I’ve been getting a lot of ads about getting a funded account where they give me the capital and we share my trading profits, is this a legitimate way to trade or should I just focus on using my own funds, the company/broker/propfirm I keep seeing is My Forex Funds
it can be, for those with genuine, reliable trading skills and little capital, but understand that most of these companies make most of their income from the fees of people trying and failing
it’s undoubtedly one of the better ones
I also read that some of the rules that are required during the challenge are tough to maintain and hit profit targets.
Like drawdown, max loss, trading day limits.
I think, in general, these are a legitimate partnership concept (naturally, one has to check specific companies out before actually proceeding). But they are not suitable for everyone.
In most cases you pay an initial, non-refundable fee for an evaluation account that is either demo or funded, for example USD 10,000.
You then are free to trade the account within the rules and products set by the prop firm. The rules usually set a limit on leverage, a max daily drawdown, and a total max loss for the account (maybe 5% of initial capital or current balance), limits on o/n and weekend open positions, etc.
The chosen product will require achieving a certain target, say 10%, within a specified period such as 6/12 months.
If you achieve the target then you are funded in a new account with different parameters and a profit split.
This kind of approach is ideal for traders who are competent and consistent and can work within sensible risk/money management constraints (which is a good idea anyway!) but don’t have capital to trade significant size.
Apart from the general business risk with any broker/company, your risk exposure is only the fee you pay upfront (if the company is bona-fide). After a successful evaluation, even a 50/50 profit split is good if you do not have much own capital and some products offer progressively higher profit shares depending on your success.
Hope this helps!
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I also heard about it much but was little bit in confusion whether or not it’s a fraud. If it’s legitimate, then it’s really a good opportunity for those who don’t have sufficient trading capital. Can you give me more information about it?
They all work on a relatively simple concept: If you are a competent and consistent trader then they provide the capital and you trade within the rules set and you both share the rewards.
But they all have their own products which vary regarding capital amount, rules base, profit split, evaluation target, duration, etc. And it is wise to check through as many as possible to get an idea of what will suit you best.
Actually, one of the most progressive and reliable of these prop firms actually posts regularly on this site. It will be worth reading through their thread and look at some of their videos as well as their home site. They have actually just revised their product range this month, I am told…
Here is their thread here:
But there are other funds as well so take the time to check them out.
Happy reading 
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There is a lot of info and reports/experiences and names of many prop firms on this site:
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These prop firms are popping up everywhere and are clearly doing well. And why wouldn’t they be, it is a very tempting offer with little risk other than the initial fee, which is what keeps them in business.
As already explained in previous posts, just like any trader you need a consistently profitable strategy to succeed, same goes for these prop firms, except now you have more rules and usually, wider spreads. Most will lose their initial fee and move on.
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Yes, the initial fee is the only real upfront risk but I dont think this is what keeps them in business. True, they do not lose if a trader blows the account, but I really do believe that their real income is derived from finding good consistent traders and sharing their earnings and/or copy trading their trades on another account - why not if the trader has proved themselves reliable! Indeed, some of these traders are managing accounts in millions so it is not “small beer” by any measure! 
But, of course, as we have said, the trader has to be consistent…
From what I have heard the success rate is not great but not as bad as for the industry in general. Most people accept that the overall failure rate amongst retail traders is around 70-90% but I think the failure rate amongst prop firms is around 50-60% - but I have no proof or evidence for that apart from general hearsay. The prop firms are not obliged to reveal such data as far as I know.
But I think it is credible that the success rate would be higher primarily because one has to pay the fees upfront and one would not do that unless one felt comfortable with one’s own trading capability in the first place.
From what I have seen the spreads are reasonable but there is usually a commission charge per trade - which is tough news for a volume trader like a scalper or even a day-trader. In addition, the low leverage (1:10 or 1:20, for example) combined with limitations and costs on o/n and weekend trades tends to push traders towards day-trading, which can result in very erratic results for many traders.
Another side benefit is that the prop firms often provide educational material and interviews with their successful traders. This is interesting because some of these traders also have their own trading Youtube channels and one can rely on the authenticity of the content because these traders’ success is confirmed and proven by their prop firm funded accounts.
One area that does puzzle me is who is on the other side of the funded account trades. It is not the prop firm because it is their money being traded as “client”. So who are the brokers on the other side and do the prop firms actually have a financial interest in the broker. I am sure they at least get a volume “cash-back” due to the size of some of the accounts being traded. But no issue with that!
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@SovoS nice to see you around again.
This seems like a very lucrative business indeed, which is why they are gaining in popularity. They win if you lose and they also win when you win. So really, they have little reason to “scam” you, as long as they’re reputable.
Problem is the pressure (time restraints, minimum monthly trades, maximum draw downs, etc) to reach the level required to become funded is very often the downfall for the trader. Then some prop firms offer a “retry” at a rate even more tempting than the original one. I’ve heard of traders “retrying” half a dozen times.
One good thing is most of these firms offer a practice run, which would seem like the smart thing to do to make sure your strategy is compatible with their rules. Assuming the practice run mimics the live account 100%.
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Good to “meet” you again, too. I have always appreciated your inputs here!
Absolutely, I think it is very much the thing of the future and a great opportunity for talented traders.
Yes, this is very much the case. The constraints can be very pressurising. But I think the competition amongst prop firms may well force them to ease up on the rules. Afterall, these rules are not set to trap one into failing, they are there as protection of the prop firm’s assets, that are being traded by a third party, by managing and limiting risk. But I have already seen extended durations and removal of minimum trade numbers and compulsory stops, as well as higher leverage etc. Competition is a great thing here! 
The great benefit here is that the trader and the prop firm are on the same side. A situation we are not generally used to in our broker relationships!
I have also heard that quite many traders have bought and blown several evaluation accounts before succeeding through to a funded account. For example, in some Youtubes and in some comments about various prop firms on Trustpilot - here are a couple of examples:
“I’ve had several evaluation accounts with ***** and have received the best customer service.”
“Was trading with ***** since the start of the year, and everything has gone great. I’ve blown a few accounts but also got paid out on any profits. Good experience, and no red flags so far.”
As you say. there is every reason why prop firms do their best to help you succeed. Your success is their success! The initial fees are only in the range of roughly about USD 90-250 which is peanuts compared with the potential on-going shared earnings from a talented trader.
It is a different world to depositing USD 10,000 with an offshore broker and never seeing your money again!
Thanks for your input here, it is an interesting topic on a very relevant development in the trading industry 
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Its a scam guys,dont be fooled. I can pass one of those sites,and still they wont give me capital as they say. The thruth is that they set unreal conditions for your trading. It is impossible to achieve such results with such low risc,and they know it ,thats why almost everyone fails with them,but still they get money from you. Those sites are made just by 1 or 2 ,maybe 3 people,who failed in trading,but still want to make money from it. It is not a company as they say,its just 2-3 people behind scene. And they dont have funds to fund your account. Ask yourself this : will a prop trading firm risc its capital to a newbee from internet? Of course no,and it doesnt matter how good you are at trading.
I remember i went to apply for a trading job in my country to a prop trading firm,they asked some history,i gave them my best one (withc i made intentionally for this purpose) 1 year trading, with profit 65% during 12 months,with average drawdawn 1-2% monthly,and still after all this ,they denied me because (as manager said to me) of low experience. And by they way i have 9 years experience.
So again,dont be fooled by those ‘‘get funded companies’’
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Hi @coolBuTcute.01
Thanks for the input! It is good for folks to hear both sides of the “story” That is the benefit of a good forum!
It also emphasises the need for any trader to do their homework thoroughly before paying up for anything.
Trading in prop firm is different guys,why cant you understand it?
And not because its not your money but their,but because you cant trade in the same way as you do now ,by simply pressing button buy or sell. Tell my pls,if you have 10 millions in your account,and you want to buy 100k or 200 or even 300k of shares,lets say Facebook (for ex),who do you think will fill you? If you want 300k shares to buy,who will fill you? None,as simple as that,your trade will simply remain as limit buy order,and it will never get fully filled .
In order for you to open this amount of trade,you must be sure you will be filled,so you start to manipulate with majority ,to make them (or most of them ) to sell to you,thats how you buy 300k shares.
Thas how they trade. Thats the reason why most prop trading firms will never hire a simple retail trader.
Because this retail trader have no idea how they work
But majority of people are stupid ( i realized it while looking at myself in the mirror) ,they believe everything they see on social media. They really think you can deposit 100 bilion and sell at once 100 million by pressing that magic button ,and of course everything must work ,because thats how majority think…
Its sad,very sad,but this whole industry its vice versa…
This retail trader wants to be part of prop firm,but he doesnt even know how they work…it doesnt make any sense…
P.S everything i said here,was about myself
Yes it is and that is why it does not suit everyone. However, the risk limitations placed on traders are protective in purpose and not designed to make you fail so they can run away with your 200 bucks…
Also, this is not a multi-millions or nothing business. Prop firms offers a progessive increase in funds and there is no pressure to move beyond a trader’s own comfort level.
Yes, it is true that the funds are not the prop fund’s own money. AS I understand it, the funds comes from liquidity providers based on the risk structures imposed by the prop firm.
It is worth bearing in mind that most prop firms start with an evaluation fund that is often a demo and the trader has to pass that stage first before receiving live funding - which may only be 10,000 to 100,000, not millions. So they are not simply giving money to “Newbies” to “play with”. You have to demonstrate a consistent strategy over a period of time and not just a lucky gamble before being trusted with live funds.
Trading forex with a 10.000- 100.000 capital is certainly not a liquidity problem, on the contrary, quite normal I think…
Since there seems to be some interest in this topic I think it is worth also looking at the regulation requirements of prop trading firms. The bottom line seems to be, as far as I can establish, that they are only regulated as much as they want to be and that there are several loopholes to avoid regulatory requirements. This is quite interesting reading:
## Regulations for prop firms that offer funded accounts
Recently, a new type of proprietary trading firm has become very popular. These prop firms don’t actually hire proprietary traders as employees, instead they offer to any independent prop traders who can prove they have a successful, safe trading strategy.
They will offer anywhere from $10,000 up to $2 million worth of trading capital to traders, usually after they’ve passed an evaluation phase and paid a one-time beginners fee or a monthly subscription fee.
These proprietary trading firms have also largely escaped regulation.
Many of these firms consider their main business to be financial education rather than trading activities. Industry leader FTMO, for example, clearly states in their Articles of Association that their main income-generating activity is the “organisation of events for the general public focused on increasing financial literacy…”
FTMO, along with other prop firms of this ilk, also use “demo accounts” for their independent proprietary traders rather than actual trading accounts. FTMO traders are actually using “virtual funds” that are somehow connected to the firm’s capital. These measures keep this type of prop firm free of any sort of regulation from the SEC or anyone else.
Even firms that offer real funds to their traders claim they are exempt from regulation. The 5%ers, a leading prop trading firm that offers funded accounts, says this in their FAQ: “However, there is no regulation clause to what we do, because we are not a financial institute and do not provide any financial services. We trade using our fund’s capital, with the support of our competent funded traders.”
Read the fine print on the websites of any of these types of prop trading firms and you will find a very similar message, if they bring up regulation at all."
But the bottom line is still that the only risk is the small upfront fee and the risk that you don’t get paid your share of the profits. But since profits can be withdrawn on a regular basis I doubt anyone would wait very long, or build up a huge amount of owed profits, before asking for a withdrawal and not getting a response. I therefore think this is quite a low-damage risk situation and one can easily identify the more reliable prop firms in the market!
I’m contemplating setting up a similar model using my own funds… The “Business” provides the education, strategies, desk space, the IT, the Platform, the risk management and access to say a 10k account (subject to competency).
The “Business” then takes a percentage of each Traders profits each week… The more successful they are the more profitable both entities are…
My belief/understanding using this model, you are no longer in the Trading Business… You are effectively making money out of money…
You are in the Finance Business…
I don’t understand how operations using a similar model cannot be deemed as lenders, investors, financial services.
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I think the issue here is not that this type of business does not need regulating, it is more a question of avoiding regulatory requirement via loopholes or technicalities in the wording of regulatory requirements. And I am sure that as this market grows, so will the regulatory interest in it, too!
But I think the core factor here is that prop firms are not holding (and risking) third party client funds at all. Therefore the risks to the client are relatively minor and, while that continues to be the case, maybe not sufficient yet to justify additional work by the regulatory authorities to encompass them in the reporting, monitoring, and investigation processes.
But I don’t think this is necessarily a negative accusation against prop firms. I doubt they are looking simply to “steal” client fees, which are so nominal. I guess they are just trying to avoid the headaches and costs of complying with regulatory requirements. But I may be just näive in this respect! I am sure there are some shady set-ups that are indeed just trying to collect some fees while they still can.
But from the trader’s perspective, they have only paid a fee, which they know is non-refundable, for services allowing them to trade, directly or indirectly, the prop firm’s own (or acquired) funds. They know the criteria that has to be met upfront and, even if it turns out to be overly restrictive, they have no basis for complaint if they fail the evaluation.
That leaves the future payout of winnings having qualified for live funding. The ability of the prop firm to do this and its stability as a business are indeed areas that could and should be regulated and monitored to avoid cases where a more dubious set up runs off with the money. But, again, this is not client capital that is at risk, it is the earnings, like an unpaid salary. It is wrong, but is it “wrong enough” to wake up the regulators? And it would be very short-lived and with limited damage before being highlighted in the industry.
But the bottom line is that unregulated means unregulated! And, as always, it is the trader’s responsibility to investigate and select the most appropriate and reliable firm if they wish to follow this path.
Maybe I paint too rosy a picture of the prop firm business, and I am no expert in these fields. But I am not aware of any evidence that prop firm trading , in total, in principle, and in practice, is purely a scam.
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For those interested in exploring prop firm terms and condiions, here is an excerpt from MFF who currently advertise on BP. If you look under program in “evaluation” you can find the typical type trading conditions that you will meet concerning limitations, rules, targets, time limits, profit splits, etc, etc.
https://fxfundedtrader.com/programs/
Personally, I think the time constraints on achieving the targets are overly ambitious and would encourage a gambling attitude as the deadline approaches. But they do state that they will consider extending deadlines in certain circumstances.
Another reason why it is worth studying a range of these companies to find one whose terms suit the trader best.