BAD News for Prop Firm Traders

Summary

This video discusses the evolving landscape of proprietary trading firms (prop firms) and their challenges. Initially, prop firms had a rigorous selection process, which has since become easier, attracting more traders but potentially weakening the business model. The presenter argues that the recent trend of increasing difficulty is positive for the industry, ensuring only competent traders get funded. They highlight the importance of a stable business model and mention their own EA, 'Titanex', which adapts to changing prop firm rules, helping traders get funded despite the challenges.

Takeaways

• 😀 The script discusses the changing landscape of prop firms and how they are getting harder to pass, which the speaker believes is a good thing for the industry.
• 📉 The industry initially had a harder challenge for traders, which then became easier as prop firms competed for traders by lowering barriers and making the challenges less stringent.
• 📈 However, making it too easy for traders to pass the challenges has led to a breakdown in the business model of some prop firms, causing them to struggle financially and even disappear.
• 💰 Prop firms generate capital by charging traders for the challenges, and the business model relies on a balance between the capital generated and the payouts to successful traders.
• 🏆 Long-standing prop firms like Fiverr and FTMO have maintained high ratings on platforms like Trustpilot, likely due to their consistent business model and less drastic changes.
• 🔄 FTMO, one of the first prop firms, initially had strict rules with time limits and minimum trading days, which made it difficult for traders to pass but has since adapted to become more attractive without breaking the business model.
• 🆚 Increased competition among prop firms led to a race to the bottom in terms of challenge difficulty, which was unsustainable and resulted in some firms failing to meet payout obligations.
• 🛑 Some prop firms, like My Forex Funds, had to shut down due to not being able to sustain the business model under the new, easier challenge conditions.
• 🤖 The speaker mentions an EA (Expert Advisor) called Titanex that helps traders get funded by adapting to the changing rules and conditions of prop firm challenges.
• 📊 The Titanex system uses a leaderboard to showcase effective trading strategies that can pass current prop firm challenges, indicating a high success rate among its users.
• 🔗 The script concludes by encouraging traders who find the prop firm challenges too difficult to consider using the Titanex system, which has helped over 900 community members get funded.

Q & A

Why are prop firms getting harder to pass?

Prop firms are getting harder to pass because they have been adjusting their rules to make the challenges easier in the past to attract traders, which has led to a breakdown in their business model due to increased payouts and reduced capital from challenge fees.

What was the initial state of prop firms before they started changing their rules?

Initially, prop firms had a more challenging environment with strict rules, such as time limits for traders to prove their profitability, which made it harder for traders to pass and get funded.

What is the business model of a prop firm?

The business model of a prop firm involves traders paying for challenges to get funded. The capital generated from these challenge fees is used to pay out successful traders, creating a cycle of capital accumulation and distribution.

Why did prop firms start changing their rules to make it easier for traders?

Prop firms started changing their rules to make it easier for traders in response to increased competition as more prop firms entered the market, aiming to attract traders by offering more lenient terms.

What are the consequences of making prop firm challenges too easy?

Making challenges too easy can lead to a decrease in capital accumulation due to lower challenge fees and an increase in payouts as more traders get funded, which can strain the prop firm's financial sustainability.

Why did some prop firms disappear or change their models?

Some prop firms disappeared or changed their models because the changes they made to attract traders, such as reducing fees and making challenges easier, led to financial instability and an inability to maintain the business model.

How have successful prop firms like FTMO maintained their business model?

Successful prop firms like FTMO have maintained their business model by making minimal changes to their core rules and understanding the importance of a balanced approach that does not compromise the financial sustainability of the firm.

What is the significance of trust pilot ratings for prop firms?

Trust pilot ratings are significant for prop firms as they provide a public measure of customer satisfaction and can influence the reputation and attractiveness of a prop firm to potential traders.

How has the prop firm industry evolved over time according to the script?

The prop firm industry has evolved from a challenging environment to an easier one, and now it is trending towards becoming more difficult again. This evolution is tied to changes in business models and the competitive landscape.

What is the role of the community in the success of the EA mentioned in the script?

The community plays a crucial role in the success of the EA by having full access to it, tweaking settings, backtesting strategies, and contributing to a leaderboard that helps identify effective trading strategies despite the changing rules of prop firm challenges.

How does the EA mentioned in the script adapt to the changing rules of prop firm challenges?

The EA adapts to changing rules by allowing traders to test various settings and strategies through a backtesting system. Successful strategies are then ranked on a leaderboard, ensuring that the EA remains effective regardless of the difficulty of prop firm challenges.

Outlines

00:00

📉 The Evolution of Prop Firms' Challenges

The speaker begins by addressing the increasing difficulty of prop firm challenges, suggesting that this is a result of the industry's evolution. Initially, prop firms had a more stringent selection process, which has since seen fluctuations in difficulty. The speaker proposes that the current trend of increasing difficulty is positive for the industry. They also hint at discussing why prop firms have come and gone, attributing this to changes in the industry that made it easier for traders, which paradoxically led to some firms' downfall. The speaker uses Prop firm match.com as a reference, noting the emergence of new prop firms and the disappearance of others, and highlights the importance of understanding the business model behind prop firms.

05:00

💹 The Business Model Behind Prop Firms

This paragraph delves into the business model of prop firms, explaining that they thrive on traders paying for challenges to get funded. The capital generated from these fees is used to pay successful traders. The speaker discusses how increased competition led to prop firms easing their rules to attract traders, which initially seemed beneficial but ultimately weakened the business model. As challenges became too easy, more traders qualified for funding, straining the capital pool. This led to some firms denying payouts or altering conditions to cope with the financial pressure. The speaker contrasts this with firms like FTMO that maintained their core business model, resulting in their sustained success and high ratings.

10:01

🛠️ Adapting to the Changing Landscape of Prop Firms

The speaker concludes by reflecting on the industry's shift from difficult to easy and now back to more challenging conditions. They argue that this is beneficial as it ensures only competent traders receive funding, preserving the capital for those who truly excel. The speaker also introduces an EA called Titanex, which has helped many traders navigate these challenges successfully. They emphasize that despite the increasing difficulty, their community's funded rate has remained stable or even improved due to the adaptability of their EA. The speaker invites interested viewers to explore their platform, suggesting it as a solution for those finding the current challenges too difficult. The video ends with a call to subscribe for more content and a farewell, promising future videos on relevant topics.

Keywords

💡Prop firms

Prop firms, short for proprietary trading firms, are companies that trade their own capital. In the context of the video, they are organizations that offer trading challenges to aspiring traders, with the goal of identifying and funding talented traders. The video discusses how the landscape of prop firms has changed over time, with some firms disappearing due to difficulties in maintaining a sustainable business model.

💡Challenges

In the video, 'challenges' refer to the trials that prop firms set for traders to prove their trading abilities. These challenges often involve meeting certain performance criteria within a specified time frame. The video discusses how the difficulty of these challenges has fluctuated, impacting the number of traders who can advance to a funded account.

💡Traders

Traders are individuals who engage in the buying and selling of financial instruments, such as currencies, stocks, and commodities. The video focuses on the experiences and challenges faced by traders, especially in relation to prop firms and their funding models. It emphasizes the importance of traders having robust systems and strategies to succeed in the competitive environment of prop firms.

💡Business model

The business model in the context of prop firms, as discussed in the video, involves traders paying a fee to participate in challenges. The capital generated from these fees is used to fund successful traders. The video highlights how changes in this model can impact the sustainability of prop firms, with some firms struggling due to making the challenges too easy and thus undermining their capital base.

💡Capital

Capital, in this video, refers to the funds that prop firms have available to finance successful traders. It is generated from the fees paid by traders attempting challenges. The video discusses how changes in prop firm business models can affect the amount of capital available and the firms' ability to pay out to funded traders.

💡Funded account

A funded account is the result of a trader successfully completing a prop firm's challenge and being provided with capital to trade with. The video discusses the implications of changes in challenge difficulty on the number of funded accounts, suggesting that making challenges too easy can lead to unsustainable numbers of funded accounts.

💡Payouts

Payouts refer to the profits that prop firms pay to traders from their funded accounts. The video discusses how some prop firms have struggled with managing payouts, particularly when too many traders succeed in their challenges and request payouts, which can strain the firm's capital.

💡Competition

Competition among prop firms is highlighted in the video as a factor that has led to changes in business models, with firms trying to attract traders by making challenges easier. However, the video argues that excessive competition can be detrimental, leading to unsustainable business practices.

💡EA (Expert Advisor)

An Expert Advisor (EA) is a software program that automates trading strategies within a platform like MetaTrader. In the video, the speaker mentions an EA called 'titanex' that helps traders navigate prop firm challenges. The EA is part of a community effort to adapt to changing challenge rules and increase the likelihood of being funded.

💡Community

The community mentioned in the video refers to a group of traders who share access to an EA and its settings, allowing them to test and refine trading strategies. The video emphasizes the importance of community collaboration in overcoming the challenges set by prop firms, suggesting that collective effort can lead to more successful outcomes.

Highlights

Prop firms are experiencing increased difficulty, which is a result of changes in the industry.

The video discusses the historical difficulty of prop firms and how they initially faced even greater challenges.

There was a period where prop firms made the process easier for traders, which is now changing again.

The presenter argues that the increased difficulty is a positive development for the industry.

An analysis of the prop firm match.com and the current state of prop firms in the market.

Many new prop firms are emerging, but some have disappeared due to changes in the industry.

The video explains why prop firms that have not changed their business model significantly are still successful.

Firms like FTMO and 5ive have maintained high trust pilot ratings due to their consistent business approach.

The presenter shares personal experience with FTMO and how the rules have changed over time.

The business model of prop firms is based on traders paying for challenges and potentially receiving funding.

As competition increased, prop firms started to lower their fees to attract traders, which weakened the business model.

Some prop firms began to deny payouts or fiddle with fees due to the strain on their capital.

The presenter suggests that the current increase in difficulty is beneficial as it ensures only good traders get funded.

The video discusses the Blue community's EA, Titanex, which helps traders get funded despite the changing rules.

The presenter claims that Titanex adapts to the challenges and maintains a high funded rate for the community.

The video concludes by emphasizing the positive impact of the increased difficulty on the prop firm industry.

Transcripts

so as I'm sure a lot of you have seen

prop firms are definitely getting harder

again and why is that why are we getting

harder challenges and why are they

making it harder to pass well in this

video we're going to be talking about

that in particular how it actually was

initially even harder than it is now

even though it is getting harder but

then we went through this kind of valley

of very easy everything changing to make

it easier for us the Traders so we're

going to be talking about that why is

that and then we're also going to be

talking about this change of the

challenge is getting a little bit harder

is it a good thing is it a bad thing I

think it's a good thing I think it is

definitely a good thing you might be

thinking what the hell it shouldn't it

be a good thing if it's getting easier

well if you stick around I'm going to be

telling you exactly why I think it is a

better thing and why it's good for the

whole industry so make sure you watch

till then let's just start with this

guys I'm here on Prop firmm match.com

I'm just going to go Forex we're not

looking at the futures for now Forex 100

and twostep right and then I'm going to

search and there we go so the reason I'm

looking at this is there are so many new

prop firms prop firms are popping up all

the time now we've seen a lot of prop

firms disappear as well which is also

going to be talked about in this video

why have they vanished why have they

gone away well it's because of the

change because of them getting easier

because of them changing everything to

make it easier for us this in turn

actually is a bad thing for them so

we're going to be talking about the

whole kind of timeline of how it was

harder it got easier now it's getting

harder again and why that is let's look

at the reason behind all of this so one

thing I do want to point out over here

is I'm actually going to take all of

these and I'm going to go to I'm going

to just do it by trust pilot rating okay

so we won highest first and there we go

what a surprise we actually have the

fivers and ftmo up there at 4.8 now

that's interesting because the fivers

and ftmo are two of the companies I'm

actually going to be talking about today

as well as others but these guys have

probably the ones that have been well

ftmo in particular they have been around

the longest for sure but they're still

up there how are they still maintaining

a 4.8 after all this time they were set

up when is it back in January 2015 FS

was 2016 so two of the longest standing

companies when it comes to these prop

firms are the ones that are at the top

of the list why is that because they

haven't fiddled around too much they

haven't changed too much yes they have

changed small things but their their

model their business model has stayed

the same and they understand the

business model I'm going to be talking

about this because it's very important I

I just want to use this as kind of my

starting point when I first started

trading prop firms ftmo was the first

account I ever took and even back then I

remember hearing about the 5centers but

you know for one reason or another I

chose to go ftmo and it was a lot harder

then than it is now for example let's go

over to the ftmo website over here now

one thing I do want to actually just

show you guys on this prop firm

match.com if we go to favorite firms

let's have a look at what the favorite

rated firms based on this there we go in

the top three we've got ftmo and we've

got fivs the two I was talking about so

not only based on trust pilot reviews

but based on this website which is

constantly getting all the data and

these guys do a fantastic job at

comparing firms and they also have a

rating system themselves so these guys

know what they're talking about and

there's a reason these companies are

there so let's have a quick look at ftmo

cuz I want to I want to talk about when

I first started when I first started

trading I basically started with ftmo

and I think there's only two of the main

rules these rules that you see when you

first come up to the website and the

ones that attract us or maybe get us you

know push us away these rules are the

ones I'm talking about cuz I'm sure

there's very small rules in the

background that have changed here and

there just based on what's happened in

the prop film industry over the last

couple years they're probably they

haven't for example they they no longer

allow Traders from the US so you know

things like that obviously have changed

but I'm talking about these rules for

today because that's the whole point of

this video when I first signed up step

one phase one we had 30 days you had 30

days to get your 10% right and then uh

step two you had 60 days to get your 5%

so there was a time limit and that I

tell you that really did make it a lot

harder a lot harder I remember that I

often was quite close but i' I'd not get

there because of the time con trained

then the only other thing that I think

has changed is this the minimum trading

days which is now 4 when it used to be

10 now the reason they changed that okay

because these guys were in the the

industry they were the first one of the

first ones there and it started becoming

very popular now you had a lot of people

coming in thinking okay he has a

brilliant business model I can make a

lot of money these prop firms were like

damn we can make some serious money here

let's jump on board you know so they all

of a sudden was a big pool of prop firms

and these guys are all competing with

each other right these guys are all in

the same business it's a business at the

end of the day and they have to get

customers because let's talk about the

business model the business model with a

prop firm is at its core we as Traders

want to get funded they are offering us

the funding but we have to pay we have

to put money down we have to for example

100K count we have to put $500 down to

basically even take the challenge that's

not a guaranteed $500 there we go

there's your account no we have to take

the challenge right we have to go

through the challenge and we have to get

funded so these guys are making Capital

by us paying for these challenges that's

how they are are building up capital and

eventually when the few traders that get

through the net and actually get to a

funded account and then also get to a

payout one two or three however many it

is that point they are basically digging

into the the funds that they've

generated from us the Traders paying the

challenge fee that challenge fee is what

has created the the capital right so

that's what they're paying us from so

that's the business model guys we all

know that and if you don't know that

where have you been you know that's how

I would say probably 95% of these prop

firms work you know there's a few others

that you know do slightly different

things some of them that talk about a

booking but we're specifically going to

be talking about this business model so

obviously as more companies come in and

there's more competition for these guys

what did they do they need to attract us

they need to grab us the Traders

attention so what did they do they start

changing the rules to make it a more

attractive uh worm on the hook for us

the Traders right so these guys are just

casting the the rod casting in but they

need to be attractive so what do they do

they make it easier and that is not a

bad idea right but the problem is once

you get to a point when you've made it

too easy you're kind of breaking the

foundation of how this business model

works because what ends up happening

you're making the challenges way too

easy you're dropping the prices way too

much so all of a sudden this Capital

that they were building up is getting

smaller because the the buyin fees are

smaller so that's getting smaller while

in the meantime more fun more Traders

are getting funded because it's easier

more Traders are getting through the net

suddenly the net is a little bit he's

got more holes in let's let's just say

he's got more holes more of us are

getting through and more of us are

requesting payouts so now not only is

this Capital smaller but more of us are

asking for it grabbing into it and that

you know starts really breaking down the

Foundation of this whole business model

and that's what we saw happening we saw

companies like my Forex funds true Forex

funds all these companies starting to

really change their models dropping

their fees you know all this going on

and then you know what starts kind of

happening is these guys all of a sudden

realize oh no we're paying too many of

our Traders too many of our Traders have

have got through the net and now they're

asking us for money and we don't have

the money so what do we do we start

denying payouts we start looking for

reasons to not pay them we start

fiddling with the feed we start doing

things that we shouldn't be doing

because we're in a situation that we've

got ourselves into and we're kind of

like oh no what do we do and that's what

happens with my Forex funds they have

the bodies looking into them saying that

you guys have been fiddling you guys

have been doing stuff you shouldn't and

why is that because all of a sudden more

Traders are requesting cash and the

model is breaking down now ftmo are one

of the few companies that did not change

too much like I said they changed two

things but interestingly they were one

of the first to change this the trading

period to unlimited now obviously these

guys were the top of the game and all of

a sudden players like my Forex funds

start trying to rip them off their top

spot so they have to do something right

but they were very smart because it was

like what can we do to make it more

attractive but it's not going to break

the foundation it's not going to change

these guys understand the business model

and how it needs to work in order for

for the whole ecosystem to stay strong

so these guys changed that which was

their enough to keep Traders interested

right all of a sudden hold on ftmo is

still a viable option because now it's

unlimited that used to be one of the

hardest things was the the time then

they also go into the minimum trading

days which used to be 10 which used to

suck you know you had to trade for 10

days before you could actually go on to

the next then they dropped that and that

that's about it you know they they still

one of the the the highest costs but

even with all of this they are still top

of the pile they're still up there guys

so you know this this this is the

problem and and that's why as things got

easier as these companies undercut each

other and really kind of started

competing to a point that it was

breaking the model down we started

seeing companies shut one after the

other we've seen a lot of companies shut

down true Forex funds is another one you

know they basically did try come back

and because they had been closed for so

long they kind of I think they were

forced to a certain degree to to try and

make it more attractive but they could

never really claw back because they they

owed too many Traders money too many

traders that got through the net too

many Traders were requesting payouts and

they just could not maintain then

eventually they had to shut down we saw

um we've seen a lot of other companies

also go down some of them were also down

to bad management let's be honest where

you know a lot of the money that was

should have been there for the capital

to pay the Traders were going elsewhere

to pay for some nice big houses and cars

and stuff like that for some people that

it probably shouldn't have been so you

know there was also bad management but

this this is the reason I I actually say

that now that we've got the rules kind

of getting a little bit harder I don't

think it's necessarily a bad thing

because now what's happening is it's

getting a bit harder less people are

getting funded as a result which yeah

you know us as the trader maybe we look

at that as a bad thing but it's not a

bad thing because if you are a good

Trader you're still going to get through

to the the funded account cuz let's be

honest you don't want everyone getting a

portion of that because you know it's

the good traders that kind of get

through the traders that are have

systems that work that are getting

through let them get paid and the less

that is in that pool of people the

better it runs for the whole the whole

company you know they they can maintain

this Capital they can continue paying

they don't have to start you know

looking for reasons to not pay people so

all around I think the challenge is

getting a little bit harder again is a

good thing for the industry is a good

thing for everyone because it it just

works it that's how the business model

thrives so I think we've got to run with

that we've got to accept that and we've

just got to trade better with that being

said here at Blue we have an EA called

titanex that basically gets people

funded and we have a lot of people I'm

sure I have a lot of people asking

unless I actually say this so then you

know why is it still difficult for you

guys are you guys finding less people

getting funded because it's getting

harder actually know we are maintaining

our funded rate if not it's got better

even though these challenges are getting

uh more difficult and the reason being

is we have a whole community that has

full access to our EA and all the

settings and we give them the full

freedom to basically try any variation

of those settings that they want put it

through a back testing system and then

it goes on to a leaderboard and once

it's on a leaderboard it's it means if

it's made it to the top of the

leaderboard it means that not only is it

good for current market conditions but

it's also working for the current uh

challenges the challenges no matter the

rules no matter what the rules are if

it's on that board currently it means

that based on the the the more difficult

rules it's still getting past you know

it's still getting through so it's a

phenomenal system that just really works

and we've got thousands of set files on

on this leaderboard so you know there's

so much to choose from our customers

constantly make their own uh can tweak

it to to basically come up with their

own their own strategies and then we

have obviously we have a lot of our guys

working in the background that are also

putting up strategies so the system just

works really well I mean we are

currently it keeps changing but I think

the last number we had was just slightly

over 900 of our Community have currently

been funded with with using this so it's

not changed for us they can make it as

hard as they want they can change the

rules as much as they want but our EA

just keeps adapting to whatever it's

whatever's thrown at it so if you guys

are interested in this if you find that

it is getting a bit too difficult for

you and you want a little bit bit of

help go to www.pr forming.com have a

look at the demo video there you know

fill in the form sign up because I

promise you you won't be disappointed

this this thing just works so with that

being said guys that's that's the video

very basic one it's it's a great topic

and it's one that I think you know I I

really wanted to talk about the the the

flow of how it went from very hard to

easy to now getting a little bit more

difficult and and I think it's a good

thing so I'm glad you guys joined thank

you very much for joining and if you

haven't already please subscribe to the

channel we'd love to have you around for

the next video the one after that and

all the videos in the future make sure

you're here because we've got some great

content coming and with that being said

guys I'm going to leave it there thank

you very much for watching and we will

see you in the next video bye-bye