What Makes a Prop Trading Firm Worth Your Time

The prop trading industry has grown tremendously these past few years and with growth comes a lot of noise. There are dozens of firms on the market touting funded accounts, profit splits and tantalizing offers so good that they’re almost too good to be true. For traders having to invest time and evaluation fees to determine what’s worth their work, the options can be daunting. However, what’s important to note is that not every prop firm is created equal and with knowledge of what truly matters when it comes to prop firms, money and time can be saved by avoiding rookie mistakes.

The Evaluation Structure Matters

The majority of prop firms limit funded accounts behind an evaluation process. Where they differ most, however, is in the structure of this evaluation process. Some have evaluations that are set up for success. Others pose more of an obstacle course to charge fees. The characteristics that separate one from another? Realistic evaluations based on valid professional trading expectations and no sudden rules or changes.

Some organizations expect 10% a month with a maximum 3% drawdown on the evaluation process. These numbers are unrealistic as actual expected profit percentages should average out to more like 1% a day and max potential drawdowns should be less than 1%. Programs that jump at the opportunity for high percentages know that they will fail most participants. However, the better firms recognize that prop trading is not about unrealistic gain opportunities; it’s about consistency achieved through risk management. Many traders flock to Funded Futures when they seek evaluations that align with feasible goals versus unattainable ones.

Even the time limit to achieve goals possesses significance. The shorter the time frame, the more pressure a trader feels to make mistakes. A 30-day evaluation is laced with stress for the trader looking to hit targets before time runs out; thus, they overtrade. An evaluation that lasts longer or one without a specified time allows the trader to actually work their real strategy without urgent, artificial time constraints.

Payout Structure

Where many firms falter is payout structure. Yes, many prop firms talk a big game in terms of profit splits but few allow participants to actually withdraw their hard-earned profits without delay or complication.

Substantial minimum payout requirements exist among some firms if they exist at all. Traders cannot request withdrawals until they’ve met excessive benchmarks and not until then. Some programs make withdrawal requests difficult or confusing while others, mysteriously, take up to ten business days to process a simple payout request.

Instead, the best firms are upfront with their payout structure from day one. They reveal minimum withdrawal requirements up front, process times and whether there are any stipulations such as making sure traders maintain consistent profit splits before requesting a one-time payout. Attention needs to be paid if the firm is vague or fails to mention anything about payouts and relegates such information to lengthy terms and conditions.

Finally, consistency matters as well. If a firm regularly pays out to its traders and encourages consistent trading behavior, it’s a real firm. If payments take weeks upon weeks with explanations still pending for missed deadlines, there’s something wrong with the business model. Traders must find reviews and testimonials that substantiate receipt of payouts, not just passing evaluations.

Scaling Opportunities

Once funded, what’s next? This is the true question for a firm potentially devoting time and money to an individual trader.

Good firms with proper intentions offer clear account scaling opportunities. After consistent profits for a period of time, increased buying power can be granted or higher profit splits can be assigned. Some firms allow multiple accounts (multiple sizes) after certain thresholds are achieved while others have multiple account sizes from which traders can choose from upon initiation as long as they’re responsible thereafter. This adds up over time and shows that the firm wants to have a long-term partnership with a consistently performing trader.

However, many prop firms have stagnant accounts upon initial funding, no opportunity for expansion whatsoever. As such, traders could be profitable for months but still never able to increase their position sizes since day one. This is frustrating as earning potential could certainly stand to be extended.

Support and Trading Conditions

From a day-to-day perspective working for a prop firm reveals how much of a trader’s potential they take care of their own traders. If support isn’t available regularly or the trading conditions are subpar, what’s the point of even being funded by that firm?

Certain expectations need to exist relative to program platforms, spreads and responsiveness. If there are consistent technical issues, poor fills or customer service that’s hard to reach, these challenges make life that much harder for traders who are trying to make profits consistently anyhow. Prior research about what platforms each firm uses should include whether there are regular technical complaints from other traders who’ve been there for years.

The rules by which we trade matter just as much. Some firms impose trading restrictions on news events or overnight positions or contract types and at first glance, these limitations don’t seem like much until they conflict directly with someone’s tested strategy.

The Real Value

At the end of the day, the value of time spent with a prop firm comes down to an ideological principle: What makes a prop firm stand out when other cutting-edge avenues exist in today’s market?

It’s true that not every reputable prop firm will create roadblocks for trading success just because they need assessments, payouts and evaluations up and running, however, it’s also true that unrealistic expectations should never be put in place for initial access to capital either.

Realistic evaluations preceded by honest payouts with transparency, increased opportunities later on down the line along with facilitated trading conditions at all times create expectations for what’s feasible instead of luxuries down the line.

Firms that survive this transition grow reputations of legitimacy over time because if they trader makes money, then they make money, which creates an aligned interest for all parties involved making it worthwhile from the get-go during this initial onboarding process. It’s worth the additional research up front because it can catapult your career, and failure of picking out the wrong firm will only waste your money and confidence along the way.