What you'll learn
- Contrast the two models on capital, selection and pay
- Understand who the online model is designed for
- Avoid confusing the two when reading marketing
Side by side
| Traditional prop firm | Online prop firm | |
|---|---|---|
| How you join | Hired after interviews and training | Buy an evaluation online |
| Whose money | The firm's real capital | Simulated account; the firm may or may not hedge |
| Selection | At recruitment | By passing the rules |
| Pay | Salary plus profit share | Profit split only, usually 80 to 90 percent |
| Your cost | Nothing | The evaluation fee |
| Numbers | Hundreds of traders | Hundreds of thousands of customers |
What the online model really sells
It sells a chance. The evaluation fee buys an attempt at a set of rules, and the firm's revenue comes mostly from attempts that fail. That is not a criticism; a driving test works the same way. But it means the firm's marketing is about the size of the account and the size of the split, while its profitability depends on the difficulty of the rules. Read the rules the way you would read the terms of a bet.
Reading the marketing
Get funded up to 400,000 dollars describes the top of a scaling plan most traders never reach. Keep 90 percent describes the split after several payouts, not the first. No time limit may be true of the challenge and not of the funded account. The lessons on rules and on evaluating firms show which figures to check.
Key takeaways
- Traditional firms hire and fund with real capital; online firms sell evaluations and fund simulated accounts.
- The online model earns from failed attempts, so the rules are the product.
- Marketing figures describe the best case; the rules describe the actual deal.
Knowledge check
Trading forex, CFDs and other leveraged products carries a high risk of losing money. This lesson is general education, not advice. Risk disclosure.