Prop trading has transformed the game for traders worldwide. Instead of risking their own capital, traders can now maximize their profits at a fraction of the risk they once had. This is all thanks to prop firms, which provide reliable traders with a set amount of capital and absorb the risk in case of losses.
But there’s no such thing as a free lunch…This is a mutually beneficial partnership!
While prop firms support traders with the capital, they also take a percentage of the earnings from trades. This aspect of prop trading is known as the profit split. Profit splits can vary across prop firms, and understanding them is a great way for traders to evaluate different partnership options, maximize their earnings, and choose the best funding opportunities.
In this guide, Falcon explains everything you need to know about profit splits, including how they work, common profit split structures, and how Falcon Funded ensures traders receive rewarding payouts.
What is a Profit Split and How Does It Work?
A profit split is the percentage of trading profits shared between a trader and their chosen prop firm. In other words, it’s the amount of money a prop firm takes after a trader has secured a profit. For example, if a trader makes $10,000 with a profit split of 80/20, the firm retains $2,000, and the trader keeps the remaining $8,000.
Since prop firms provide the capital, they are also responsible for keeping their businesses afloat, which is why this arrangement exists. That said, not every prop firm offers the same profit split. Percentages can vary depending on the firm’s policies, trader performance, account scaling structure, etc.
Common Profit Split Structures
Not all prop firms are equal, and neither are their profit splits. Below are a few common split structures you’ll find in the world of funded trading.
Fixed Profit Splits
Some prop firms use a fixed profit split, in which traders keep the same percentage regardless of their performance. Common fixed splits include 80/20, 85/15, and 90/10.
Tiered Profit Splits
While some firms retain the same percentage regardless of trader performance, others reduce the amount they keep as the trader generates more revenue. For example, a new trader may be offered an 80/20 split, which can later increase to 85/15 or 90/10 as they hit higher profit milestones.
Scaling-Based Profit Splits
Lastly, some firms increase the profit split percentage as traders meet specific scaling criteria. For example, Falcon Funded offers growth-based plans that allow traders to retain a higher percentage of their profits as they demonstrate success.
Why Pay Attention to Profit Splits?
While the difference between an 80/20 profit split and a 90/10 one may not seem so vast initially, you’ll be surprised to discover how much it can impact your capital in the long run.
As you grow and enter more profitable trades, your chosen firm’s profit split will impact your earnings potential, long-term growth opportunities, and even motivation to continue sharpening your skills. This is why choosing the best profit split option and one that incentivizes growth is essential.
The Best Profit Splits? Falcon Funded
At Falcon Funded, we believe that traders should be rewarded for their skills. This is why we provide up to a 90% profit split, allowing you to keep the majority of your earnings. Moreover, our scalable earnings model ensures you receive even better splits as you grow, allowing you to stay motivated and competitive.
Final Thoughts
A profit split refers to the percentage of earnings you share with your prop firm. While small discrepancies may not seem like such a big deal initially, the profit split is one of the most critical aspects of prop firm trading.
When choosing a prop firm, make sure to look for competitive profit split models. For example, Falcon Funded offers high earning potential with up to a 90/10 profit split and incentivizes skilled traders with structured scaling.
Ready to get funded and start earning your share of the profits? Join a challenge and prove your potential today.
