Profit Split Models in Prop Trading: Understanding How Firms Share Profits

Profit split models are a cornerstone of proprietary trading, defining how profits generated by traders are shared with the prop trading firms that provide the capital. These agreements not only incentivize traders to perform well but also determine the financial viability of joining a proprietary trading firm. For aspiring traders, understanding what profit splits are in trading and how they work is essential to choosing the right prop firm.

In this guide, we’ll explore the various profit split models in prop trading, the factors that influence profit-sharing agreements, and the proprietary trading firms offering the best profit splits in the industry.

What is a Profit Split in Prop Trading?

A profit split in prop trading refers to the percentage of profits a trader retains after successfully generating returns on the capital allocated by the proprietary trading firm. For instance, If a trader earns $10,000 in profit with an 80/20 profit split, they keep $8,000, while the firm retains $2,000.

Profit-sharing agreements vary widely between firms, ranging from 50/50 splits to 90%-100% splits for top-performing traders.

How Profit Splits Work in Proprietary Trading Firms

Profit splits are determined by the firm’s revenue model and the trader’s level of funding. Here’s how they generally operate:

Initial Agreement: When traders join a firm, they agree to a predefined profit split based on the firm’s policies. Most firms offer profit splits ranging from 80% to 90% for funded traders.

Performance-Based Adjustments: Many firms increase profit splits as traders demonstrate consistent performance or meet specific milestones.

• Example: A trader with FTMO starts with an 80/20 split, but this may increase to 90/10 with consistent profitability.

Payout Frequency: Profit splits are typically paid on a weekly, bi-weekly, or monthly basis. Some firms, like Funding Pips, offer flexible payout cycles.

Retention for Operational Costs: The percentage retained by the firm is often used to cover operational expenses, including platform fees, risk management systems, and scaling programs.

Types of Profit Split Models in Prop Trading

1. Fixed Profit Splits: In this model, the profit-sharing percentage remains constant, regardless of the trader’s performance.

Example Firms:

• BluFX: Offers a consistent 50/50 profit split for its funded traders.
• Maven: Provides 80/20 splits for all funded accounts.

Pros:

• Simplicity and predictability.
• Ideal for traders seeking stable agreements.

Cons:

• Lack of incentives for high performers to earn better splits.

2. Performance-Based Profit Splits: Performance-based splits reward traders with higher profit-sharing percentages as they demonstrate consistent profitability and adherence to risk management rules.

Example Firms:

• FTMO: Offers an initial 80/20 split, which can increase to 90/10 or more based on trader performance.
• Hantec Trader: Provides scaling opportunities with profit splits of up to 90%.

Pros:

• Encourages consistent trading and risk management.
• Incentivizes traders to perform at their best.

Cons:

• Requires meeting specific milestones, which may not suit beginners.

3. Milestone-Based Profit Splits: In this model, traders unlock higher profit splits as they hit predefined milestones, such as achieving a profit target or managing larger accounts.

Example Firms:

• The5%ers: Starts with a lower split (e.g., 50/50) but increases it as traders progress through scaling plans.

Pros:

• Aligns incentives with trader growth.
• Encourages long-term relationships between traders and firms.

Cons:

• Initial splits may be less competitive.

4. Profit Splits for Instant Funding: Instant funding programs typically offer lower profit splits due to the higher risk assumed by the firm. However, they provide immediate access to trading capital.

Example Firms:

• BluFX: Offers instant funding with a fixed 50/50 profit split.
• Sabio Trade: Provides instant accounts with splits starting at 80/20.

Pros:

• No evaluation process required.
• Quick access to trading capital.

Cons:

• Lower splits compared to evaluation-based accounts.

Best Proprietary Trading Firms with High Profit Splits

Here’s a comparison of profit splits offered by top proprietary trading firms:

Prop Firm	Profit Splits	Scaling Opportunities	Payout Frequency
FTMO	80% – 90%	+25% account growth every 4 months	Bi-Weekly
The5%ers	50% – 75%	Double account size at milestones	Weekly
Hantec Traders	Up to 90%	Gradual increase when challenge completed	Bi-Weekly
E8 Funding	Up to 90%	Performance-based scaling	Bi-Weekly
Sabio Trade	80%	NA	Any Time

How to Maximize Profit Splits in Prop Trading

If you want to get the most out of a prop firm’s profit-sharing model, follow these tips:

• Choose Firms with Performance Incentives: Look for firms that reward consistent performance with higher profit splits. Examples include E8 Funding and Hantec Traders, which offer up to 90% splits for top traders.
• Adhere to Risk Management Rules: Most firms increase profit splits for traders who strictly follow daily loss limits and maximum drawdowns.
• Focus on Long-Term Consistency: Rather than chasing short-term profits, aim for steady growth over time. This increases your chances of unlocking milestone-based splits.
• Leverage Advanced Strategies: Use trading tools and platforms like MT4, MT5, and cTrader to refine your strategies and improve profitability.

FAQs

Conclusion

Profit split models are one of the most critical aspects of proprietary trading, influencing trader profitability and firm selection. By understanding the different types of profit-sharing agreements—fixed, performance-based, milestone-based, and instant funding—traders can make informed decisions about which prop firm to join.

Whether you prioritize high splits, rapid scaling, or consistent payouts, firms like FTMO, Hantec Trader, and E8 Funding offer competitive profit-sharing models tailored to your needs. Choosing the right firm and maximizing your split through consistent performance can significantly enhance your trading career.

Looking for the best profit splits in prop trading? Explore our detailed reviews of FTMO, E8 Funding, and Hantec Trader to find the perfect firm for your trading journey!