How to Classify Traders in a Prop Firm and Build a Sustainable Business
The proprietary trading firm (prop firm) model has reshaped the trading industry in recent years. Providing capital to talented traders in exchange for a share of the profits seems like a perfect formula. But building a sustainable prop firm is more complex than it looks. Not all traders are equal, and not all prop firms last. At Swiset, we’ve analyzed the behavior of hundreds of thousands of traders using our platform and working with partnered prop firms. Based on that data, we’ve identified patterns that reveal what makes a firm truly sustainable
- 8 min
- Manuela Palacio
Last Update: March 26th, 2025
Content
How to Classify Traders in a Prop Firm and why it is Crucial
Many prop firms fund traders just because they passed a challenge.
But passing a challenge doesn’t mean a trader is consistent or profitable in the long run.
Without a classification system, firms face problems like:
Funding inconsistent traders
Losing capital due to poor risk profiles
Relying only on challenge sales for revenue
Business failure within 12 months
To avoid these outcomes, a firm must classify traders in a prop firm based on real performance—not just a test.
The 5 Levels of Traders
Inspired in part by Drew Niv’s analysis on LinkedIn and supported by Swiset data, traders can be grouped into five performance levels:
Level 0 (90%-91% of traders)
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Profile: Inconsistent retail traders. They use high leverage, set poor stops, and lose more than they gain.
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Risk: High. These traders often blow up accounts and hurt your firm’s sustainability.
Level 1 (4%-5% of traders)
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Profile: Traders with slightly more discipline. They follow mean reversion strategies and use stops more effectively.
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Risk: Lower than Level 0, but still vulnerable to sharp market moves.
Level 2 (3%-4% of traders)
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Profile: Consistent traders with diversification and better risk control.
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Opportunity: Good candidates for long-term funding. They start showing strong track records.
Level 3 (1.5%-2% of traders)
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Profile: High-quality traders. They manage risk well, avoid large floating losses, and maintain efficient trades.
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Opportunity: These are the traders to build your core portfolio around.
Level 4 (Less than 0.001% of traders)
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Profile: Elite performers. They use institutional-level diversification and advanced portfolio techniques.
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Opportunity: These traders can lead proprietary portfolios or managed investment products.
Note: Classification inspired by Drew Niv’s LinkedIn insights, with additional data from Swiset analytics.
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What Happens When You Classify Traders
Firms that classify traders in a prop firm based on data enjoy clear benefits:
Higher survival rates among funded traders
Better profitability
New revenue streams like talent retention programs or managed accounts
A business that grows beyond challenge sales
Now, the question is: how do you do it at scale?
Introducing Swiset Risk Tool
To support firms in this process, Swiset developed the Swiset Risk Tool — a platform designed to analyze and categorize trader performance in real time.
What the Risk Tool Does:
Groups traders by performance, risk, and volume
Detects consistent traders vs. random performers
Enables step-based funding programs based on real metrics
Flags top traders for elite funding or investment products
Applies risk rules to protect your margins proactively
This isn’t just risk reduction.
It’s business optimization—designed to help your firm move past basic challenge models and scale with confidence.
Final Thoughts
The most successful prop firms don’t just attract traders — they identify, support, and grow with the right ones.
In today’s competitive market, technology, data, and risk management are not optional. They are the foundation of every strong prop firm.
At Swiset, we help firms around the world turn volatility into opportunity—and build businesses that last.