Prop firms are legit, but there are still differences worth it to explore and consider when choosing your prop firm. Let’s get through it step by step and evaluate what makes a prop firm legit. Also, let’s see if there are good reasons for prop firms to get banned.
Disclosure of company details and founder
When it comes to money, you want to know who you do business with. Is your favorite prop firm transparent about the company name? Is the company mentioned on the homepage of the website, is it at least visible on the contact page, or is it hidden in the terms and conditions?
Some prop firms don’t even disclose the company details at all, which is a clear warning sign.
A plus is also if the CEO or founder is listed on the prop firm’s website. If everyone just mentions the first names, or if pictures that you have seen before on the internet somewhere else are used, then it’s also a warning sign.
Jurisdiction of the prop firm
As long as you are in the prop firm challenge, it’s unlikely that any legal-relevant issues will arise. However, what if you make $200,000 in profits where, based on your profit share agreement, you could theoretically withdraw 80% to your private bank account, but the prop firm refuses to do so? In that case, it is a benefit if the prop firm you work with has jurisdiction in a country where you have a chance of getting your money.
Transparency about the trading rules
Trading by the rules is the non-plus-ultra when it comes to the fundament of success, and only if you know the rules can you understand and trade by them. But what if a rule is hidden somewhere in the third sub-folder of the help guide at the end of a 2,000-word article?
If the prop firm you work with is really interested in your success, they should invest in transparency about the trading rules. That is because only if you know them well can you make money so that the prop firm makes money from your trading success.
A prop firm only hides its rules if it wants to avoid under any circumstances that you complete the trading challenge successfully.
So, go to the homepage of your favorite prop firm, and if you find the rules on the homepage, then you find a firm that does things better than the average.
Good choice of payout methods
When it comes to paying a prop firm, the prop firm is entirely flexible in the payment methods used. Be it a credit card, debit card, PayPal, cryptocurrency, or some less-frequently used payment methods, they are typically all accepted.
But what are the payout methods supported? What if you made money trading your funded account, and now it’s time to withdraw the profits?
This is the point until it feels that you did everything right. You successfully traded by the rules and succeeded in trading what statistically is less than 10% of prop traders’ archives.
Imagine you now come to a point where the prop firm says, sorry, we know you paid us via ACH transfer, but we can only pay you via crypto. Still, crypto is not an option for you or makes things complicated with your tax office, bookkeeping, or local authorities. You want to avoid that under all circumstances and ensure researching the payout methods is supported.
Good ratings outside of Trustpilot
Trustpilot always reflects a wonderful-looking world. Hundreds of good ratings, or even thousands. Some prop firms collected tens of thousands of positive Trustpilot ratings.
What you need to understand is that a company can actively manage the ratings published on Trustpilot. That’s why it is important to look a bit closer at the negative ratings once they appear and the positive ratings that are there. If a company has 99% positive ratings, how likely is it that this can be true? It is like buying at your favorite online store – it is always worth it to take a more detailed look before just trusting the shining stars.
A rating profile should always contain some negative or neutral ratings. Why? Because that’s how it typically is. One product can never satisfy everyone. There is always something that does not work that well, leaving a customer unsatisfied.
Real-funded accounts vs. virtual-funded accounts
Here is the deal. If your funded account is funded with real money, or if you are trading a virtually funded account, it is not that important. What counts is that you get the payout once you made money in your funded account. As long as this is the case, everything is just fine.
Still, suppose a prop firm’s website lets you believe that they fund the account with real money, but they only do it with paper money. In that case, it’s an entirely different story since they hide the fact that they won’t fund the funded account with real money And if they hide this fact, how likely is it that everything else is legit?