The OANDA Labs Trader Challenge is a smart way to enter the world of prop trading, with tiers to suit traders at every level. But what exactly is prop trading, and how is it different from standard 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.
A prop trading firm allocates an agreed amount of capital to a trader to trade with. Prop traders generally have autonomy over how they then trade – they face the same challenges as standard traders. Prop traders use a number of different strategies for trading, including approaches such as arbitrage (including index, volatility and merger arbitrage), global macro trading, swing trading and day trading.
Risk management is a vital factor in any form of trading and prop trading is no exception. Because a firm’s own capital may be at risk, there will often be higher levels of scrutiny with regards to the activities of prop traders, and stringent conditions will usually apply.
One of those is the maximum drawdown limit that the firm imposes on prop traders – if their trading account drops below a predetermined threshold, it’ll be suspended.
In a standard trading setup, a firm would derive its income on a commission or percentage basis from acting as a broker on behalf of its clients. The client is using their own funds to place trades – and that’s a major difference between a brokerage model and prop trading.
In the case of prop trading, the firm is using its own funds, so it earns 100% of any profits or losses that it makes.
The trader makes their money from an agreed share of any profits that they make. In the case of the OANDA Labs Trader Challenge, the allocated funds are virtual – but the prop trader gets a genuine share of up to 90% any profits they make.
Funding level
Prop trading usually gives traders access to a higher level of capital than they would normally have available for trading. This offers the opportunity for higher levels of profit.
Technology and market data
Prop trading firms normally include access to their tools, technology and market data as part of their programs. These would usually be too costly for many potential traders.
Low-risk learning
Trading can be challenging. Prop trading can offer learning opportunities for traders of any level as the cost for participating is limited to the fee the participant pays to take the challenge.
Increased oversight
OANDA wants to make sure that the traders who generate signals are qualified for the program. Risk limits and rules are in place to make sure traders who qualify to become signal providers are producing usable, valuable trading information.
Your income depends on your skill
Successful trading at any level depends on the skill of the trader. A prop trading firm may supply you with the tools and tech to help you build your strategies, but you have to evolve them and make them work.
It might not be for you
Not everyone is cut out for trading. It’s a competitive environment and there’s a lot to learn.
Prop trading is a great way for aspiring traders to find out if trading is for them – or for experienced traders, it offers the opportunity to earn a profit share based on higher levels of funding, and make use of sophisticated technologies and a wealth of market data. And that’s exactly what OANDA brings to the table.
We’re a regulated broker with a lot of experience in trading at a global level – over 25 years, in fact. We’re also a fully self-sufficient prop trading firm with our own technology and technology licenses, which means that we don’t need to depend or rely on broker partners.
And we’re always looking for ways to help new traders get started, and for existing traders to level up their game. That’s why we set up the OANDA Labs Trader Challenge.
It’s a prop trading offering that offers you the chance to trade using virtual funds – but we’ll give you a real share of 80% of any profits that you make if you complete a Challenge. There are five variations to choose from, starting from our $249 Titanium Challenge which gives you a virtual funding allocation of $25,000, right through to our Black Challenge with $500,000 of virtual funds to trade with.
Pass the two-phase Challenge and we’ll set you up as a signal provider. After that, the only limit is your prop trading skills.
It’s the smart move for smart traders. We’re ready when you are.