization.
As of February 1st, Breakout is becoming a crypto-only prop firm. We will no longer offer any FX trading. With crypto prop trading products dominating over 91% of trading activity on the platform, Breakout is dedicated to improving its services to better cater to the evolving needs of these traders.
Breakout has made this decision for 3 key reasons. First, our crypto product is far more popular, with 91.10% of all traders choosing crypto, as mentioned above. The Breakout team is fully crypto-native. Shifting our entire focus to crypto will allow us to be even faster with listings, platform updates, and customer support.
Second, the crypto product is unique. Breakout has brought transparent perpetual futures liquidity to crypto prop trading, directly from a Tier 1 centralized exchange. No suboptimal tradfi brokers, no opaque CFDs, and no unrealistic trading conditions.
Third, Breakout believes FX evaluation-based prop trading is unsustainable. The account sizes are large, pricing is undervalued, and regulations are too lax. We observe that many companies are forced to offer these conditions out of necessity, neglecting proper risk management. Rather than participating in the downward spiral, Breakout is respectfully opting out and shifting focus to the cryptocurrency realm, where we hold a distinct advantage
As of February 1st, Breakout is becoming a crypto-only prop firm. We will no longer offer any FX trading. With crypto prop trading products dominating over 91% of trading activity on the platform, Breakout is dedicated to improving its services to better cater to the evolving needs of these traders.
The investment to become a prop trader goes beyond capital, as it includes an evaluation process designed to highlight proficient traders. At the heart of the process is the evaluation stage, a component that not only ensures the best candidates for the prop trading firm but also offers aspiring traders a risk-free educational journey.
Traditionally, talented traders go through a tough journey, risking their capital over years to figure out whether they possess the skills required for full-time trading in other financial markets like trading stocks.
However, crypto prop firms like Breakout offer a different path to starting a trading career. By going through the evaluation process, traders can gain invaluable insights and experience without risking anything.
Should they stumble along the way, they are free to recalibrate and start afresh or opt-out entirely. Once they pass the evaluation stage, serving as a testament to the soundness of their trading strategies, they are ready for successful trading.
Crypto prop trading firm Breakout’s commitment to educational resources is evident through its FAQ section, trade news, concise rules and terms, and dedicated customer service team. These resources provide real-time support and clarity, empowering crypto prop traders to navigate the intricacies of the market with confidence.
Moreover, prop trading firm Breakout’s emphasis on risk management fosters a culture of accountability, ensuring that traders operate prudently and responsibly. A priority for anyone who wants to generate profits.
Breakout’s crypto environment closely simulates live markets, featuring dynamic conditions mirroring real-time changes in spreads and order book depth.
While the best crypto prop firms are still in their nascent stages, crypto prop trading firm Breakout leads the industry in innovation, leveraging the latest technological advancements to provide exchange-grade experiences.
By combining technological prowess with educational resources, Breakout simplifies the path for traders to pursue their prop trading dreams.
With a forward-thinking approach, prop trading firm Breakout remains committed to staying ahead of the curve, constantly refining its services and offerings to meet the ever-changing needs of traders.
This holistic approach not only saves valuable time and money but also nurtures a community of skilled and proficient traders poised to thrive in the dynamic cryptocurrency market.
In conclusion, the journey to becoming a prop trader transcends mere financial investment. It encompasses a path of self-discovery and skill development, facilitated by innovative platforms like Breakout. Through a meticulous evaluation process and unwavering support, Breakout empowers traders to unlock their full potential and embark on a fulfilling career in prop firm crypto trading.
