Prop firm: forex or futures?

[Higher_High]

I’ve been learning to trade and I have a simple system (I did not invent it) which I can trade ok so far on a demo account.

So I’m thinking to try to use it for a prop firm evaluation to try to pass, of course, and take a funded account to try to trade. I can afford the evaluation entry price, but to trade with my own money, it will take me very long to build up the amount slowly. Like many people, I guess?

My big question is whether to try a forex prop firm or a futures one?

I read a bit about both, but am confused which one to do. Who can tell me briefly the advantages and disadvantages of both, please?

[MartialChartsFX]

Someone else will have to weigh in on the forex prop firms, but with Futures you generally have to be flat (all positions closed) by the end of New York session, so no swing trading. If you’re not used to trading on the lower timeframes this can take some getting used to. You can open positions the night before and hold until the end of NY session the next day.

I can’t say if forex prop firms allow swing trading or not.

Prop firms may have more regulations and restrictions based on your country of residency. Many of the forex prop firms stopped accepting U.S. traders so many have turned to futures.

Most prop firms will have rules that add difficulty for passing such as consistency rules, daily loss limits, max loss limits, and often trailing drawdown limits (either end of day or intraday).

[TheodoreThring]

In addition to MC’s helpful comments above …

They’re two different worlds. They’re chalk and cheese. They’re the sublime and the ridiculous.

There are lots of threads and posts here, discussing the relative merits and demerits of each. Have a look around.

My own opinion is that the key difference between them, and the most important criterion to understand, relates to their own incentivisation after you’re funded. The forex/CFD ones aren’t actually funding you and don’t want to pay out much, as it’s their money you’re winning (the same as counterparty market-makers pretending to be “brokers”). The futures ones are your partner and want you to win, after you’re (genuinely) funded with a real account on a real exchange.

The only disadvantage of futures ones over CFD/forex ones that I know of is that the futures ones have to charge monthly because they have to pay the CME monthly for the data-feed they provide for you. So, overall, if you’re going to take a while to qualify (as many people do!) it’s likely to cost more at the outset. A partial answer to that issue are discounts and special offers.

Be aware that there are countless scammy, horrible CFD/forex ones (“Axi-select” and “Monavie” spring to mind!) and there’s even a pretty nasty futures one (“Apex”), too. Take care. Due diligence was never more due!

A careful read of these 5 posts can only help you -

Genuine Prop firm?

It depends what you mean by “genuine”, I think. Out of the forex/CFD ones, the one with the best overall reputation is almost certainly FTMO (now owned by the broker Oanda). But it’s increasingly widely reported that even there, the number of people who take an evaluation and ever get as far as a payout is only about 1 in 500. I think they’re “genuine,” though, in that they’re not dishonest and don’t refuse to pay people who win. It’s just that what you have to do, to make money from it, is MU…

Prop Firms and Funding

No. Companies like Topstep and Tradeday have a totally different business model from companies like 5%ers and FTMO. It equates to the difference between CFDs and futures, as explained above. 5%ers and FTMO are not really funding anyone, and not pretending to. They’re counterparties. I’ve recommended Topstep and Tradeday to people who know what I do for a living, and have asked me because they have some trading skills but no capital. These are companies that actually fund people (verifiably so…

Forex Prop Firms Disappearing

It’s no secret that a lot of forex prop firms are still (August 2024) going under, fairly regularly. Note that this is just forex prop firms, not the futures ones, which have a very different and far safer, more reliable and more honest business model. FunderPro claims that more than 50 forex prop firms have disappeared so far in 2024 alone (and of course many went under in late 2023). The CEO of FunderPro, Alex Zanutto, is far from alone in believing that the traditional forex prop-firm trad…

Prop Firms will kill Retail Brokers

They vary enormously (just like the forex prop firms do). They have special offers and discounts and stuff, on and off. At the moment I believe Topstep is $50 for a $50k account with no time-limit, but theirs is a monthly charge, not a one-off, so it might really cost you $100 or even $150 if you’re not in a hurry at all. Tradeday is one of the best, currently 40% off, but also monthly (slightly lower profit target than Topstep and no daily loss limit - they vary!). Apex is the cheapest (it…

Prop Firm: Yes or No?

they do - several do (what you’re asking about are actually “funding companies,” not “prop firms”, though in this forum they’re commonly labelled and described as “prop firms”, and these days even some of the funding companies call themselves that, which is hugely misleading!) there were - among others - a few people here who successfully traded with MFF (“MyForexFunds”), currently in receivership with regulatory litigation pending i, like many others here, mistakenly thought they were one o…

And lastly, welcome to the forum.

[SchmaltzHerring]

Great replies, above - just in case you haven’t found this point somewhere in the links above, check carefully how the “drawdown limits” work - both on the evaluation and on the funded account if/when you’re funded - before paying!

There’s a great “gotcha” catch about this point, among (forex) prop firms.

A static drawdown (doesn’t rise with your account balance) is best - there are at least two firms with this.

A maximum drawdown that trails your end of day balance is next best (and ok, and common).

A maximum drawdown that trails your end-of-position balances (i.e. moving “per trade”) isn’t quite so good, and is rarer.

A maximum drawdown allowance that trails open equity is a scam and a fraud and is designed purely to catch you out (very, very few companies still use this, after all the terrible publicity about it!).

[Higher_High]

Thank you.

So the forex CFD ones have no advantage at all apart from the fact that you don’t have to pay for a data feed from an exchange, because there’s no exchange involved?

The prop firms I’ve found with static drawdowns seem to have very small static drawdowns?

I see that having a drawdown that trails open equity must be dangerous - I was trying to think through the mechancis of how it works, which isn’t easy, and decided you could even theoretically lose the account without ever losing a single trade?

Would anyone like to recommend a specific futures firm, either with or without giving reasons for their choice, please?

[SchmaltzHerring]

@Higher_High

So the forex CFD ones have no advantage at all apart from the fact that you don’t have to pay for a data feed from an exchange, because there’s no exchange involved?

It depends what you consider an advantage.

I’d say that the CFD ones have no advantages. Period. Not having an exchange involved is a disadvantage.

@Higher_High

you could even theoretically lose the account without ever losing a single trade?

Not just theoretically. It happened surprisingly often.

This “drawdown trailing open equity” has absolutely no real equivalent at all, in the real world of trading. It’s not an attempt to duplicate or substitute for anything genuine at all. It has no legitimate function in assessing anybody’s trading abilities. It’s a total scam.

@Higher_High

Would anyone like to recommend a specific futures firm

Sometimes it’s not so easy to do that in a forum without wrongly being accused of being a “shill” (!) but I suggest you look at TradeDay, Earn2Trade and Topstep and see whether any of them fits in with what you’re looking for.