The regulation of a financial institution is the oxygen to its investors. Traders should consider regulatory frameworks and thorough supervision of platforms as a virtual lifeblood to the longevity of their finances. After all, regulation and proper checks and balances could be the foundation of an individual’s portfolio and savings therein. On the macro level, effective regulation strengthens national economies and reduces the probability and severity of financial crises.
Regulation is intended to protect participants of financial markets and to ensure stability and integrity of the system. It is the foundation that gives investors the confidence to participate.
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According to a study conducted by the International Monetary Fund (IMF), countries with stronger regulatory frameworks and effective supervision have experienced fewer banking crashes. From international banks to independent brokerages, well-regulated systems promote transparency, minimize risk, and safeguard the interests of investors and consumers.
Prop firms – the hype funding platform – are famously in a grey area of regulation. Many traders have been caught unawares by the invisible strings attached to the promise of funding from a prop firm. As is often the case in finance and beyond, where there is opportunity there will also be risk. Where great profit potential exists greed will not be far behind, and the prop firm industry is no exception to the rule. Unfortunately, the individual cases of certain unsavory prop firms have sullied the image of the industry for some traders.
For any readers unsure of the terminology, prop firms or "proprietary firms" are platforms that offer funding to traders. Sometimes up to millions of dollars in company capital, the profits from funded accounts are distributed between firm and trader, with the trader usually keeping the lion's share. The risk of any associated losses is assumed by the prop firm.
To recap: prop firms offer traders vast amounts of company capital, with minimal risk and majority gain - are prop firms for real? While alarm bells may sound for someone who feels this is “too good to be true” remember that proprietary firms do not simply dish out funds to any trader who knocks on their proverbial door. Interested traders seeking leverage will first need to demonstrate their ability to meet consistent targets within the parameters of risk.
To assess applicants, prop firms will often use an internal evaluation or series of tests, sometimes referred to as a "Challenge." Traders will pay a small fee to access a trading account, and often throughout a limited period, they will need to meet certain criteria such as profit targets, maximum daily and overall drawdown, and observe trading regulations such as the Consistency Rule. Traditionally, participants of a funded challenge will trade with a demo account using virtual funds.
Those who demonstrate sufficient trading ability will then pass onto the verification stage and be funded with company capital, using real money in live accounts. From this point on, any profits earned will be split between the firm and trader – and this is a legitimate source of funding for many traders.
Funded traders benefit from more than just company capital: as the industry grows bigger by the day, many prop firms are seeking to keep their competitive edge by offering extra features to their traders, including in-house mentors, tutorials and webinars, professional training schemes, and competitions with cash prizes.
Many traders have effectively used prop firms for instant capital: sometimes paying an extra fee for a “fast-track” account that enables them to begin trading larger accounts and profit accordingly. The experience of trading with hundreds of thousands of dollars – albeit in a demo account initially – can be invaluable to traders seeking to learn the ropes or practice a new strategy without investing their funds. However, traders should be aware that regulation and prop firms do not go hand in hand.
Prop firms are not the Fairy Godmothers of funding – a business model designed to only give away money would send off red flag warnings. Prop firms do collect funds, not only from the shared profits of the recruited traders using company capital but also from the failed challenge fees.
Other prop firms take their cut by charging fees from traders. Regulation is important in prop trading and most prop firms are not regulated, which means there are no strict rules to protect traders. So, it is up to you to figure out if a prop firm is trustworthy or not.
The regulatory grey area enjoyed by many prop firms opens them up to multiple means of generating dividends from their funding model. How can you evaluate the trustworthiness of a prop firm?
The most accurate reflection of the quality and longevity of a prop firm will be found neither in review sites nor in their Challenge small print. The most important litmus test of any prop firm is often the least common one: who is their CEO? The proof is in the pudding: successful companies have strong leaders at the helm. Numerous studies have demonstrated that high-performing CEOs experienced higher returns on assets and higher stock returns compared to firms with underperforming CEOs. Good leadership inspires positive financial performance and shareholder value.
Consulting gurus PricewaterhouseCoopers (PwC) recently published an eye-opening new study: companies with transparent and effective CEO communication experienced higher employee engagement and retention rates. In other words, CEOs who keep the communication channels open and keep things above board have happier employees who are in it for the long haul. This is critical in the financial industry where talent and expertise give companies their edge over competitors.
A CEO who can communicate with their team can be a game-changer and lead to a positive “trickle-down effect.” Prop firms with a leader who can represent the company's vision, values, and goals will inspire and motivate employees and traders, leading to increased productivity and performance. The most important value in a CEO is transparency: where there is trust there is longevity, and this fosters growth and investment.
Gary Mullen, the CEO of FunderPro, and his dedicated team have made significant strides in the proprietary trading firm industry. Their relentless efforts have led to the creation of a groundbreaking challenge that is poised to be “a game changer”.
By eliminating complicated trading rules and providing traders with unlimited time, FunderPro is transforming the trading landscape. With a focus on empowering traders and fostering growth, Gary aims to provide real value and opportunities for participants to showcase their skills and compete for capital gains. As an STP platform, FunderPro aligns its success with the success of traders. Under Gary's leadership, FunderPro is reshaping the prop trading landscape, offering a simpler and more rewarding trading experience for traders worldwide.
Prior to his role as CEO of FunderPro, Gary Mullen demonstrated his exceptional abilities as the Chief Commercial Officer of Red Acre Group. His strategic vision and expertise in commercial strategy, marketing, and sales played a pivotal role in driving remarkable revenue growth and expanding the company's market presence. Equipped with a wealth of experience and a proven track record, Gary brought invaluable insights and leadership to his position at FunderPro, setting the stage for continued success and innovation.
Otakar Suffner is the CEO of FTMO, who was born and raised in Prague. He believes you don’t need a university education to be a good trader or businessman, although it certainly helps. This was due to having a smaller account since his options were minimal then.
As a co-founder of FTMO, a dynamic and ambitious company, Otakar and his team actively seek out and financially support trading talent in financial markets. Prior to launching FTMO, Otakar dedicated three years to full-time trading before deciding to fully commit to the project.
In his approach to trading, Otakar is highly analytical and data-driven, placing great emphasis on statistics. He leans towards probability-based strategies, leveraging numbers to develop unique and innovative trading ideas.
Michael Patak is a Founder and CEO at Topstep. He is a financial markets professional based in Chicago and a former floor trader and member of the Chicago Mercantile Exchange. He is best known as the founder and chief visionary officer of Topstep Trader, an educational and funding platform designed for new traders.
Previously he was the founder of Gorilla Gamer.
In 2016, Patak was a finalist for the Ernst & Young EY Entrepreneur Of The Year® 2016 Award in the Midwest, which encompasses Illinois and Wisconsin.
Gil Ben Hur is the founder and CEO of The5ers.com Funding Traders & Growth Program which is an innovative transformation for the classic proprietary trading fund model. He has been a full-time individual Forex trader since 2007, specializing in Orderflow and Price-Action methodologies. Mr. Ben Hur is also a trading coach and a former private investors portfolio manager. In 2016, he launched The5ers.com, a unique trading-career-platform that caters worldwide forex traders, by providing significant trading capital and a fast-paced trading career growth.
Murtuza Kazmi, the founder and CEO of My Forex Funds (MFF), is the driving force and mastermind behind the organization. He started his journey as a part-time trader and had the foresight to become an early investor in cryptocurrencies, reaping substantial gains. Leveraging his crypto profits, Murtuza redirected his capital towards funding forex traders, recognizing the potential for better utilization by skilled traders. Having experienced both successes and setbacks in his own trading career, he launched MFF to provide funding opportunities for forex traders and capitalize on the success of those who excel in the field.
Jana Seaman, a serial entrepreneur and financier, is the driving force behind SurgeTrader, the world's leading prop trading firm. Recently honored as one of the top 40 businesspersons under 40 by Gulfshore Business, Jana has witnessed unprecedented growth with SurgeTrader in just its first year.
Drawing on a track record of success and a team of professionals, Jana's VALO Holdings Group has positioned SurgeTrader for exponential future growth. Jana Seaman's visionary leadership and commitment to empowering traders have solidified SurgeTrader's position as a game-changer in the industry, propelling individuals towards financial success and life-changing opportunities.
Abdullah Jayed is the Founder and CEO of FundedNext and NEXT Ventures. Abdullah Jayed attended North South University.
Jayed has gained prominence for his successful ventures, including Growth Alliance, MoneyBackFX, and eComChef, which swiftly became market leaders in their respective domains. Building on his track record, he founded FundedNext, a multi-million dollar proprietary firm that is revolutionizing the prop firm industry on a global scale.
A strong advocate for supporting young and passionate individuals in pursuing their dreams, Jayed shares his values and works to empower others in their entrepreneurial journeys.
Dylan Elchami is the founder and CEO of E8 Funding. Mr Dylan Elchami was born in 1992, is resident of United States and has American nationality. Dylan's vision was to create an inclusive platform that provides traders with excellent opportunities and conditions. He remains committed to enhancing E8 Funding's offerings and attracting more traders to join the firm.
Dylan's primary focus in the industry is to simplify trading for individuals by offering strategic partnerships and state-of-the-art software solutions.
City Traders Imperium's CEO is Daniel Martin. Daniel Martin and Martin Najat are also the co-founders of City Traders Imperium. Together, Daniel Martin and Martin Najat have established City Traders Imperium, a platform aimed at providing traders with the knowledge and support they need to excel in the world of trading. Daniel Martin brings over 20 years of trading experience to the table, specializing in assisting traders in achieving consistent profitability by emphasizing the development of their trading psychology and methodology.
Thomas Heyden is the CEO of The Trading Pit. Thomas has demonstrated his expertise in the financial industry by successfully launching and managing multiple investment funds through his regulated company. His clientele comprised institutional investors and high-net-worth individuals (HNWIs). In recognition of his exceptional performance, Thomas was honored with the German Fund Award in 2009 for one of his outstanding investment funds.
Thomas plays a significant role in The Trading Pit, where he is actively involved in the development of TTP (The Trading Pit) in Liechtenstein. Drawing upon his extensive experience in financial engineering, asset management, and business development, Thomas contributes to shaping the growth and expansion of TTP within the region. His expertise in these areas enables him to make valuable contributions to the company's strategic initiatives and overall development.
Making money with prop firms is possible if you are a skilled and consistent trader with a proven strategy. But keep in mind that prop firms only fund a small percentage of traders. You need to meet their criteria and align with their trading style. And remember, evaluation is a two-way street: you need to assess whether your choice of prop firm is a sensible one and prudent for your long-term financial success.
When evaluating the risk associated with trading with a prop trading firm, several key factors should be considered. These include the firm's regulatory status, track record, industry reputation, and level of transparency. Conduct thorough research on the firm's history, financial stability, risk management practices, as well as information about their CEO and Founder. Additionally, be vigilant for any potential conflicts of interest. Seeking legal advice is advisable to gain a deeper understanding of the risks involved and to safeguard your interests.
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