I digress. As a TopStep trader, or as a trader for anyone (including yourself) yes, you can still deduct expenses i.e. home office, computers, etc. This information is all easily available on the IRS.org website IRS publications.
Is Topstep Trader legit or a scam?
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that is not surprising ! any company will publish good news...more honest thing would be to publish what % of traders actually get funded and what is the average " Combine fee" that the funded people burn!
Not a scam. Not illegal but questionable IMHO... and at the lowest level of "Prop" firms , no wonder the hamster wheel of fees label ( mentioned by many not just me) is stuck with companies like these.
earn2trade mentioned how many traders passed their prop firm evaluation. I think it was around 20% and considering earn2trade has the lowest amount of rules and is the most easy. I can only imagine other prop firms are more like a 5-10% success rate.
What I really want to know, is do these prop firms make more money from traders failing the prop firm or actually becoming profitable and splitting 20%. However, I highly doubt these prop firms would release audited financial statements on their profits/loss.
It would be nice to see their $ incentive inline with profitable traders, however, with some of these questionable rules/requirements, I have my doubts.
They make their money from monthly fees
Kinda. It is always nice to know the details, if for nothing else you may want to know just how committed they are to certain part of their business. As about rules, they have been changing them through the years, but as long as you get your check, it shouldn't matter.
You could say, as a Tesla investor, as long as the stock keeps going up, you don't really care if they make profits by selling cars or selling EV credits. Thus they might not care about car quality. Or your fav burger joint makes most of its money on soda, and not on selling burgers? Thus they might not care about the burger's quality. I think you are getting my point.
The devil is in the details.
It's different because profits will influence the stock price (even if it takes some time). At some point in the future, not being able to make profits will make the stock price go down.
However, if they make say 90% profits of commissions, it doesn't matter as long as they keep their word on what is offered if you pass (you should be able to keep your deal even if they change the rules later). It's just that not many people will take advantage of it. What will happen though, is that the rules they give you could be tailored to make you fail long term. That clearly happens in many of these firms while others are not so evident.
It's up to the trader to study these rules, their trading stats and make a decision of whether it's worth it or not.
Anyway if you study all the offers you will see that what they all offer is just x10 leverage on your money after passing a test of competence.
Nothing wrong if company makes money, hell they have too but what matters is "How" the so called prop firm makes it's money
A) by test fees from failed "applicants" or B) by profits from actual funded traders
If A> than B then that is questionable
Just think.. simple logic there are props firms around the world who recruit purely based on education / past trading Track record etc and do not practice this "Test fees from 1000 and fund a small %" model
Why? becasue these are true props who DO not depend on test fees, the "Real" motive is to find talent, any way ...
