Are Prop Trading Firms Legit?

A prop firm is like a sports team that seeks to draft the best players, or traders in this case. Then, it provides them with capital to execute their trading strategies. Any profits generated are shared between the trader and the firm, with the trader keeping the lion’s share.

There’s a popular quote that “talent is everywhere, but opportunity isn’t.” A prop firm bridges that gap between talent and opportunity, helping skilled traders access capital to implement their strategies.

Just like scouts evaluate their prospects, prop firms evaluate traders before allocating capital to them. During the evaluation stage, traders need to pass a demo challenge to demonstrate their skills. They’ll only get capital if they pass the challenge, becoming funded traders with the backing of a professional prop firm.

Prop firms are duly incorporated companies, but aren’t strictly regulated like other trading firms because they deal with their own money. Traders manage the firm’s portfolio, which is funded with the firm’s capital, and this privilege is granted to a small minority that qualifies as live traders. Most retail prop trading involves demo accounts with virtual capital, not real money.

Conduct due diligence before selecting any prop firm. If you notice any of the above red flags, it’s a signal to find an alternative or risk losing money for nothing.

The prop trading sector has its criticisms and problems. These include:

Some prop firms create evaluation challenges that are impossible to scale through. Their aim isn’t to fund traders, but to make money from evaluation fees. These firms depend on traders making repeated attempts to get funding before finally giving up.

To avoid falling victim, you should thoroughly evaluate a firm before signing up. Read reviews on financial websites and forums about the firm. If you notice many people complaining about the evaluation process, it’s a hint to steer clear of the firm.

Some prop firms have unclear or hidden rules that can lead to denied payouts. You could be trading profitably and following the platform’s rules, yet suddenly have your account closed. These unfair rules lead to financial losses and frustration with trading in general.

To avoid facing unfair rules, always read the fine print when choosing your prop firm. If the rules aren’t transparent, the funded trading process likely won’t be.

Working with legitimate prop firms offers many benefits and avoids the risks mentioned above. You won’t have to worry about unfair rules, hidden fees, or getting your earned payouts.

As a talented trader, prop firms enable you to trade with limited financial exposure. The firm provides the financial resources to execute your trading strategies, and you avoid risking personal capital. You don’t have to risk that hard-earned money pot you’ve accumulated over time, as prop firms willingly absorb the risk in exchange for profit-sharing agreements.

Prop firms aren’t only offering access to capital. They’re like professional scouts who provide guidance to their sports prospects. Prop trading platforms have risk management rules that help minimize losses, such as maximum drawdown limits and minimum trading days.

We’ve talked about the benefits of working with legitimate prop firms. How do you identify these prop firms? You can follow the checklist below when researching prop firms.

Trustworthy prop firms publish their rules, evaluation parameters, fees, and profit-sharing arrangements. This is critical information to know as a trader, and legitimate prop firms must be transparent with it.

You don’t want a situation where you face inconsistent rules. You’re about to enter a financial contract with the prop firm, so you need to know all the details. If the details aren’t clear, you can contact the support team for clarification.

Trustworthy prop firms provide payout certificates to prove their reliability. They publish their precise payout percentages and commit to specific payout periods. For example, Hash Hedge traders get an 80% payout of the profits generated from their strategies.

Seeking third-party opinions is an effective way to judge a prop firm’s trustworthiness. Legitimate prop firms have good track records with other traders. That’s why prop firms often display positive reviews on their websites; nothing beats glowing testimonials from other traders who have previously worked with the firm.

Apart from reviews displayed on the firm’s website, check third-party sources to get unbiased information. Many blogs specialize in reviewing prop firms and helping traders make the right decisions. Read articles on these blogs to note the pros and cons of your intended prop firm.

You can also check trading forums to hear directly from users. Note that no firm’s reputation will be totally positive, but there should be a higher rate of positive reviews than negative ones. Overly negative reviews are a bad signal for you as a trader.

We mentioned that prop firms aren’t just about providing capital. They also offer expert guidance to help refine your trading strategies and boost profits. Likewise, they provide exclusive access to a like-minded community of traders you can trust. You can exchange ideas within this community and learn from the best.

Hash Hedge is your perfect partner as a prop trader. We provide funded trading accounts ranging from $5,000 to $100,000, with support for 200+ crypto assets and up to 5x leverage.

Hash Hedge allows news trading, letting you react quickly to crypto market events, unlike many prop firms that restrict it. Extensive support resources are available to boost your profits, and you’ll keep 80% of the spoils. Sign up today, pass the evaluation, and amplify your trading profits.