Joining a prop trading firm is a great way for new traders to learn and make money without using too much of their own money. These firms give traders money, tools, and help, and in return, they take a portion of the profits.
However, traders must be cautious when selecting a prop firm to work with. While most prop firms operate ethically, some unregulated or shady firms like my forex funds may take advantage of traders through unfair conditions, hidden fees, or even fraud.
Before teaming up with a prop trading firm, it’s crucial to do thorough research. This article will explore how traders can find reputable prop firms, increase earnings, detect untrustworthy operations, and assess the best prop trading companies.
What is a Prop Trading Firm?
A prop trading firm is a financial institution that offers traders the money to trade in the financial markets.
These firms don’t own the trades themselves but typically earn a fee or a portion of the profits generated. Prop trading firms can be a valuable way for traders to begin trading because they provide access to significant capital without requiring traders to invest their own funds. Nonetheless, it’s crucial to select a reputable prop trading firm, as there are fraudulent ones in the market.
Choosing a Reputable Prop Trading Firm
Several key factors should be evaluated when determining if a prop trading firm is legitimate and right for your needs:
Regulation and Safety
Firstly, respectable prop firms strictly follow the laws and rules in their operating regions. Many reputable firms are supervised by well-established authorities such as the UK’s Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC) in the European Union, or the US National Futures Association (NFA).
Regulation is essential because it guarantees that firms treat traders fairly, adhere to industry standards, and safeguard your funds in separate accounts. Be cautious of unregulated firms and prioritize those that operate under the oversight of regulators in their home country.
Reputation and Reviews
Secondly, conduct in-depth research into any prop firm you consider working with. Check sites like Trustpilot and Forex Peace Army for trader reviews. Legitimate firms tend to have mostly authentic customer feedback, while shady operations exhibit more unreal and paid reviews mostly with near to zero negative reviews.
Additionally, search Reddit and trading forums for insider perspectives on different prop firms. Bear in mind traders often vent frustrations online, so moderate complaints are expected. But multiple severe complaints could indicate issues at the company.
Thirdly, leading prop firms provide responsive multi-channel trader support including email, live chat, phone, and social media. While delays may happen during peak periods, quality firms are generally helpful and aim to resolve issues promptly. Unresponsive or elusive support staff could be a red flag for shady operations. Prop firms should demonstrate they value their traders and aim to help them succeed.
Transparency of Conditions
A reputable prop trading firm will have established a partnership with a trustworthy and regulated broker to provide traders with top-notch trading conditions. Therefore, it’s essential to verify that the prop firm you’re considering works with a well-regarded broker.
Subsequently, make sure they have clearly outlined all trading minimums, maximums, profit splits, fees, and other conditions on their website and agreement forms. Carefully review these to ensure you fully understand. Reputable firms are transparent about costs and payout structures to attract skilled traders.
Watch for vague policies or claims that seem too good to be true. Non-transparent prop firms may hide fees and other catches that enable them to take advantage of traders.
Quality of Trading Platforms
The trading platforms and technology provided by prop firms should be assessed. Reputable companies offer fast execution speeds and maintain robust infrastructure. Watch for frequent platform crashes or lagging charts, which could impede your ability to trade profitably.
On the contrary, ideal prop firms integrate with top platforms like Meta Trader 4/5 that offer helpful tools for analysis and risk management. Proprietary platforms can be fine as well but should be stable and include the features you need.
- Do your research: Before you sign up with any prop firm, do your research. Read reviews, talk to other traders, and make sure you understand the terms and conditions.
- Start small: Don’t start with a large amount of capital. Start with a small amount and gradually increase it as you gain experience.
- Be patient: It takes time to become a successful trader. Don’t expect to make a lot of money overnight.
- Be disciplined: Trading is a business. Treat it as such and be disciplined with your trading plan.
How to Profit from Prop Firms
When partnering with prop trading firms, following best practices can help maximise your profit potential:
- Maintain a personal trading account – Keep a separate account funded with your own capital to hedge risk and withdraw profits into. Don’t leave all funds in prop firm accounts.
- Withdraw profits regularly – Transfer profits from prop accounts to your personal account monthly or quarterly. Don’t let funds accumulate in case issues arise.
- Copy trades across accounts – Use software like MT4 Copier to simultaneously execute trades from your personal account on prop accounts and vice versa.
- Reinvest to grow accounts – Continuously reinvest profits from prop firm payouts into building your personal account. This will reduce reliance on prop firms over time.
- Rinse and repeat – Clear profit targets with one firm, then join a new one and repeat the process to continue scaling up. But avoid overextending yourself.
How To Avoid Shady Prop Firms?
While most prop firms are legitimate, some unregulated operations or scams do exist. Be on guard for these warning signs when evaluating a potential prop firm:
- No regulatory credentials: Unregulated firms may have lower standards, poorer fund security, and less recourse for traders.
- Overly positive reviews: Shady firms may inflate reviews on sites like Trustpilot. Evaluate reviews closely for signs of manipulation.
- Anonymous leadership team: Reputable firms provide background on their founders/leadership. An anonymous team could be a red flag.
- Vague or non-transparent conditions: Watch for complex fee structures or policies that allow a firm to take more profits without cause.
- Claims consistently high win rates: Even the best traders have losses. Firms promoting guaranteed profits or impossibly high win rates are suspect.
With proper due diligence, traders can gain great benefits from prop firm trading while avoiding falling victim to “get rich quick” schemes or frauds.
Choosing the Best Prop Firm for You
Once satisfied a prop trading firm is operating legitimately, you still must evaluate which is the best fit for your needs.
Thus, these are the key factors to consider when selecting a prop firm include:
- Account minimums – Entry thresholds range from $500 to $50,000+ at different firms based on strategy.
- Maximum funding – Top prop firms offer over $1 million in funding to profitable traders.
- Markets traded – Some specialise in forex, others offer stocks, crypto, futures, and CFDs. Choose markets you trade.
- Profit splits – Common ranges are 50% to 90% for traders once funded, depending on performance.
- Fees – One-time and monthly fees vary. Consider profit splits and fee structures.
- Educational resources – Look for trading courses, mentors, and community support.
- Growth potential – Seek firms that can grow accounts and funding based on consistent performance.
- Trading restrictions – Understand limits on trading instruments, position sizes, leverage, trading hours, etc.
- Withdrawal policy – Compare frequency and minimums to withdraw profits from prop accounts.
- Customer support – Assess responsiveness and channels available such as email, chat, and phone support.
Finally, taking the time to carefully evaluate prop firms on these factors will help identify the best partner for your trading business and style.
If you are new to prop trading, you can check out our explainer blog The Prop Trading Challenge Made Simple! – Telegram Signal Copier
Our Top 5 Picks
Now, that we’ve covered how to identify reputable prop firms and maximise success, here are five of the top-rated prop trading companies based on trader trust and transparency:
1. FTMO: FTMO stands out as one of the largest, most established prop firms. Regulated across the globe, they offer:
👍 Funding up to $300k
👍 Lucrative profit splits starting at 70%
👍 Multiple account tiers and sizes
👍 Responsive support and global phone numbers
👎High minimum profit targets for passing combine
👎 Complaints of occasional platform outages
2. The5%ers: UK FCA regulated The5%ers requires only a one-time fee to get funded.
👍 Funding up to $1 million
👍 Generous 70% profit splits
👍 Strong trader community
👍 iOS/Android app
👎 Lengthy onboarding and verification
👎 High minimum trade volumes to withdraw profits
3. TopstepFX: TopstepFX provides separate futures and forex accounts.
👍 $400M+ funded to traders
👍 Profitable traders earn over 80% of income
👍 Educational resources and active chat rooms
👎 High combine restart costs
👎 Strict trading restrictions for new traders
4. TrueFunded: TrueFunded is a Florida-regulated prop firm with high funding ceilings.
👍 Up to $1 million in funding
👍 No ongoing fees beyond profit splits
👍 Advanced analytics and order tools
👎On the contrary, high loss limits compared to rivals
👎 Withdrawals can take 1-2 weeks
5. OneUp Trader: OneUp offers crypto and forex trading with flexible account tiers.
👍 Lower minimum capital requirements
👍 Up to 80% profit splits
👍 Strong sense of community
👍 Active chat rooms and trader community
👎 Relatively new company with limited history
👎 Support can be slow to respond
👎 Restrictions around trade styles and instruments
Therefore, this covers key factors to evaluate when choosing a prop trading firm partner. Conduct thorough due diligence, start with markets you excel at trading, and use best practices to maximise profits. Seek out reputable firms offering ample funding, fair profit splits, and resources to support your success.
Choosing a prop firm is an important decision. By following the tips above, you can not only choose a legitimate prop firm that is right for you but also can increase your chances of success when trading with a prop firm.
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