The Truth About Online Prop Firms

Things You Need To Know Before Taking the Next Challenge

Prop Firms

Let’s not kid ourselves here. These firms make most of their money from the subscription fees paid to trade the challenges. And there’s nothing wrong with that. You might think that means there’s a big conflict of interest, they want you to fail.

Yes and no. They want some traders to pass and make money, but not everyone…

Well, they need some profitable traders to use as marketing collateral right? You can’t have no traders making money or that’s not good for attracting new talent. But you also don’t want everyone passing because now you are running a different business with bigger risks.

So what does that mean for you the trader?

You need to be one of the few that passes the challenge, gets funded and starts withdrawing profits. Let the crowd fund the business, they can use you as a poster child for what’s possible.

Oh, and it’s worth noting here that some firms put you on a live account, meaning the better you do, the better they do. You make 100k, they might get 10-20k depending on the split.

But many don’t push you to live. A lot leave you on a demo but pay you as if it’s live. Why might they do that if you passed the challenge? Well, they know that a good chunk of traders blow accounts up once they have passed. And if that’s a live account the company is on the hook for those losses (Even though they are capped depending on the account size)

Some companies realised it was better to just be a counterparty to all traders than take all traders live. Plus they have the option to switch really good traders to a live environment if they wish later on.

Interesting Mark, but how does any of this affect me? Well, I think if you are going to use these online prop firms, you need to look for a few things before choosing.

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Things to Keep in Mind

1. Make sure the company is big in size


Well, we discussed the business model earlier. The bigger the company the more revenue they will get from challenges fees and the happier they are you passing and making money.

2. Know if you are on demo or live

I think either is fine, I mean who really cares if the firm pays you or the market? But knowing what type of account you trade after you pass will impact the business model and also potentially the way you can trade. If you are on a demo they will be far less tolerant of scalping and short-term trading due to the inefficiencies of a sim environment.

3. Pick a challenge with fair rules

Some rules are just ridiculous and you’re almost guaranteed to fail. It doesn’t matter how good you are, at some point you will lose trades and you will draw down. Setting highly restrictive rules under the guise of prudent consistency is stupid and shows they do not want you to pass.

4. Read the small print

Double-check what happens when you pass. After passing and trading a live account, one company would suspend your account for one rule break and keep your profits. That’s just insane!

Let’s say you’d built up an £80k cushion and not yet withdrawn it. Then you went over a daily loss limit, or held a trade over some news. The whole £80k would be gone. If you see that type of thing, AVOID.

Fine, the rules are there for a reason, but they shouldn’t be keeping your profit to date.

5. Don’t get caught up in always trying to pass challenges

  • Pick one and put all your effort into it.
  • If you fail have another 2 gos max before stepping back.
  • It’s too easy to get sucked into trying to pass challenge after challenge.

It might be that these rules don’t suit you. That’s not an excuse to be poorly disciplined! But there are many ways to trade and intraday trading in the major markets is just one.


I believe these online prop firms play a good role. The legit ones are a nice stepping stone from demo to live. You cap your total risk but still have skin in the game.

Just make sure you choose wisely!