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.