What's the problem with prop trading firms? - futures io
futures io



What's the problem with prop trading firms?


Discussion in Traders Hideout

Updated
      Top Posters
    1. looks_one RCOtrader with 5 posts (5 thanks)
    2. looks_two forgiven with 5 posts (2 thanks)
    3. looks_3 Mik618 with 4 posts (4 thanks)
    4. looks_4 bobwest with 3 posts (19 thanks)
      Best Posters
    1. looks_one Pa Dax with 13 thanks per post
    2. looks_two bobwest with 6.3 thanks per post
    3. looks_3 matthew28 with 6 thanks per post
    4. looks_4 Contango39 with 3.5 thanks per post
    1. trending_up 2,831 views
    2. thumb_up 79 thanks given
    3. group 14 followers
    1. forum 24 posts
    2. attach_file 0 attachments




Welcome to futures io: the largest futures trading community on the planet, with well over 150,000 members
  • Genuine reviews from real traders, not fake reviews from stealth vendors
  • Quality education from leading professional traders
  • We are a friendly, helpful, and positive community
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts
  • We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

(If you already have an account, login at the top of the page)

 
Search this Thread
 

What's the problem with prop trading firms?

(login for full post details)
  #1 (permalink)
Contango39
London UK
 
 
Posts: 8 since Aug 2020
Thanks: 12 given, 10 received

Hi all,

I have been reading through the forum this week and have been surprised to see comments from members advising others enquiring about trading with prop trading firms, to basically avoid them at all costs, as they are never as good as advertised.

I have completed (UK) NVQ levels 4 & 5 in financial market analysis, and trading & risk management with Amplify Trading in London pre pandemic, and had planned to do the NVQ level 6 with the potential for mentorship on completion, performance dependent. Unfortunately due to the extended lockdowns we endured through 2020-2021 AT closed the prop trading side of the business as nobody could visit the office, and so now focus on developing and providing simulated finance roles to finance students across the UK, and US and China I believe.

So my backup plan had been to, eventually, try and qualify for a funded account with TopStep Trader. Some of the comments I have read regarding prop firms is that they take a percentage of your profits, TST is 80/20 split I think. Im not quite sure how good the mentoring could be for someone like me based in the UK when they are based across the pond (US) as its all obviously online based, but it was my assumption that, assuming someone qualifies for a funded account, then it would be in their interest to support and mentor you as best they could because the more successful you are the bigger their 20% is. And this was assumed for all prop firms offering this type of deal.

Another UK based one I have recently discovered is Alphachain, seems good but I cannot say too much about them as I don't know anything, just that they are UK based which is the initial appeal. But do want 50% of profits, which apparently is acceptable, I beg to differ. Unless they literally do all the trading for me and hand me 50% lol.

I also see there are some dedicated threads on the forum to TST, Jigsaw, L2T, so Im guessing if any are going to be endored it'll be these. But I'd be interested in hearing people thoughts, and if possible experiences if anyone has traded with a prop firm; pros and cons. Im mainly interested in how/if it helped your development more than anything.

TIA

Reply With Quote
The following user says Thank You to Contango39 for this post:

Can you help answer these questions
from other members on futures io?
IKYP - How I solved email troubles on VPS
NinjaTrader
Sierra Chart Teton_Denali vs TT Platform
Platforms and Indicators
CME 2023 Fee Increases (MES +16%!)
Traders Hideout
Asking Wall Street Billionaire for Investment Advice
Psychology and Money Management
strategy builder help
Traders Hideout
 
Best Threads (Most Thanked)
in the last 7 days on futures io
1 Tick from the ES/Per day
18 thanks
What if a broker declare bankruptcy!!! Ftx first whose next?
12 thanks
HFT Algo: anyone doing HFT here?
8 thanks
Want your NinjaTrader indicator created, free?
7 thanks
commission
7 thanks
 
(login for full post details)
  #2 (permalink)
 Pa Dax 
Legendary Price Action Scientist
Netherlands
 
Experience: Advanced
Platform: NinjaTrader, IB TWS
Broker: InteractiveBrokers, CQG
Trading: ES
 
Pa Dax's Avatar
 
Posts: 1,212 since Oct 2017
Thanks: 1,895 given, 6,203 received

Let me say it polightly. These are not prop firms but subscription sellers. There's a massive conflict of interest between ppl that want to be successful and what they want from their customers.

Mathematically there is no difference between you trading your own account the same size of their maximum drawdown. So a topstep150k or whatever with 3.5k drawdown is similar to your own acct funded with 3.5k and a low intraday margin broker. Now you'd never trade 15 ES contracts on a 3.5k account and that's basically what they provide you with. Even with 1 contract it's very very leveraged and your risk of ruin is almost 100%

Sent using the futures.io mobile app

Visit my futures io Trade Journal Reply With Quote
The following 13 users say Thank You to Pa Dax for this post:
 
(login for full post details)
  #3 (permalink)
 matthew28 
Legendary Elite_Member
United Kingdom
 
Experience: Beginner
Platform: Bookmap
Trading: US Equity Index Futures
 
matthew28's Avatar
 
Posts: 1,234 since Sep 2013
Thanks: 3,396 given, 2,482 received



Contango39 View Post
I have been reading through the forum this week and have been surprised to see comments from members advising others enquiring about trading with prop trading firms, to basically avoid them at all costs, as they are never as good as advertised.

I would say they do what it says on the tin and are as advertised. Considering how many people are trying to get funded or have been at least briefly funded, the number of complaints seem minimal to me, at least on this forum which is well regulated.
There is occasionally a complaint but there is often an explanation from the firm and that's that. Sometimes there are lots of posts about it but very few original verified complaints (not just "my friend said this happened....", or "I saw on another forum somebody said....").

They are simply funding companies and could be a good choice for somebody who wants to perhaps limit their initial risk or doesn't have their own capital without being under capitalised. How much size one chooses to trade is up to the trader but psychologically there is always the temptation to try and pass quickly and over leverage as Pa dax said.
All the companies have slightly different rules and requirements for funding (one step or two step test, End of Day or real time drawdown, trailing drawdown on intraday profits etc). You just need to make sure you understand fully what you have signed up for.

In the UK there is Axia prop firm who the Jigsaw software company have a training package with, but that is online (and Jigsaw isn't a funding company). Topstep don't do training other than free webinars but no official training product are sold by them. I think E2T has a beginner course but I imaging it is pretty much just talking about indicators and Risk:Reward ratios, so probably nothing you can't read online yourself.

The Topstep split is now 90:10 after the first $5k of withdrawn profit which is 100%. Cynics would say they know that the vast majority of people will find it hard to get funded in the first place and a large proportion of those that do will never actually make a profit so offering 90%, more than other firms, is going to attract more customers to them paying to take their tests and that will easily cover any potential extra payout.
True of course otherwise they wouldn't have implemented the change in the first place, and these are businesses not charities.

Personally if you agree to the rules and they suit your trading style I think they can be a good option with no more reason to lose with them than trading your own account. Costs can add up though so cheaper to practice in sim and see if you can follow their rules yourself in sim before spending money on the tests, and then avoid spending lots on resets.

There are quite a number of people here who have tried funding companies and it didn't work out, but are quite happy with the experience and accept it was their own fault they didn't stay funded (myself included).

There are also lots of journals of people who pass then fail multiple times, people talking about how good they are at trading and starting a journal to prove it in a funded account, then blowing it, then the very occasional one of somebody who looks like they are being successful, at least for the moment.
So basically no different to people funding their own accounts, the vast majority will not be successful whether on sim, trading their own money or using a funding firm's capital/margin. Not a scam in my book, just another available trading option.

You do not win as a trader, you just get to play again the next day. If that game doesn’t appeal to you then you should not trade. Gary Norden
Visit my futures io Trade Journal Reply With Quote
The following 6 users say Thank You to matthew28 for this post:
 
(login for full post details)
  #4 (permalink)
 bobwest 
Site Moderator
Sarasota FL
 
Experience: Advanced
Platform: Sierra Chart
Trading: ES, YM
 
bobwest's Avatar
 
Posts: 7,604 since Jan 2013
Thanks: 54,837 given, 25,086 received


Contango39 View Post
I have been reading through the forum this week and have been surprised to see comments from members advising others enquiring about trading with prop trading firms, to basically avoid them at all costs, as they are never as good as advertised.

...

I also see there are some dedicated threads on the forum to TST, Jigsaw, L2T, so Im guessing if any are going to be endored it'll be these. But I'd be interested in hearing people thoughts, and if possible experiences if anyone has traded with a prop firm; pros and cons. Im mainly interested in how/if it helped your development more than anything.

There are many positions on this, and many have good points to them. I agree in part, for instance, with both the previous comments of @Pa Dax and @matthew28, although they are very different.

For whatever it's worth, here is my take on it:

1. Many traders who attempt these things will fail at them, and generally this has very little to do with the firm or its rules (this is contrary to a narrative that many will tell you, and genuinely believe) -- usually it's just that the trader clicked the mouse at the wrong time. Bought high, sold low, the usual. New, and not-so-new, traders go through this rite of passage, and not all emerge on the other side, whether trading live or not. Afterward, there may be complaints about the rules, but no one else clicked the mouse for them. (Disclosure: I tried and failed pretty miserably in a Topstep Combine, or a lot of them, and it was always me clicking that damn mouse, as it always is.) But no matter what some will say, it was never the fault of the firm that the trader clicked the mouse at the wrong time, or held the losing trade too long, or otherwise drove the account into the ground. It's usually that the firm just cut them off when the losses got too high. When I did that, it was me all the way. Excuse making is a big thing in trading. Afterwards.

There's a lot you can read about this, but I think it's 100% about not taking responsibility for something the trader did or didn't do. This is not a very popular opinion with some people, by the way. But we have the exact same issues when just trading our own accounts. No one else clicks that mouse for me.

2. If you can do it financially, @Pa Dax is right in his comment -- just trade your own account. I would add that the way to go is micros and brokers that require very small margins (there are brokers that require proportionately small margins for micros compared to minis.) Part of the appeal of the prop firms is that you can get into the market with very little actual cash you put up -- just pay the Combine fees and they do the rest. This only works if (1) you are broke, so you have very little to put up, and (2) you pass the Combine without too much effort in terms of the fees it costs you. If you have to put too much into it (as in, you keep paying the monthly fee and don't get funded because you don't make the target), it becomes similar to just trying to accumulate the money to trade in your own account.

3. If you are strapped for cash but can trade well (this can happen, but is probably not too common), and can pass the test and be funded fairly soon, without paying out a large amount for the privilege, you may do better with one of them.

There are probably intermediate cases between 2 and 3.

And then there is always the question of "Should I stay with them once I'm making piles of money," or "Should I just take the money and put it into my own account instead?" Well, there have been different kinds of "prop" firms, where they back beginners with little capital, for years and years. Sometimes, in the past, you had to contribute your own capital to the firm. I think that all these questions arose then with those firms also, in some form, and that, in general, the firms made more sense if you had less money, essentially. If you have enough to withstand the initial learning curve (and steep initial losses) of trading, just do it. If not, you improvise, including trying these companies.

Sorry, a long, long post, and I know that many people on the forum have heard similar things from me before. I just want to combat both the too-rosy view of these firms ("I'll get rich!") and also the too-negative view ("They're a rip-off!"), as I see them.

I think the best way to learn to trade is to do it with your own money in your own account. Everything is more real that way. But have you had the experience of not knowing how you will pay the rent because you lost it in the market? I have. That's a pretty real experience too.

Bob.

When one door closes, another opens.
-- Cervantes, Don Quixote
Reply With Quote
The following 9 users say Thank You to bobwest for this post:
 
(login for full post details)
  #5 (permalink)
 matthew28 
Legendary Elite_Member
United Kingdom
 
Experience: Beginner
Platform: Bookmap
Trading: US Equity Index Futures
 
matthew28's Avatar
 
Posts: 1,234 since Sep 2013
Thanks: 3,396 given, 2,482 received

Following on from my earlier reply, I obviously think in general the online funding companies can be a valid alternative when starting out. But if one does become funded and can trade consistently for say six months, or long enough to build up some capital, then after that I don't see any advantage to staying with the frequently mentioned companies and I would then open my own account. There really are no benefits that I have seen once funded:
  • You just give up a cut of profits, percentage wise minimal if only 10%, but still.
  • You pay professional CME data fees, some companies charge for all, some give the first free so that's okay if you only trade one.
  • You can often finder cheaper commissions if opening your own account, Topstep TSTrader uses the full Tradovate fee structure for example which can easily and cheaply be reduced if trading for yourself.
  • No mentorship or any extras when trading for the firm.

The only company whose website I have seen that does provide guidance with daily briefings during the trading day (which traders are expected to attend), and monthly evaluations, as well as CME membership rates does charge a $500 monthly "desk fee" which includes TT. But the Apteros test is relatively expensive for the monthly fee and would require at least two months to pass so might appear less attractive.

People can do the research, make a choice of company; or open their own account. Horses for courses and lots of options.

You do not win as a trader, you just get to play again the next day. If that game doesn’t appeal to you then you should not trade. Gary Norden
Visit my futures io Trade Journal Reply With Quote
The following 6 users say Thank You to matthew28 for this post:
 
(login for full post details)
  #6 (permalink)
Contango39
London UK
 
 
Posts: 8 since Aug 2020
Thanks: 12 given, 10 received

Thanks for the replies guys,

I was primarily interested in the support aspect of these companies, the idea of being monitored by, and learning from experienced traders, to ideally catch wrong actions early and advised on how to rectify a mistake, either thought process or trade management or whatever, going forward.

But it sounds like you need to have your plays and strategies already in place and use these companies as simple funding alternatives, if you cannot fund yourself. I've still got work to do on my plays, as well as my mindset because I've just came out of a 6 month loss aversion fog, trading order flow in sports trading markets. Trying too hard to make money (pressing) and chasing losses with real focus and determination. Excessive lol.

I was just enquiring after reading comments in other threads and wondered what the deal was. When I work through my issues and make the transition back to futures, and looking to try micros live, I think I would at least try to get funded first, just for the experience. And if profitable over an extended period look to move over to trade my own account.

Thanks for the advice

Reply With Quote
The following 6 users say Thank You to Contango39 for this post:
 
(login for full post details)
  #7 (permalink)
Mordecai
Melbourne Australia
 
 
Posts: 71 since Mar 2022
Thanks: 44 given, 104 received

You might consider Tradeday. They do formal mentoring for funded traders. The funded accounts are real funds, not live sim, and you can scale up pretty quickly if you trade well. You can find some interviews with the founders on YT. I was funded with them for a short time but didn't do well. But I have a high regard for the owners and the way they run their firm.

Cheers
Mordecai

Reply With Quote
The following 4 users say Thank You to Mordecai for this post:
 
(login for full post details)
  #8 (permalink)
HiLatencyTRDR HLT
Tallahassee
 
 
Posts: 368 since Dec 2018
Thanks: 15 given, 123 received

None of the prop firms having you pay to trade demo are what any real trader would call legit prop firms!!!!

Reply With Quote
The following user says Thank You to HiLatencyTRDR HLT for this post:
 
(login for full post details)
  #9 (permalink)
Spottrader
springfield, US
 
 
Posts: 20 since Apr 2022
Thanks: 0 given, 10 received

I may or may have been in the industry and I'll tell you that legitimate prop firms don't waste their resources this way.

Each firm has be be registered with the SEC, NFA, CFTC and FINRA. Depending on how they're structured, the traders need to licensed and registered as well.

It's bad form to call these funding companies proprietary trading firms. If you look closely at how they do business they're more of an introducing broker that can't get a legit registration and are no better than on-line gambling websites. They just take in the deposits of these fools one after another as they can't even pass their trials.

If someone can't trade their way into a successful living with all the resources and leverage available through legit means and has to resort to these companies what does that tell you?...and then somehow they're going to with more astringent trading rules?

There's a real disconnect and too many people are just plain delusional. These companies are in retail forex as well and it's just sad/pathetic seeing these people bent over them.

They (the companies) even refer to the wannabe traders as "customers" on their websites, but these people are too ignorant to see straight.

Greed and desperation can make a person illogical.

In forex the US brokerages will not go near them.

Reply With Quote
The following 2 users say Thank You to Spottrader for this post:
 
(login for full post details)
  #10 (permalink)
 forgiven 
Market Wizard
Fletcher NC
 
Experience: Intermediate
Platform: nijia trader
Broker: A.M.P. I.Q. ....C.Q.G.
Trading: ym es
 
forgiven's Avatar
 
Posts: 782 since Mar 2012
Thanks: 222 given, 498 received


At the end of the day you are trading in sim with the try out period . I have a little different take . I think every one should take a few combines . The reason is the risk management and discipline . They likely will have some free resources that will help . trade plaining , management and journaling come to mind . Most of you reading this and are struggling do none of that . After you have experienced the above and it takes ,move to micros . None of these firms are looking for prop traders . Their bread and butter is selling trader stuff . If they stumble across someone that already knows how to trade , they will be introduced to the educational side of the firm .

Follow me on Twitter Visit my futures io Trade Journal Reply With Quote
The following user says Thank You to forgiven for this post:


futures io Trading Community Traders Hideout > What's the problem with prop trading firms?


Last Updated on November 27, 2022


Upcoming Webinars and Events
 

NinjaTrader Indicator Challenge!

Ongoing
     



Copyright © 2022 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada), info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts