What Is Prop Trading?

Proprietary trading (“prop trading”) involves a firm supplying traders with its own capital, technology, and training. These traders—whether part of a dedicated team or global remote talent—trade using the firm’s funds. They earn a profit split (commonly 50–80%) while the firm retains the rest.

Key Features:

• Low personal capital needed — pay a training fee or pass evaluation, then gain access to sizable funds.

• Structured onboarding — live education, simulated evaluations, then real trading after qualification.

• Flexible strategies — from scalping and trend-following to quant models and global macro.

• Risk controls — firms impose drawdown limits, trading rules, and daily caps to protect the capital.

What Is Market Making?

Market makers provide critical liquidity by offering continuous buy and sell quotes, profiting from the bid–ask spread.

• Who they are: Specialized entities—some overlap high-frequency trading firms like Virtu, Citadel, Optivar.

• Their role: Executing customer orders instantaneously (e.g., PFOF from brokers), smoothing market flow.

• Primary risk: Inventory risk—holding assets that move unfavourably versus execution prices.

• Strategy depth: Now heavily automated via HFT, using limit orders, co-location, and algorithmic execution.

Comparing the Two

Shared Ground

Both prop traders and market makers:

• Thrive on liquidity—keeping markets active and trading smooth.

• Pursue profit as a primary goal.

• Leverage technology, though at different intensities.

• Operate in fast-paced, risk-aware environments.

Who Suits Each Role?

• Aspiring traders with discipline enjoy prop trading—structured progression, personal strategy development, profit-sharing, and minimal initial capital requirement.

• Quant-focused or institutional players gravitate toward market making or HFT—using cutting-edge automation and deep technology to profit at scale.

Final Thoughts

Prop trading offers a gateway to funded trading without risking your own money, ideal for disciplined individuals mastering strategy. Market making, by contrast, is a tech-heavy, institutional pathway focused on liquidity, requiring advanced systems and scale.