Is that challenge prop business model sustainable ? Discussion

TrAndy2022

TrAndy2022

Do you think that the Ponzi like business model from challenge prop firms, where challenge fees collected from props are used to payout all profitable traders, is profitable longterm for the prop firm ? Or is there no way out of it of a failure, because so many prop firms recently failed, I think over 50 of them in last couple of months. Some bigger ones too, like TrueForexFunds, TheFundedEngineer or TheFundedTrader. Most cannot survive for 6 months for the smaller new props popping up this year. The problem is that it makes most sense for "card counter" where they reverse trade between prop and personal accounts to hedge positions to secure a guaranteed payout request. Another problem is that too many profitable traders are left and generate far larger payouts than challenge fees invested. See this link below.
https://www.financemagnates.com/for...clients-lose-funds-investing-4300-on-average/

Because it is like b-book and a-book model from an ordinary FX broker this prop business model, where a normal broker is able to switch from b-booking to A-booking when trader shows consistency or is highly profitable. In that way or something, as I have no FX broker knowledge expertise. The new broker based prop firms, like Think Capital, BlueberrryFunded or ICFunded to name just a few, should have that expertise, but do you think it will change and those prop firms will stay for much longer ?

Please share your thoughts and let's discuss.
 
Topstep has been around since 2012 and it seems like they are doing well.

I did some conservative calculations and I'd say they take in at least 10MM a month in fees, according to their own numbers that's more than enough to cover the payouts so i doubt they are going to go out of business any time soon.

If you trade well with them you get an actual live trading account, unlike most other firms out there.

Edit: for transparency: I do have a funded account with Topstep but I don't get paid by them for saying anything positive and I am not in the affiliate program.
 
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This will go on
1) As long as there are enough rabbits who will go for the carrot
2) as long as regulators are sleeping
3) Until all of a sudden many "Funded traders start winning and the "firm" can't manage the risk they are taking ( Since it seem they don't take the trades to real market )
Now even regulated OTC ( FX ) brokers are getting in to the game

A simple thing, many clearly mention that even after funding the trading on SIM.. if that so then how come no body asking where do the money comes from when profitable traders needs the payout???
Why this is not seen as OTC product providing and regulated in the same way is beyond logic
Also most mushrooming "Props" are based on OTC products just like thousands of FX brokers,, very few are based on real Exchange traded Futures or Options or Equity,
There seems to be another breed of Prop offering First Loss funding based in Canada but again not regulated as Broker dealer..
TST as pobox24 pointed seems to make more money on fees
so all a mess
 
traderjo said:
This will go on
1) As long as there are enough rabbits who will go for the carrot
2) as long as regulators are sleeping
3) Until all of a sudden many "Funded traders start winning and the "firm" can't manage the risk they are taking ( Since it seem they don't take the trades to real market )
Now even regulated OTC ( FX ) brokers are getting in to the game

A simple thing, many clearly mention that even after funding the trading on SIM.. if that so then how come no body asking where do the money comes from when profitable traders needs the payout???
Why this is not seen as OTC product providing and regulated in the same way is beyond logic
Also most mushrooming "Props" are based on OTC products just like thousands of FX brokers,, very few are based on real Exchange traded Futures or Options or Equity,
There seems to be another breed of Prop offering First Loss funding based in Canada but again not regulated as Broker dealer..
TST as pobox24 pointed seems to make more money on fees
so all a mess
More...

All these firms try to make more money from fees than what they have to payout, since most traders lose that isn't an issue if you have enough customers.

Otherwise none of them would stay in business. If I were to pick one right now I certainly would only pick on in the futures business, one that does actually provide a live account and has some credibility.

Most of the firms out their meet none of these criteria, but it still surprises me how many people are willing to throw money at anything shiny.
 
traderjo said:
I certainly would only pick on in the futures business ,one that does actually provide a live account
Which one?
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I already made my pick, but there are a few others that I might also consider if I had to pick today.
 
How about Darwinex, they have investors behind and marketing it. Any knowledge about this program as I am unaware of ?

Can someone tell me, is Darwinex an independent FCA regulated broker or belonging to someone, who then ? So I can deposit how much I want and trade like on a normal broker and they do all the risk calculation for investors ? Where is the benefit here, if you can upload your statements and then have same effect, true ? Then I could trade on other broker and sometime in future just upload statements and then start to collect investorts money with Darwinex (not zero) or how does it work ?

Second, what are the requirements for Darwinex Pro to have a successful launch with investors money ? Just making thoughts about it, not really serious. Do I need to have a license on my own, or do you do it with your umbrella fund ? What is included for 10k fix cost and 5k annually here ? Because this is really cheap.
 
TrAndy2022 said:
How about Darwinex, they have investors behind and marketing it. Any knowledge about this program as I am unaware of ?

Can someone tell me, is Darwinex an independent FCA regulated broker or belonging to someone, who then ? So I can deposit how much I want and trade like on a normal broker and they do all the risk calculation for investors ? Where is the benefit here, if you can upload your statements and then have same effect, true ? Then I could trade on other broker and sometime in future just upload statements and then start to collect investorts money with Darwinex (not zero) or how does it work ?

Second, what are the requirements for Darwinex Pro to have a successful launch with investors money ? Just making thoughts about it, not really serious. Do I need to have a license on my own, or do you do it with your umbrella fund ? What is included for 10k fix cost and 5k annually here ? Because this is really cheap.
More...

I have no experience with Darwinex but i assume their FAQs will answer all your questions.
 
p0box4 said:
I already made my pick, but there are a few others that I might also consider if I had to pick today.
More...
ok which one? that you think is reputable and actually trades real money on a regulated exchange
 
traderjo said:
ok which one? that you think is reputable and actually trades real money on a regulated exchange
More...

Topstep and Earn2Trade and a newer one that I might consider is probably TradeDay, but I think they are fairly new.

I would then decide which one has the fewest rules or is best suited for my trading style and of course the fees.
 
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