7 Prop Firm Red Flags Guide (2024 Update)

Summary

This video script discusses the hidden challenges and tricks of proprietary trading firms (prop firms) that may lead traders to fail. It highlights the importance of understanding the types of drawdowns, avoiding deceptive marketing tactics, and recognizing the potential for unfair practices like slippage and payout restrictions. The speaker emphasizes the need for traders to be wary of prop firms with unfavorable conditions, suggesting that a fair and transparent business model is crucial for success in trading.

Takeaways

• 🤔 The speaker expresses skepticism about prop firms, suggesting they may not have traders' best interests at heart due to their business model, which profits from traders' losses.
• 💡 Prop firms are seen as a tool that can provide opportunities like access to larger capital, but they may also use gamification methods to manipulate traders' emotions and psychology, leading to poor trading decisions.
• 📉 The speaker is critical of 'equity-based' and 'trailing' drawdowns, which can be unfair to traders, especially those who trade with high risk-reward ratios, as they can lead to account closures even after profitable trades.
• 📊 The importance of understanding the terms and conditions of prop firms is highlighted, as confusing language can mask unfavorable conditions that may trip up traders.
• 🚫 A warning against prop firms that impose minimum profit requirements before payouts, suggesting they may be trying to avoid paying out on small profits earned by traders.
• 💰 The speaker advises traders to be wary of marketing gimmicks and to assess the true value of a prop firm beyond just the initial cost or profit targets.
• 📈 A suggestion to use a ratio formula to compare the maximum drawdown to the total profit target to evaluate the fairness of a prop firm's challenge terms.
• 🛑 The potential issue of slippage is discussed, where some prop firms might intentionally provide poor trading conditions to cause traders to lose more money.
• ❌ A caution against choosing prop firms based on influencer endorsements or social media presence, as these can be misleading and not indicative of the firm's reliability.
• 🏢 The risks associated with prop firms that outsource their technology to third-party providers, which may lead to higher costs and potential instability.
• 📝 The speaker emphasizes the need for traders to have autonomy in their trading decisions, criticizing prop firms that restrict holding trades over weekends or during news events.

Q & A

What is the primary concern of prop firms according to the video script?

The primary concern is that prop firms make money when traders lose money, and they may use hidden tricks to ensure traders fail, which in turn lines their pockets.

What are the three types of drawdown mentioned in the script?

The three types of drawdown are balance-based drawdown, equity-based drawdown, and trailing drawdown.

Why is the balance-based drawdown considered fair by the speaker?

The balance-based drawdown is considered fair because it allows traders to lose only a certain percentage of their account balance after closed positions, which protects traders and ensures they are not trading recklessly.

How does the equity-based drawdown differ from the balance-based drawdown?

The equity-based drawdown is based on unrealized profits, meaning it can cause a trader to lose their account even if they haven't closed a losing position, and it can penalize traders for drawdowns in profit that haven't been realized yet.

What is the issue with the trailing drawdown according to the speaker?

The issue with the trailing drawdown is that it reduces the trader's buffer for losses as they make profits, which can lead to account closure even after the trader has earned a profit, and it's seen as unfair because it doesn't reflect real-life trading conditions.

What is the speaker's opinion on the use of gamification methods by prop firms?

The speaker believes that gamification methods like leaderboards and certificates are used by prop firms to emotionally manipulate traders, which negatively affects their psychology and trading strategy.

What is the ratio formula suggested by the speaker to evaluate prop firm deals?

The ratio formula suggested is total profit target divided by max drawdown, which helps to determine if a prop firm's deal is favorable or not.

Why does the speaker warn against choosing a prop firm based on low prices or profit targets?

The speaker warns that low prices or profit targets may come with hidden catches like equity-based or trailing drawdowns, large slippages, or high commissions, which can make it harder for traders to succeed.

What is the potential issue with prop firms that outsource their tech to external providers?

The potential issue is that these prop firms may have to pay a significant percentage of their revenue to the tech providers, which can lead to financial instability and the need to make traders fail more often to maintain profitability.

What are some of the red flags the speaker advises to watch out for when choosing a prop firm?

Red flags include equity-based or trailing drawdowns, minimum profit requirements for payouts, influencer promotions, and restrictions on trade holding times such as overnight or over weekends.

Why does the speaker suggest avoiding prop firms that have recently started or are promoted by influencers?

The speaker suggests avoiding these firms because they may not have a proven track record, and their promotions may be marketing gimmicks rather than indicators of a fair and sustainable business model.

Outlines

00:00

💰 The Conflict of Interest in Prop Firms

The speaker discusses the inherent conflict of interest within proprietary trading firms (prop firms), which make money when traders lose. They mention that while prop firms offer access to larger capital, they may employ tactics to encourage traders to fail, such as gamification methods like leaderboards and certificates, which play on traders' emotions and competitive nature. The speaker intends to reveal red flags and hidden tricks used by prop firms to maintain profitability at the expense of traders, advising on how to avoid unfavorable conditions and build strategies against them.

05:00

🚫 Warning Signs of Unfair Draw Down Policies

This paragraph delves into the issue of draw down policies in prop firms, which can be detrimental to traders. The speaker explains three types of draw down: balance-based, equity-based, and trailing draw down. The balance-based draw down is considered fair, allowing a trader to lose a percentage of their account balance. However, equity-based and trailing draw down are criticized for their potential to cause traders to lose their accounts due to unrealized profits or a moving margin for error, respectively. The speaker advises traders to avoid prop firms that use these latter two types of draw down.

10:01

📉 The Risks of Misleading Marketing Tactics

The speaker warns about prop firms using marketing gimmicks to attract traders with seemingly attractive profit targets and low prices. They introduce a formula to evaluate the fairness of a prop firm's deal, which is the ratio of total profit target to the maximum draw down. The speaker illustrates how a seemingly lower profit target might not be a better deal if the draw down is also lower, as this could lead to an unfavorable ratio. They caution against choosing prop firms based on influencer promotions or social media presence and emphasize the importance of a firm's reputation and review history.

15:02

⚠️ Red Flags in Prop Firm Operations and Practices

The speaker outlines several red flags to watch for in prop firms, including unfair payout conditions, reliance on tech providers, and restrictions on trade holding periods. They criticize firms that delay payouts until a minimum profit is reached, arguing that this is a tactic to avoid paying traders what they are due. The speaker also warns against new prop firms that may not have the financial stability to sustain payouts in the long term, especially if they are outsourcing tech solutions and paying high percentages of their revenue to tech providers. They advocate for transparency, reasonable profit targets, and the freedom for traders to make their own decisions without undue restrictions.

Keywords

💡Prop firms

Prop firms, short for proprietary trading firms, are companies that provide traders with capital in exchange for a share of the profits. In the video, the speaker discusses the complex relationship between traders and prop firms, emphasizing that while they offer opportunities, they may also have mechanisms in place that favor their financial interests over the traders' success.

💡Draw down

Draw down in trading refers to a decrease in the value of a trading account. The script mentions three types of draw down: balance-based, equity-based, and trailing draw down. The speaker argues that certain types of draw down are unfair to traders and are designed to make them fail, which is a key point in the video's critique of prop firms' practices.

💡Equity-based draw down

Equity-based draw down is a type of account monitoring where the maximum loss allowed is based on the current equity, including unrealized profits or losses. The video describes how this can be detrimental to traders because it can lead to account closure even when a trade eventually results in profit, due to fluctuations in unrealized gains.

💡Trailing draw down

Trailing draw down is a mechanism where the maximum allowable loss is adjusted based on the trader's profits, effectively 'trailing' behind the account's performance. The video criticizes this as unfair because it can eliminate the buffer that a trader has earned, leading to account closure after a series of losses, even if the initial profits were legitimate.

💡Gamification

Gamification refers to the application of game-design elements and principles in non-game contexts. In the script, the speaker mentions how prop firms use gamification methods like leaderboards and certificates to emotionally engage traders, potentially leading to less rational trading decisions and benefiting the firms.

💡Risk management

Risk management in trading involves the identification, evaluation, and prioritization of risk factors and the coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. The video emphasizes the importance of a proper profit-taking system as part of risk management and criticizes prop firms for practices that can undermine a trader's risk management strategy.

💡Slippage

Slippage is the difference between the expected price of a trade and the price at which it is executed. The video discusses how some prop firms intentionally provide large slippage to traders, effectively increasing the likelihood of traders losing money and thus benefiting the firms.

💡Payout

In the context of prop trading, a payout refers to the share of profits that a trader receives from a prop firm. The script criticizes certain prop firms for setting minimum profit targets before allowing traders to receive their payouts, which can be seen as a tactic to delay or avoid paying out earned profits.

💡Influencer

An influencer is an individual who has the power to affect the purchasing decisions of others because of their authority, knowledge, position, or relationship with their audience. The video warns against choosing a prop firm solely based on its marketing or the influence of popular figures promoting it, advocating instead for due diligence based on the firm's reputation and practices.

💡Tech provider

A tech provider is a company that supplies the technological infrastructure and services necessary for other businesses to operate. The video points out that many prop firms outsource their technology needs to third-party providers, which can lead to conflicts of interest and financial strain if the provider also operates its own competing prop firm.

💡Profit Target

A profit target is a predetermined level of profit at which a trader plans to close a trade. The script discusses how prop firms may manipulate profit targets as part of their business model, using them to lure traders with seemingly attractive offers while potentially setting up conditions that make it harder for traders to achieve those targets.

Highlights

Prop firms may not be on the trader's side due to their business model, which benefits from traders' losses.

Hidden tricks by prop firms include gamification methods like leaderboards and certificates to emotionally influence traders.

Red flags for prop firms include unfair draw down types: balance-based, equity-based, and trailing draw down.

Balance-based draw down is considered fair, protecting traders from reckless trading.

Equity-based draw down can be deceptive, affecting traders even with unrealized profits.

Trailing draw down is criticized for removing traders' buffers earned through profits.

Prop firms may use deceptive marketing to attract traders with low profit targets and hidden conditions.

A ratio formula is suggested to evaluate the fairness of prop firm deals based on max draw down and total profit target.

Slippage issues are highlighted as a common trick used by prop firms to cause traders to lose more than expected.

Payout policies that require a minimum profit before allowing traders to receive their earnings can be restrictive.

Influencer-endorsed prop firms may not be the best choice due to potential conflicts of interest and marketing gimmicks.

Prop firms that outsource their tech may be at a disadvantage, paying high percentages to tech providers, affecting their sustainability.

Restricting trade holding times, such as overnight or over weekends, may be a sign of a prop firm trying to control traders' profits.

Prop firms that deny payouts or restrict account access for profitable traders may not be acting in good faith.

Newly established prop firms may lack the stability and reputation of those that have been around for years.

A part two of the red flags is suggested, indicating there are more issues to be aware of in the prop trading industry.

Transcripts

when you make money we make money by the

trader for the Trader the reality is as

you already know prop firms are not

really on our side now they're a

beautiful tool wonderful opportunity for

any Trader to be utilizing because you

can access larger capital and capitalize

on a skill set but the problem is the

prop firms are not on our side as we

know from the business model they make

money when we lose money therefore

they're going to put hidden tricks in

place for us to trip over for us to fall

and keep lining their pockets by buying

more and more challenges and in a

previous video we spoke about how they

do that various gamification methods

remember the leaderboards and the

certificates and we spoke about in that

video our PL firms do these things for

the only reason to get us emotional to

get us playing on our status and

competing with one another all of these

things feeding negatively into our

psychology and framing Us in the wrong

way as Traders so that we are more

likely to blow accounts so in this video

I'm going to go through the red flags of

prop firms the hidden tricks that they

are doing that are only there for us to

keep losing money once we are aware of

this then while we are armed we know

which PL firms to avoid and we know how

to build a strategy around these

conditions so that we do not fall victim

to these unfavorable conditions now the

first one that I'm going to mention is

the three types of draw down now when I

found about the two types of draw Downs

that certain prop firms are doing it

actually made me angry I was like what

the is this this is only there to make

Traders fail and we should also

completely avoid the Prof Firs that are

utilizing the two types of draw down

that I hate so when it comes to the

three types of draw down we have a

balance-based draw down an equity based

draw down and a trailing draw down now

the balance-based draw down is the one

you're used to it's the one that makes

sense it's the one that's fair is to say

that if I have 100K account I'm only

allowed to lose 10% after a 10% draw

down when I've lost more than $10,000 on

a $100,000 account I'm out I failed the

challenge and I have to go buy a new one

that's fair that's there to protect us

to make sure you're profitable and

you're also not trading recklessly now

the problem is the other two types and

to be honest I read through the websit

and I read certain terms and conditions

where they're describing the equity

based draw down and the trailing draw

down and they word in such a complicated

way and use confusing terminology so

people just don't get it and therefore

the only way you understand it is when

you lose your first account so the next

one is equity based draw down so that's

basically to say if I start off with

100K accounts let say I'm allowed a 10%

margin the maximum I can lose is $10,000

so the moment I go below 90k I lose the

account and that's balance-based meaning

on closed positions once I've taken

profit or hit stop- loss once I'm out of

the trade then that's going to update my

balance and then I see am I on 89k then

I've blown the account if I'm on 92k

then I still have space to climb out of

my draw down now unfortunately the

equity based one is on unrealized profit

it's to say that even if you haven't

closed the position you can't lose more

than the percentage they say let's say

you're someone like me who trades high

risk reward I've shown a million times

on many of my case studies or my track

record all my signals that I've done on

Twitter I can trade between a 3 to 7 pip

stop loss my average stop loss is about

four to 5 Pips let's say I take a trade

with a four pip stop loss and I'm

targeting London volatility my TP I'm

going for a 1 to 10 risk reward just for

example I might take an entry on a trade

and I might go into profit and I mean

okay 1% up 2% up three four maybe I get

to 7% up I haven't taken a partial yet

for example now I'm 7% floating profit

and I haven't closed the trade yet now

let's say that position has a healthy

retracement 40% retracement a 50%

retracement and then it continues in my

direction and then I finally close out

for 10% profit so in the end what

happened a profitable trade I made 10%

profit and maybe I even passed the

challenge well in equity based draw down

I might still fail that challenge now

what these prop firms do is after a

certain point in the day they'll say

okay that's your equity for the day and

if you go below that now 5% or 10% even

if you didn't close a position you lose

the account so for example in the

situation where I'm 7% up and then I

have a retracement and it goes to just

2% up floating profit not a closed

position I actually went from 7 to 2 I

lost 5% in unrealized profit and then it

went on and hit my TP and I locked in

10% profit so my balance went from

100,000 to 110,000 I made 10% gain but

they saw that My Equity it went up to 7%

back down to 2% and then contined to 10%

that's when I locked it in that portion

in the Middle where it went from plus 7

to plus2 that was enough to violate an

account that is not fair that is just a

trick for you to fail that is prop firms

trying to grab your money now when I

mentioned about this online certain

Traders were just coping they were just

like oh but it makes you encourages you

to take profit oh but you know a

sensible Trader wouldn't even have that

small of a stop loss oh you shouldn't

even be doing such a high risk reward

this is just excuses for people to

accept the nonsense that prop firms are

doing we shouldn't tolerate this because

of course we can optimize yes we can

take partial earlier on yes we can

modify our strategy but what are the

domino effect of that as I've mentioned

in previous videos your profit taking

system is as important as your risk

management your profit taking systems is

detrimental because we optimize our

profit taking systems for data therefore

we don't optimize on a trade by trade

basis we optimize our portfolio so

skewing things in one way or another is

going to have a ripple effect a

butterfly effect Way Beyond what we just

see because it might overall affect our

profitability it might even be enough to

make us not profitable just by the way

we manage our profits now the last one

that makes me angry is the trailing

based draw down is basically that if I

start at 100K account and then I make

profit let's say I make 110k and I'm now

I'm up 10% initially my margin for error

would be what if I start at 100K my Max

draw down was $10,000 so I couldn't go

below $90,000 so it starts at 100K I

can't go below 90k and then when I make

profit to 110k well now I have a $20,000

buffer because I can go from 110 back

down to 100 and all the way down to 90k

before I lose the account so as you gain

profits you increase your buffer and

therefore your draw down can get larger

and larger and that's a safety net

trailing draw down is a draw down that

follows you so if I make 10% profit then

my draw down goes from 90,000 to 100,000

it always follows me it Trails me so

let's say I'm sitting on $110,000 I've

made 10% gain and then I have a losing

period a normal losing period that can

happen and maybe unfortunately I go from

110,000 all the way back to to 100,000

in a balance-based prop firm that's

completely fine I didn't hit $90,000 I

haven't breached the account so I go

through a little bit of a losing streak

and I can build it back up now with a

trailing base draw down it followed me

so even though I was 10% up my account

was at 110,000 and then I had a 10% loss

and then I started back where I began at

100,000 that is enough to lose the

account meaning to say they cut your

buffer for no reason you earned the

buffer you earned a bit of profit and

they said we're going to follow you now

certain Traders will say ah but in

instills good habits it makes you it

forces you not to have losing streaks it

forces you to follow good risk

management which is true you should

follow risk management but why if I've

earned profit in an account why would

they Trail my draw down because that's

not real life that doesn't help anyone

that is only there for you to lose money

in a normal situation where you can have

a losing streak now that's not fair so

red flag number one is avoid the prop

firms that do Equity based draw down or

trailing draw down and only work with

balance-based draw down because that is

the only way that it's going to be fair

for us the next red flag is how they

trick you into believing something is a

good deal versus a bad deal now prop

firms know what we focus on they know

what the industry wants they want cheap

prices and easy profit targets okay

what's the cheapest one okay this one's

cheap and it's a 6% Target let's work

with them but what they won't realize is

what's the catch don't fall for the

marketing gimmicks don't fall for the

Trap they are only giving you a 6%

profit Target or an 8% profit Target to

invite your money what they'll even do

is they'll say you can do it in one

phase you can do it in two phases or you

can do it in three phases so a friend of

mine Kimmel which you've probably seen

his YouTube videos he actually gave me

this idea of how about we make it a

formula let's not just get lost in the

numbers but let's do it as a ratio

between what is your Max draw down and

what is the total profit Target you need

so let's say you're doing a two- Fae

Challenge and your profit Target is 10

and 5 so therefore you have 15% total

profit gain and your Max draw down is

10% you can go from 100,000 to 90,000 so

if your Max draw down is 10% your profit

Target is 15% and then you do a division

total profit Target divided by Max draw

down in this case is 1.5 so in this case

this is reasonable then you find another

PL fir that is for example it's a 6%

Target and a 6% Target so you think okay

well the other one it was I had to get

10% in Phase One this is now only 6% I

don't have to make an extra 4% so you

think that's perfect but then what you

won't realize is that PL firm will not

give you a 10% draw down they'll give

you maybe only a 5% draw down so then

you realize you have 12% profit Target 6

plus 6 and then your Max draw down is

only 5% and then you divide that by the

Max draw down so let's say 5% that means

the result of that formula is 2.4 so in

this case that ratio is not as favorable

as the 1.5 of the other firm so just

because it looked more appealing of 6

plus 6 doesn't mean it's a better deal

so what I would say is don't always go

for the cheapest PL fir don't always go

for the prop firm that has the less

profit Target because they're going to

do other things to make it harder for

you anyway usually these firms are going

to do the equity based draw down or the

trailing draw down or probably have

large slippage or probably have large

commissions or whatever they're going

just make life harder for you rather

work with a reputable PL firm that has

reasonable targets I think what's fair

in this day and age is Phase 1 8% Phase

2 5% anything around that is ideal we

don't need to chase lower and lower the

next one is slippage now this is

something that we all know about we

heard about the mff situation where they

had literally documents leaked saying

slip them to hell were literally

targeting traders to give them large

slippage to lose accounts and that's why

they got shut down and that's why they

got investigated by the US Regulators

this is something that many prop firms

are doing and we have to be careful

therefore it's important to work with a

prop firm that has a good reputation

certain prop firms I won't name them but

they are known to do this they are known

to give you 10 pip slippage on EU

regularly and it's kind of like you just

have to accept it if you want to work

with prop firms you have to deal with it

that is nonsense once again work with a

prop firm that is not going to give you

slippage if you have a five pip stop

loss they should respect your five pip

stop loss and not just give you randomly

a 10 pip stop stop L and therefore

double the amount of money you lose just

by accident and they'll say oh but you

know life trading conditions and that's

the cost of Forex and brokerages do this

too well this is a simulated environment

this is not really live money this is

not really live marketing conditions so

therefore they're only doing this for

you to lose money don't tolerate that

now another red flag that you don't

realize until it's the day of your

payout certain prop firms will only give

you a payout after you have a minimum

profit which is strange because it's

kind of like if I make profit I should

get my payout if I even make $100 I

should get my profit split of that and

to be honest that's a strategy that you

should be doing let's say you've got a

funded account now and you know you paid

$500 for that account well you know that

the moment you lock in even just $100 of

profit you know that they will refund

you your evaluation fee so your

objective is just lock in a very simple

payout so therefore you made a little

bit of profit you've got your profit

splits and then you've also got your

refund on your challenge fee so

therefore that account is now risk-free

because you took out your initial

investment and therefore you can use

that to buy more and more accounts

that's the way we should approach this

now while certain prop firms do they'll

give you cheaper prices they'll give you

less profit targets and they'll say come

trade with us we have great conditions

and all of these things and then what

will happen is you trade that account

you get funded let's say and then even

you go on and you continue to trade it

and you lock in let's say 1% gain and

you're okay I've locked in 1% I want my

refund of my valuation fee that I'm due

and then also I want to lock in my 1%

payout and therefore in $100,000 account

you say Okay 8020 split I want $800 plus

my initial investment that's great now

what this PL for will come back to you

and say is hey well you can't get a

payout until you at least make let's say

3% or let's say 5% so they're basically

saying even if you make 2% we're not

going to pay you even if you make 1%

gain we're not going to pay you you have

to make a minimum profit for you to get

your payout why is that it's to force

you to trade it's to force you to trace

a Target and it's to avoid them

basically paying you out on your first

,000 that you deserve that is not for

any benefit that is only there for them

to be cheeky for them to save money and

not pay you out so what I'd say is avoid

prop firms that are doing this that are

giving you minimum withdrawal targets no

it's a prop firm it's a live account we

agreed if I make profit I get my payout

on the agreed split that's how it should

be another red flag that you need to

watch out for is don't go with the ones

that your favorite influencer is

promoting don't go with the pl firms

that have the biggest Instagram Pages or

the best YouTube channel or whatever

because these are all marketing gimmicks

look at their reputation look at their

reviews look at what people talk about

them online if you find a profer that

has a good price they have hundreds of

thousands of followers on Instagram you

even can see the CEO and you know who's

behind it but then you go on their trust

pilot or you look around on Twitter and

all you see is payout denied account

access restricted people making too much

profit and then they cut them off

randomly the problem firms that fail

your challenges because they felt like

it because they said we did a review and

we found this did not follow our terms

they give this approach of we are

subjective and we can choose who we give

in a count to or not and they'll

basically say if you're too profitable

if you have too many payouts we're going

to Blacklist you and that's happened to

a lot of people that I know so we have

to be careful about these proforms that

are doing these dirty tricks because

they have the followers that would just

say okay well we don't need you we got

plenty of customers but that's not

honest ethical approach and I don't want

to invest my money in a prop firm like

that every influencer and their mom is

starting a prop firm there's hundreds to

choose from and some of them just

started a month ago 6 months ago they

are not true businesses we need to work

with the ones that have been around for

2 years 3 years 5 years that have a

stellar reputation and have stood the

test of time now the next red flag I'm

going to let you in on a little secret

maybe you didn't know this but prop

firms they need a little bit of tech

they need a software to actually run all

of this on some prop firms build that

themselves and they'll spend $200,000 or

$500,000 building their own website

building their own infrastructure

building their own risk management

systems and actually building everything

internally for everything that is

required to actually sustain a prop firm

now a lot of the influencer based ones

or a lot of these new prop firms that

pop up basically 95% of prop firms they

Outsource that they pay a tech provider

to actually do all of this for them and

there's two main companies that are Tech

providers one of them has their own prop

firm so you can already start to think

if this one prop firm competing with 50

other prop firms that they are providing

the tech solution too they're

purposefully never going to let other

prop firms outshine them they're not

going to let them take their market

share so if we know that one prop firm

is feeding many PL firm's Tech Solutions

I don't want to be working with those

ones because this main PL firm is always

going to make it worse for them so that

they can be the best one second of all

and more importantly is working with a

tech provider and externalizing that

component means that you have to pay

them a percentage of your Revenue so

certain prop firms that work with these

Tech providers they pay them a setup

cost and they also give them 30 to 40%

of their revenue now why is that

important because right now there is a

price War every PL fir is trying to get

cheaper and cheaper and undercut each

other and that's great for the consumer

because we just get the best prices but

the problem becomes is they're going to

cut Corners somewhere else if they can

provide a cheap service to you it means

they need to make you fail even more so

that they can still make money

especially if they have to give 40% to a

tech provider then they have to have

about 25% of their revenue to pay out

customers then they have their costs of

maintaining a staff marketting marting

website all of these other costs and

then they also have to pay taxes we can

see that this 40% of the tech provider

eats in hugely to their margins but

they're still trying to cut their prices

meaning that they are going to implode

maybe one day they're not going to be

able to pay out and a lot of these PL

Firs that are around right now will not

be around in 5 years because the

founders is their first business they

don't have money to reinvest and if they

get big payouts they'll go bust because

they can't keep affording to do payouts

because they pay 40% of the tech

provider and then 20% in taxes let's say

what's really left for them nothing so

we know that if they keep making it

cheaper and cheaper and cheaper we know

that they're eating more and more into

their profit margin and eventually these

prop firms will collapse that's why I

always say I would rather work with a

prop firm that even if it's a little bit

more expensive to buy the evaluations

but if they have their own technology

well that's 40% they don't have to give

to anyone else they can still afford to

do payouts and that's important because

as a customer as a user as a Trader I

want to make sure I'm working with a

platform that it is stable that is

sustainable and that is not using all of

their cash flow just to pay out now a

few little red flags are for example if

they don't let you hold your trades over

the night or if they don't let you hold

your trade over the weekend or if they

don't let you hold your trades over news

now that is up to me if I'm trading and

I have a strategy and I want to hold a

trade overnight I should be allowed to

if I want to hold it through a news

event because I'm break even I should be

allowed to if I even want to enter

during a news event it's a little bit

risky but if I want to it's on me I

choose to do that if I want to if I want

to hold a trade over the weekend because

it hasn't met my profit Target yet it

hasn't reached my TP and I know that

maybe next week on Tuesday it might hit

then I should be allowed to do that so

prop firms that are restricting us and

they're saying is to force you to take

profit so you can always be growing your

account is to stop you getting caught in

news volatility sure they're justifying

it but they're only doing that to give

you a reason to put that condition there

in the first place the reality is a real

Trader doesn't need that we don't need

to be babysits we don't need to be told

how we should trade or whatever they're

not doing that to help us they're only

doing that so you're forced to take

profit before you want to so that your

profits aren't as big as you want so

you're forced to take it before news

event or you can't enter 30 minutes

before a news event but what if you get

a valid entry and then the news event is

the Catalyst to hit your take profit

well you missed a good trade then or

they force you to cut it over the

weekend or overnight it's basically only

there to force your hand is to force you

to make decisions you didn't want to

make to ultimately affect your

profitability therefore to me it makes

sense to work with a prop firm that is

not doing that why would I make life

harder for myself if I'm allowed to do

it based on my back testing based on my

Edge based on my data I should be

allowed to do it because my goal is to

make profits and if that's what the prop

firm wants when we make money you make

money then they should let us the

reality is when we make money they lose

money so they'll do these things and

they'll convince you it's for us that's

a lie so we have to be careful so ladies

and gents that's my list of initial red

flags and you're probably thinking damn

there's a lot and to be honest there's

even more red flags so maybe I'll make a

part two and let me know in the comments

if you want to hear more red flags from

me but the reality is we can't just

focus on the cheap prop form or the one

that has the best marketing budget

because followers does not equal better

prop fir or cheaper price doesn't equal

better prop fir or less profit Target

doesn't mean better PL fir because you

have to realize all of these hidden

things that they do to make us fail or

to make life harder for us so now that

we know these things we can start to see

what we can avoid so that we don't keep

losing money on profam challenges