What is A Booking vs. B Booking?

🎓 PROP TRADING TERMINOLOGY

What is A Booking vs. B Booking?

There’s been many questions about the difference between A booking and B booking. Trading firms often differentiate between "A booking" and "B booking" in terms of how they handle trades and manage risk. The main difference is that in A booking, the firm avoids market risk by passing trades directly to the market. In B booking, the firm is the counterparty and takes on market risk. Most prop firms B book their customer trades.

Here’s a detailed comparison of these two booking types:

A Booking 📈

A booking refers to the practice where the trading firm acts as a true intermediary, routing all client trades directly to the market. The firm does not take on market risk from the client's trades. Instead, it offsets it in the market and earns from the prop trading challenge fees. This is typically associated with a more transparent relationship with clients, as the firm's interests are more aligned with a client's success. 🤝

B Booking 📉

B booking refers to the practice where the trading firm takes the opposite side of a client's trade, either absorbing it or acting as the market maker. The firm assumes the market risk for the client's trades. If the client makes a profit, the firm incurs a loss, and vice versa. The firm profits when the client loses. In the prop trading industry, the assumption is that most traders lose their first few challenges, so there’s no need to offset the market risk. 💸 

With funded accounts, prop firms usually evaluate the traders success to determine whether they should be A booked or B booked though most are still B booked.

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