Prop Firm Question

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Prop Firms

I have a question about prop firms. It has likely been answered before, but I have had difficulty finding clear answers. The question is, how do prop firms pay you out? I have heard that they only payout from failed challenges, I have heard that they link accounts of profitable traders to live accounts to leverage investor capital, I have heard that some don’t payout at all… Also, what is an A-book prop firm, does that mean you are trading live funds? And finally, if I were to have a 500k account with The Funded Trader for example, what is the likelihood of me being paid out. I would like to know these things before investing in an expensive challenge. 

Your answers are greatly appreciated.
 

 1)how do prop firms pay you out?

-They pay you out from failed challenges... 

2)I have heard that they link accounts of profitable traders to live accounts to leverage investor capital?

-Only a small % of live trader will ever trade real funds pretty much none

3)I have heard that some don’t payout at all?

- Yes if a small prop firm with little to no customers has to pay out some won't as they don't want to pay out of there own money but big firms like the funded trader, ftmo, funded next and many more are ok as they have loads of capital to pay out from there failed challenges as they've made millions.

  4) Also, what is an A-book prop firm

- A book means every order you execute will be placed into the live markets, B Book accounts are accounts that when you trade they're not placed into the live market, 

5)  if I were to have a 500k account with The Funded Trader for example, what is the likelihood of me being paid

- As they have millions in funds from there business model you should be safe and they will pay out most. Unless you cheat them or they cheat you by saying you broken the rules. 

 

Take a few lessons from Prop Firms (Part 1) — An introduction - the article

Is there a reliable, proven, prop firm EA? - forum discussion thread
Take a few lessons from Prop Firms (Part 1) — An introduction
Take a few lessons from Prop Firms (Part 1) — An introduction
  • www.mql5.com
In this introductory article, I address a few of the lessons one can take from the challenge rules that proprietary trading firms implement. This is especially relevant for beginners and those who struggle to find their footing in this world of trading. The subsequent article will address the code implementation.
 
Marcel Mase:
Prop Firms

I have a question about prop firms. It has likely been answered before, but I have had difficulty finding clear answers. The question is, how do prop firms pay you out? I have heard that they only payout from failed challenges, I have heard that they link accounts of profitable traders to live accounts to leverage investor capital, I have heard that some don’t payout at all… Also, what is an A-book prop firm, does that mean you are trading live funds? And finally, if I were to have a 500k account with The Funded Trader for example, what is the likelihood of me being paid out. I would like to know these things before investing in an expensive challenge. 

Your answers are greatly appreciated.

... "I have heard" ...

Did you take the time and put in the effort to actually research the various prop-firms, comparing them, looking up their trust ratings, reading reviews, etc.?

Don't accept hearsay and just assume things. If you intend to trade with a prop-firm then do your homework.

But most importantly, make sure you actually know how to trade properly, consistently and professionally long term, or else you will just be wasting your money on prop-firm challenges.

 
There is plenty of firms out there. Read every rule and the TOS. You can compare 40 firms on fxpropwatch.
 
Marcel:
Prop Firms

I have a question about prop firms. It has likely been answered before, but I have had difficulty finding clear answers. The question is, how do prop firms pay you out? I have heard that they only payout from failed challenges, I have heard that they link accounts of profitable traders to live accounts to leverage investor capital, I have heard that some don’t payout at all… Also, what is an A-book prop firm, does that mean you are trading live funds? And finally, if I were to have a 500k account with The Funded Trader for example, what is the likelihood of me being paid out. I would like to know these things before investing in an expensive challenge. 

Your answers are greatly appreciated.
1.How do they pay you out? One of the biggest prop firms said in their begginings that ~92% of challenges fail, so mathematics is as follows: if ~half of accounts fail at the challenge because of max loss(say 10% of account nominal value) and another half because of breaching max daily loss(say 5% of nominal value, calculated from the last day closing value of equity, their loss before profit split would be ~12 times paid fee(in reality it is probably less than that), yet as ~92% challenges fail, they get 1/(1-0,92) = 12,5 fees for each successul trader. So, they get money to be paid out from paid fees. No problems for payout, but a big problem to get there. And one more thing: how big the account is (500k in your case) is just an marketing trick: if you lose 25k in a day, carry open loss of 25k over night regardless of profit made on the account or if loss from closed trades+valuation of your open positions exhibit equity value of less than 450k, your 500k account is no more. What you get is 25k to 50k account with no margin for open positions deducted and they name it 500k account. I call that genius marketing. :)
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