In the ever-expanding world of proprietary trading, new firms continue to emerge, promising aspiring traders the opportunity to trade with substantial capital. However, not all that glitters is gold. Today, we’ll examine one of the prominent players in the prop trading space and uncover why their rules and fee structure may give potential traders pause.
The Initial Appeal
At first glance, Prop Number One presents an attractive proposition: trade with a funded account, keep a significant portion of your profits, and potentially scale up to larger capital allocations. Their marketing materials highlight success stories and emphasize the potential for financial freedom. However, a deeper examination reveals concerning aspects that every prospective trader should consider.
Breaking Down the Fee Structure
The fee structure at Prop Number One raises several red flags:
- High Monthly Subscription Fees
The firm charges substantial monthly fees regardless of trading performance. While they market this as “platform access costs,” these fees can quickly accumulate, especially during learning periods or drawdowns. - Hidden Evaluation Costs
Before accessing live funds, traders must pass multiple evaluation phases. Each attempt comes with a significant fee, and there’s no guarantee of passing. This creates a recurring revenue stream for the firm, potentially at the trader’s expense. - Profit Split Complications
While the advertised profit split might seem generous, the fine print reveals various conditions and thresholds that must be met before profits are distributed. This can make it challenging for traders to realize actual earnings.
Restrictive Trading Rules
The rules governing trading activity present additional challenges:
- Strict Stop Loss Requirements
Daily and overall account stop losses are incredibly tight, leaving minimal room for normal market volatility. - Limited Trading Hours
Trading is restricted to specific hours, which may not align with optimal market conditions or your schedule. - Asset Restrictions
Many potentially profitable trading instruments are off-limits, limiting diversification opportunities.
The Real Cost of Trading
Let’s break down the potential monthly costs for a typical trader:
- Monthly subscription fee
- Platform data fees
- Additional market data costs
- Retake fees for failed evaluations
These expenses can easily exceed $200-300 monthly before any trading activity begins. For many aspiring traders, these costs represent a significant barrier to entry.
Impact on Trading Psychology
Perhaps the most concerning aspect is how these rules and fees affect trading psychology:
- The pressure to perform while managing high fixed costs can lead to overtrading
- Strict rules may force traders to exit profitable positions prematurely
- The constant threat of rule violations can create decision paralysis
Alternative Approaches
Before committing to Prop Number One, consider these alternatives:
- Traditional Prop Trading Firms
Many established firms offer better terms and actual mentorship - Small Personal Account
Starting with a smaller self-funded account might provide better learning opportunities - Demo Trading
Perfect your strategy without the pressure of fees and restrictions
Conclusion
While Prop Number One might work for some traders, their combination of high fees and restrictive rules creates an environment where success becomes unnecessarily challenging. Prospective traders should carefully consider whether these conditions align with their trading goals and financial situation.
Before committing to any prop firm, thoroughly research their terms, understand all associated costs, and consider whether their rules support or hinder your trading style. Remember, a prop firm should be a partnership that benefits both parties, not just one side of the equation.
Your Next Steps
If you’re considering a prop trading firm:
- Request detailed fee structures in writing
- Calculate your monthly breakeven point including all fees
- Review all rules and restrictions thoroughly
- Connect with current traders at the firm
- Consider alternative paths to trading success
Trading is challenging enough without excessive fees and overly restrictive rules. Choose your prop firm carefully, and ensure their structure aligns with your path to becoming a successful trader.