Prop Trading Business Model

[wmwmw]

If you can consistently make money but need more capital, then earn2trade, FTMO and Myforexfunds are the ones to go.
You pay a challenge fee upfront.And after you pass the challenge, the fee is refunded. So you actually pay no cost to get funded if you are really good。

Myforexfunds has cut the fee really low, $499 for a $100000 account, and you can pass the challenge as fast as in 10 days.Once you are funded with live account, profit split is up to 85% for you.

Once you have enough capital, prop firms are no more a better option for you, because in your own account, you have benefit of compounding.

 

[RedSun]

@wmwmw

This is exactly what I'm thinking.

 

[Laissez Faire]

If you can consistently make money but need more capital, then earn2trade, FTMO and Myforexfunds are the ones to go.
You pay a challenge fee upfront.And after you pass the challenge, the fee is refunded. So you actually pay no cost to get funded if you are really good。

This is news to me. Maybe some of the companies does this, but certainly not E2T or TopStep.

I don't know anything about FTMO, but most of these companies aren't viable alternatives for serious funding.

If you're a good trader you're pretty much always better off by funding an account of your own. If these companies actually gave you any capital to trade it would be different, but the risk parameters are so tight that you can't use much leverage with them anyway.

 

[Fonz]

It doesn't seem hard to see that funding companies are not in the business of funding traders. They are in the business of making money from poor traders, dreamers, gamblers, lottery players, etc.

Why? It is just how casinos and insurance companies operates. The odds are just so not good for these traders, it is just so easier to make money from them, than chasing an hypothetical great trader (who doesn't know herself how great she is..).

Is it wrong? No, it is just business, except if they break their own rules.
Robert provided a very good explanation of what are legitimate prop. Firms.

A good trader could easily trade micro futures contracts or even just one tiny ETF or stock, with her own rules and risk management, and then compound slowly and progressively until the desired trading size.

Good trades!

 

[Laissez Faire]

I talked to another firm which seems legitimate, but they require you to put up a first loss capital and where they're typically not interested in anything less than 20K. Now, on those 20K - they're not really offering any more BP than you would have on your own as a retail trader with intraday margin on futures.

 

[Robert Morse]

Laissez Faire, that is an interesting comment. I'd like to expand on that. The value many years ago when these prop firms where hot, in most cases, not all, of the JBO prop firm was to get good leverage, with a small deposit and get a K1 that offered taxes based on 60/40 (Long term/Short term). The cons were a lock up capital, registration with regulators, comingling assets with a business you have no management control over their business or their risk of your capital, in addition to what other restrictions and requirements they might have. Today, with Globex access to the CME, a large number of symbols to trade with a low margin requirement and the addition of Micro futures that give smaller players even more flexibility, and yes, these are 1256 contract taxed at 60/40 too, I'm not sure the value of these prop firm now. The exception would be a firm with technology you can't get on your own with smaller funds such as Market Making or hosted HF trading.

I talked to another firm which seems legitimate, but they require you to put up a first loss capital and where they're typically not interested in anything less than 20K. Now, on those 20K - they're not really offering any more BP than you would have on your own as a retail trader with intraday margin on futures.

 

[daytrader_Canada]

I talked to another firm which seems legitimate, but they require you to put up a first loss capital and where they're typically not interested in anything less than 20K. Now, on those 20K - they're not really offering any more BP than you would have on your own as a retail trader with intraday margin on futures.

How much leverage are they offering? I trade similar sort of capital on 30x leverage with a prop so if they are offering more than that would be interested. Though I am a non-US citizen so not sure where the firm you spoke to is based out of

 

[RedSun]

@daytrader_Canada

What market with the 30x leverage?

 

[Laissez Faire]

Today, with Globex access to the CME, a large number of symbols to trade with a low margin requirement and the addition of Micro futures that give smaller players even more flexibility, and yes, these are 1256 contract taxed at 60/40 too, I'm not sure the value of these prop firm now.

Right.

I imagine the value of such a firm would be relevant mostly to equity traders who may not have access to the same leverage.

While I could utilize the same leverage on my own - they would offer me to use the same leverage overnight. So that could be an additional benefit. In addition to lower rates.

However, all things considered it doesn't seem like an attractive opportunity for me. They do seem to fund people without putting up capital if they could provide a track record, so that could be an alternative at some point. We'll see.

 

[Laissez Faire]

How much leverage are they offering? I trade similar sort of capital on 30x leverage with a prop so if they are offering more than that would be interested. Though I am a non-US citizen so not sure where the firm you spoke to is based out of

T3 Capital. Contact them if you're interested. They seem serious.

For equity trading it might be worthwhile, but as mentioned in my prior post I don't see the great value for a futures trader.