Is that challenge prop business model sustainable ? Discussion

Is it unethical that they payout a lot of traders with the income from losing traders fees?
It is not ethical because then the real motive is more failed traders on a hamster wheel than more good traders,
and when I say real prop firms I mean real big one who don't advertise for Traders or sell education , they pick from either exp traders or Uni grads
 
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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TakeProfit (futures) claims to do live acct once you get to Pro+

Also--they supposedly allow you to withdraw profits every day as opposed to most other firms that at most only allow profit withdraws once every 2 weeks or once every week. Being able to withdraw profits every day (if true) is a big advantage as you could make your daily profit--withdraw it same day, then repeat every day. The reason most (if not all) firms delay your ability to withdraw once every 2 weeks (most of them) or once a week (some of them) is because it tips the scale in their advantage as they know most traders will end up losing money within that 1 week or 2 week window and there is more likely a chance that the payout will be much less or none at all if they violate loss rules or just simply lose money over that 1 week or 2 week window before withdraw time as most traders will not be willing to stop trading all together after 1 or 2 profitable days and simply sit on their hands for 2 weeks until payout is allowed

https://takeprofittrader.com/#about-tradingIMG_3689.jpeg
 
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Yes--agree with that (their PRO is still Sim so where does the wining traders get paid? Hamster wheel fees). The only advantage on the Pro "sim" account compared to other challenge firms is the ability to withdraw profits every day (as opposed to waiting 2 weeks for a "payout allowed now" date. In that scenario of a daily profit withdraw at least if they shut down in the you should have been able to at least withdraw the profits you made everyday up until that point --because if one day your daily withdraw request was not paid and received by you then you would not trade the following day --so at most at risk 1 day of profits (theoretically)

Ultimately in my opinion even with a Pro+ account that supposedly is a live account with real orders to the exchange and supposedly not sim --the only real benefit with a Pro+ account (assuming the orders actually are live in market and not sim) is the ability to trade multiple futures contracts without having to put up the same initial per contract margin required in a real regular trading account which can run about $15,180 on SP500 emini to $23,000 on Nasdaq emini per contract--but since you cannot hold positions overnight and have to be flat at end of session day margin only required is $500 per contract on SP500 emini and $1,000 per contract on Nasdaq emini--so if they are giving you the ability to trade up to 15 emini contracts or 150 micro emini (not a good idea to trade that many though)-- then maybe they provide some benefit of less daytrading margin required as opposed to a regular account depending on how many contracts you are trading, but if you are only trading 1 to 3 eminis or 10 to 30 micros at a time and only day trading them and flat at end of session then probably no advantage other than the fact that downside limited due to their auto-liquidate on loss violation whereas with regular trading account your losses could possibly exceed the balance in your regular trading account in a fast moving market if the regular broker liquidates but end price at liquidation results in a loss exceeding your balance then they ask you to wire difference
Tradeovate.jpg


Here is what they say on website upgrading from Pro to Pro+ live trading
https://takeprofittraderhelp.zendesk.com/hc/en-us/articles/15171929948829-Benefits-of-PRO

PRO+ accounts are $0 margin live accounts that have following benefits:

- No daily loss limit

- 90/10 profit split

- Trader directly routed to the exchange, not SIM or ''copy traded''.

- No buffer zone requirement

Each trader that will reach a $5 000 profit in the PRO account will be presented with opportunity to move on to PRO+ account.
 
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TrAndy2022 said:
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 ?
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One nuance needs to be discussed. If a prop firm is being run correctly, it will not be run like a Ponzi scheme.

The evaluation fee should be set high enough such that of the 100 traders that buy evaluations today, the evaluation fee from these 100 traders should be large enough to cover the expected stream of lifetime payouts of these 100 traders.

The temptation for a prop firm is to become a Ponzi scheme, where they lower the evaluation fee to chase growth, and so the evaluation fee from these 100 traders is now insufficient to cover their expected stream of lifetime payouts. Thus they need new traders tomorrow to join the Ponzi scheme, in order to avoid bankruptcy.
 
It may not be 100% Ponzi but the main point is the business Model is based on Failure and Not success ( 10000 of test fee V/s paying out only few)

It is like Tesla or google charging those engineers wanting to get a job charging $1000 fee millions apply as these are god reputable companies,,, and fail.. only few get a job meaning the 1 M *1000 pays for the salary ...Not Google or Tesla
 
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