Prop Firms and Funding

So, how do prop firms make money? What is their business model and do they all follow the same model?

1 Like

I’m pretty sure most of them make almost all their money from the fees of people repeatedly trying and failing.

No - very far from it! The forex/CFD ones and the futures ones are two totally different types of business (just like forex/CFD brokers and futures brokers are, and actually for very similar reasons, too). So there are at least two radically different business models.

3 Likes

The post below will interest you, and it also contains inside it a few links to a few other little threads here which will interest you.

I think most CFD prop firms are about as scammy as you can get. Their collective record on paying out is atrocious. They keep disappearing and re-starting under other names, etc. etc. The whole business is awful.

That’s the CFD ones. Not the futures ones.

But I think you’ve chosen one of the very few decent and reasonably ones, yourself. I know some members here had unresolved complaints with them, and dislike them … but compared with others, they’re still pretty good, I think.

PS. Sorry, apparently I’m too new to post a link!

Anyway, it’s the 4th post in a thread called “Prop Firm: Yes or No”, the one with a few links in it, which you’ll find in the Prop Firms section in this forum (which is where you should have posted this thread, maybe? :wink: ).

3 Likes

No problem - fixed that. :grinning:

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) on an exchange. Their incentive is verifiably for those funded traders to make profits, of which they take a share, and to continue to do so. But even these firms, I’m sure, make much more money in fees than from their profit-shares.

Trading is like driving a car: everyone thinks their skills are “above average”.

When they lose, either they were unlucky, or it was someone else’s fault.

They think lack of funding is the reason they can’t win.

And they’ll pay to try again, if they can afford to.

The countless “scammy” firms exist only because and while people pay them.

4 Likes