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How do Prop firms make money besides subscription fees?
It is all paper trades, not real money trades. I was told Topstep actually sends orders to CME but how? it's all paper. I was also told Future prop firms pick and chose which trades to copy but how is that possible? copy trades those that are profitable only? I mean Apex Bulenox etc charge $150 for funded accounts for life. if funded accounts are real trade, for total drawdown of say $5000, how do they afford to cover the loss, if a funded trader loses $5000 while only paying $150 for funded account? Until recently Topstep actually refunds evaluation fees and don't even charge for express funded account, so how could they possibly make any profits besides subscription fees? is it simply because most traders lose money and blow their account and only about 1% of all prop traders make any payouts?
Can you help answer these questions from other members on NexusFi?
Every company is different. When I was at the physical prop shop, traders were on SIM until they proof they are profitable. Then you get allocation on how many contracts you can trade and risk parameters that you need to stick too. Within a company there are risk people who monitors the traders & risk parameters. Based on my understanding in critical times they have a right to close your position. In some cases they call you to discuss what is going on.
So basically the company is investing money into the individual. Some getting few chances some only one. Basically it is like any other investment. You put money on the line and hope you get something in return.
I am not sure in regards copying trade but it will be depends on the account structure I guess. For example when I passed E2T gauntlet. They moved me to a prop shop where my account was set up. It didn't take long and I blew it up. So it was the company loss.
You also need to keep in mind that you have trailing DD. that moves with your balance so their Risk is reduced. This is why they encourage people to build the buffer.
In my opinion i don't think Apex or any other is coping trades. They simply do not have to. Most of the people are failing it and resetting accounts. They have enough capital to support that limited amount of people who actually withdraws money.
Once these people are successfully traded for a year or more, they likely shifted to live account because they have proven track record.
Don't forget they also getting their cut would it be 10% or 20% it is still counts.
So how it is all possible. Risk management software and the company policy. Bear in mind these companies running marathon when 90% of us running a sprint.
You also need to include that prop shop increasing your trading size they push you to trade bigger size. The more you make the more they make as well. This is what E2T is done with their plan from 50K to 200K.
There are few people here who run Prop shops I think Mike Bell (SMB Capital) can give more details how it works within.
It is interesting to know how they make their money but it is more fascinating how we can trade profitably.
I think that for all prop firms most of the profits come from people failing the challenges.
However it's not true that never pass the orders to the market, I leave you a link to a previous post on this forum in which we discussed this extensively. I was personally funded with TopStep and Earn2trade and they do pass the orderr to the market (see link below).
Concerning CFD prop firms ( ftmo, mff etc...) they normally have a A-book and a B-book. I heard this in an interview with the CEO of one of these companies.
Basically all trades that are on the B-book never enter the market, whereas A-book trades are passed to the market, normally if they see that you are profitable they pass the orders to the market.
In the CFD case, what is the market? is it the broker's internal market? I think so.
I also think that even though some companies do not pass the orders to the market they can hedge their positions if all traders bet on the same market direction, so to be market neutral.
Hello everyone,
I recently found a video that I made some months ago when I was funded by Earn2trade, I made it with the idea to post it but for some reason the audio was not right and it needed some editing. Today I settled it and I decided to post …
They will never disclose it but I would bet a lot that they make most of their money on subscriptions. That's the reason there's so many of these places, if there was money in backing under-funded retail traders they would be competing to offer better technology and lower fees to help boost profitability. Instead they compete on making it 'easier' to pass their try outs with lower profit targets, longer time windows, overnight holding etc. The longer they keep you around the more they can bleed sub fees off of you.
yes, I agree with you. However think about it this way: if you work on a big investment bank, everyone wants to be on the trading desk.
The reason is simple: the traders are the ones who make most of the money, they are the ones that have the higher salaries and bonuses.
So to be a trader is everyone's dream.
Now suddenly there are these "prop firms" that offer you to risk 10K for a price of 500 USD and to prove to yourself what you can do.
It would be insane not to take the challenge.
Many traders are too focused on the "hard rules" of these challenges, but you must have rules anyway even if you trader your own capital.
Take FTMO for instance, they just ask you to make a 10% profit with a 10% risk, and then a 5% profit with a 10% risk. No time limit, no limits on size no trailing drawdown.
You want to take 1 year to do so? ok, no problem.
