There are loads of "prop firms" propping up everywhere at the moment due to the boom. Be careful of the distinction between the funded firms where the model is based on a monthly fee and the older prop firms. The main difference is that your money and account will NOT be safe ate the newer firms and they are NOT overseen by any regulatory body such as FINRA. If they fold you will lose any money you have invested or made.
The older prop firms and most brokers are overseen by FINRA and therefore less chance of going bust.
The older prop firms and most brokers are overseen by FINRA and therefore less chance of going bust.
MattK
Active member
- Messages
- 201
- Likes
- 31
How can I effectively evaluate the credibility and safety of a proprietary trading firm before deciding to invest or trade with them? Only FIRNA?
Is there any trustworthy rating system or source where traders can check the credibility and safety of proprietary trading firms?
If they are registered with Finra, they will be on Finra's register. You should be able to check for yourself on the Finra website. However no company is safe from failure. You would have to search the internet with regards to how credible they are but you would at least know where the money is unlike the funded firms. However to be able to trade with these prop firms, means you have to pass certain qualifications. You should take your time to read the extensive documentation on the Finra site.
Look up Tuco Trading, FTX, MyForxFunds to understand the reasons why they were bankrupt and all will become clear..
Finra (or FCA in the UK) registration implies that in addition to following other rules and regulations, the firms have to segregate your cash in special accounts. That is why your cash will be safer.
In addition, particularly for security trading, if the firm is also registered with SIPC in the US and FCA in the UK and has your cash, the cash will generally be protected (upto a certain amount).
Finra (or FCA in the UK) registration implies that in addition to following other rules and regulations, the firms have to segregate your cash in special accounts. That is why your cash will be safer.
In addition, particularly for security trading, if the firm is also registered with SIPC in the US and FCA in the UK and has your cash, the cash will generally be protected (upto a certain amount).
MattK
Active member
- Messages
- 201
- Likes
- 31
Thanks! I have already read about MyForexFunds. As I see that the number of prop firms is increasing, could this just be a new trend?
frugi
1
- Messages
- 1,843
- Likes
- 133
The modern prop firms such as FTMO, MFF, TFT, Alphacapitalgroup etc. do not hold client money as clients trade simulated accounts. The only personal money at risk is what you have paid to take the initial challenge to become "funded". This is usually refunded with your first payout. Others charge a monthly fee instead, as pointed out by iq200. This type of prop firm does not need to be regulated (in the UK at least; US is more stringent) as they are not holding your money and using it to place real trades in a live market.
As we have seen, there is of course the possibility that they will not be able to pay you (and some of them do all they can to make conditions as unfair as possible too) nevertheless the risk to capital is minimal.
If you accept their trading conditions and rules such as max daily / total drawdown etc. and pick an honest firm they can be an attractive option, especially for those with limited capital. But research is needed as a lot of them are run by inexperienced chancers who only seek your failed challenge fees and do not want a long term partnership. If you pass a challenge and become funded I'd advise making withdrawals as frequently as they allow, usually every two weeks or so, to guard against this.
As we have seen, there is of course the possibility that they will not be able to pay you (and some of them do all they can to make conditions as unfair as possible too) nevertheless the risk to capital is minimal.
If you accept their trading conditions and rules such as max daily / total drawdown etc. and pick an honest firm they can be an attractive option, especially for those with limited capital. But research is needed as a lot of them are run by inexperienced chancers who only seek your failed challenge fees and do not want a long term partnership. If you pass a challenge and become funded I'd advise making withdrawals as frequently as they allow, usually every two weeks or so, to guard against this.
Last edited:
IlIlIlIlI
Senior member
- Messages
- 2,593
- Likes
- 1,898
MFF should not be taken as attractive or working prop firm as long as the CFTC investigation is not closed.
$310 Million Fraud: Regulators Freeze Assets of My Forex Funds
My Forex Funds, a prop trading firm, has terminated its services as the Commodity Futures Trading Commission (CFTC) in the United States and the Ontario Securities Commission (OSC) in Canada have moved against the alleged scam of about $310 million. Both regulators brought charges against Murtuza K…
Breaking: My Forex Funds Questions CFTC’s Jurisdictions on Its Business
The legal representatives of My Forex Funds and its CEO, Murtaza Kazmi, have responded to all the allegations brought by the CFTC and categorically denied them.
Court Orders Release of MFF Founder's Assets
The New Jersey court, tonight (Tuesday), partially granted My Forex Fund's request in the lawsuit filed by the CFTC against the company.
frugi
1
- Messages
- 1,843
- Likes
- 133
"MFF should not be taken as attractive or working prop firm as long as the CFTC investigation is not closed."
I could not agree more sir, hence my advice to research thoroughly! As the prop landscape evolves, I expect several others - built on a similarly dubious business model with highly questionable ethics - will follow suit. A year or two ago all you needed to do was build a fancy website, hook up a second rate grey label broker and splash pictures of Rolexes and Lambos all over the socials and the challenge fees would flood in. I think people are wising up after the MFF debacle and the firms that operate professionally will squeeze out those that don't.
I could not agree more sir, hence my advice to research thoroughly! As the prop landscape evolves, I expect several others - built on a similarly dubious business model with highly questionable ethics - will follow suit. A year or two ago all you needed to do was build a fancy website, hook up a second rate grey label broker and splash pictures of Rolexes and Lambos all over the socials and the challenge fees would flood in. I think people are wising up after the MFF debacle and the firms that operate professionally will squeeze out those that don't.
MattK
Active member
- Messages
- 201
- Likes
- 31
Thank you for the advice. I have a question about whether this prop firm is suitable for beginners. Some firms claim to have good training and support, and they also offer consultations with their specialists
IlIlIlIlI
Senior member
- Messages
- 2,593
- Likes
- 1,898
The only prop firm suitable for beginners is FTMO.
The reason is very simple: they are the only one I know who offer a 10 days demo account and you should seriously use it before thinking about a live account. Market data are identical to their live accounts, the seldom tricks also
I strictly recommend the "swing" trading demo account as it has no additional rules on the live account to drive the trader crazy and "prove" a rule violation, these rules and checks are not fully implemented in any demos. The "disadvantage" is a spread of 1:30 instead of 1:100, but 1:30 is more than enough if you have to regard stop limits.
IMO their prizing for live accounts is competitive to the others.
frugi
1
- Messages
- 1,843
- Likes
- 133
FWIW Alphacapital (ACG) also offer 30 day free trials (as many as you want) and the trading conditions are exactly the same as those on challenge and funded accounts (same server, same LP price feed). The rules are also the same across all accounts except max lot size which only applies to funded accounts.
There isn't any training as such, but they do offer free 1-1 risk reviews with Gerry their head of trading education if you fail 2+ challenges. Their support is excellent and the owners very visible, accessible and active on their Discord.
I think ACG and FTMO are the clear leaders at the moment and both are suitable for beginners. Why not get a demo from each and see which you prefer, MattK? Their rules are slightly different and you may find one suits you better. Please ensure you read the rules very thoroughly before buying a challenge. Amazing how many people don't and then complain when they fail because they break one.
Not wishing to push ACG too hard, but they are doing 40% off till 31 Dec, discount code is XMAS40 (or XMAS4 if that doesn't work). A 50k account for approx £140 is a bargain in my view.
There isn't any training as such, but they do offer free 1-1 risk reviews with Gerry their head of trading education if you fail 2+ challenges. Their support is excellent and the owners very visible, accessible and active on their Discord.
I think ACG and FTMO are the clear leaders at the moment and both are suitable for beginners. Why not get a demo from each and see which you prefer, MattK? Their rules are slightly different and you may find one suits you better. Please ensure you read the rules very thoroughly before buying a challenge. Amazing how many people don't and then complain when they fail because they break one.
Not wishing to push ACG too hard, but they are doing 40% off till 31 Dec, discount code is XMAS40 (or XMAS4 if that doesn't work). A 50k account for approx £140 is a bargain in my view.
Last edited:
IlIlIlIlI
Senior member
- Messages
- 2,593
- Likes
- 1,898
You're right, ACG also offers a free trial.
It looks like they also started allowing EAs after their approval (to avoid martingale strategies) and the main difference to FTMO seems to be that they only offer MT5 while FTMO offers additional MT4 without visible restrictions on the EA. ACG keeps the spread at 1:100 but restricts the trading volume directly while FTMO does this by reducing the spread to 1:30 on swing accounts.
I didn't read the T&C of ACG but I know that FTMOP has a diffuse clause in their T&C that they can suspend a trading account when it beleaguers the server significantly. FTMO also has a limit on the number of open positions at 200 and I don't know this from ACG (I should run a test EA on their free trial to find it out).
frugi
1
- Messages
- 1,843
- Likes
- 133
Yeah ACG are strict about EAs. I admit that is a significant disadvantage if they're your thing. You can use lot size calculators, trade management utilities etc. no problem, but not commercial or publically available trading robots as they break their group trading rule. But you can develop your own bot and use it if you provide them with the original mql code.
You can tick a box at purchase to enable any EA during the challenges, but they do need to be formally approved at the funding stage and as I say if they're off-the-shelf it's likely to be a No.
Yes, no martingale (adding larger size to an open position in drawdown) but that can be circumvented by stacking lots of the same size.
And average trade length must be > 2 minutes, with majority of profit from trades > 2 mins. They do this to stop HFT, all or nothing news gambling, people taking advantage of their price feed or overloading it with hundreds of trades. I suspect they have a similar clause about beleaguering (good word
) the server!Indeed leverage is 1:100 for all products, though the indices contract size is significantly smaller than gold or forex, which can be a problem for ES/NQ traders who trade, say, 1 min with minuscule stops.
MT5 only (do people still use MT4 - it's seriously ancient now?) with CTrader soon to be integrated as a more modern alternative, with luck this month. They're also opening up their (now regulated) partnered broker to client deposits later on. Lots of progress going on there... they're a younger firm than FTMO but run by mature people with a lot of trading and financial market qualifications and experience, and it shows.
Anyway I'll stop the ACG flag-waving now but I've been with them for a good while and am very happy with almost everything about them.
Last edited: