Prop Firm vs. Retail Broker: Where Should You Put Your First $500? (2026)

1. The Case for Retail Brokers (IC Markets)

If you are still learning, Prop Firms are a trap. The pressure of the 'Challenge' will force you to over-leverage and blow the account.

• Benefit: With a broker like IC Markets, you can trade 0.01 lots. You can hold trades for weeks. There is no 'Daily Drawdown' to kill you.
• Goal: Use retail to build a 6-month track record.

2. The Case for Prop Firms (FTMO/The5ers)

If you are already profitable, Retail Trading is a waste of time.

• Math: To make $2,000/month on a retail account, you need a $40,000 balance (assuming 5% return). Most people don't have $40k.
• Solution: A $500 fee gets you access to that capital immediately via a Prop Firm.

3. The Hybrid Strategy

Smart traders do both.

1. Put $500 into a Raw Spread Retail Broker. Trade micro-lots to refine your edge.
2. Once you have 3 profitable months, use the profits to buy a Prop Challenge.
3. Use the 'Copy Trader' tools to copy your safe Retail trades to your aggressive Prop account.

Recommendation: Start with Reliability

Don't rush into a Prop Firm if you haven't mastered execution.

IC Markets is the industry leader for Raw Spreads (0.0 pips on EURUSD). This low cost of entry is vital for beginner scalpers.

Compare Spreads First

Before you decide, look at the costs. Prop firms often have higher spreads than retail brokers.

Check our Forex Broker Table to compare the spreads of IC Markets against top Prop Firms.