In the world of trading, Prop firms have made a really huge impact and invited opportunities and traders who could never trade with bigger capital and polish their skills. Since 2012, Prop firms have grew quite a lot in number and offered capital and educational resources but nowadays starting a prop firm is fairly easy for anyone who has a significant amount of money and not every prop firm comes with good intentions and as the prop firms are increasing in number, it is getting harder to figure out which prop firm is good but there are few ways we can figure out if a prop firm is legit or trying to scam us 

Unclear Rules about Trading

One of the major red flag about a scam prop firm would be unclear rules about prop firms, these rules can be about what trading styles are allowed and how much leverage can a trader use, how and what EA and copy trading methods are allowed, Rules like these are must always be clearly explained and If a prop firm doesn't mention what rules are not allowed then keeping a distance from them is a better choice. Also if a trader wants to buy a prop firm challenge, noting down that prop firm's prohibited strategies are a must as it will help you understand what trading strategies you are not allowed to perform as practicing any prohibited strategy can lead to an account termination.

Fake Trustpilot Reviews

Reading reviews about a prop firm is a one of the ways that a trader can get to know about a firm, social media platforms are also doing a good job when it comes to reviewing a prop firm but mostly people around the world have accepted Trustpilot as their main source of review about any website, company, service or in general anything. Even though Trustpilot is a great website for reviewing any prop firm, some scammer prop firms pay to some shady services to write good reviews about their prop firm. 

How would a person identify that? Traders can simply just filter out bad and 3 star reviews where the real people  talk  about the insights of the company and shed light on the reality of the prop firm.

Beware of Recently Launched Prop Firm

Prop firms are launching at a really high rate nowadays and although they can look exciting due to their fresh and Innovative approach, Revolutionizing methods and newly launched offers and exciting giveaways, still there can be a secret scam hidden. Often time these prop firms think that prop firms are easy and after a few months, they get to find out the complexity and experience to run a prop firm is not that easily attainable. After that traders start to see and hear problematic rumors which can lead to prop firms being closed. We at TheTrustedProp advice from the start that traders should at least wait for 6 months before investing their money in a prop firm so that they know how the prop firm is performing.

CEO Promising Quick Riches

Traders must understand that no CEO or founder of any legit prop firm will promise you that you can get rich quick with their prop firm or show off with fancy Lamborghini, Rolex or parties. Trading as a whole is a way a person can make a ton of money but those who make money in this industry are people who have learnt trading for more than 3 years. Prop firms are a great way to trade with bigger capitals but traders must understand that if a CEO is telling you consistently that only their prop firm is the only path to wealth you have only imagined then it is a major Red Flag.

High-Frequency Trading (HFT) and Demo Environments

High-Frequency trading is one of the strategies that not many prop firm allow and even if a legit prop firm allow HFT in their platform then it will be a specially curated challenge which will require you to trade using HFT. As of today’s standards, HFT is not allowed in almost every single firm unless they have a special HFT challenge. Traders must understand that mostly prop firm provided simulated challenges which are basically demo accounts but with prop firm’s rules integrated in them and prop firms will have to replicate the trades executed by the trader, HFT is something which is not easy to replicate and can also lead to slippage and financial challenges for prop firms. Neither in challenge phases nor in live accounts, traders are usually allowed to practice activities like HFT and if a prop firm allows that in general and does not have a special challenge account for HFT then it’s one of the clear signs of a Red Flag.

Unprofessional Staff

One of the major Red Flags you can find in a prop firm is how professional and expert the staff is there and how much they know about the prop firm space and about trading.

If a prop firm has staff with lack of knowledge about trading and if the company CEO is also not that knowledgeable about the trading world or their behavior doesn’t match with the industry then it raises confusion about the firm’s trustworthiness. A reputable prop firm always keep the well knowledgeable and experienced people in their company so they can talk to their community and provide precise knowledge on the matter everyone is talking about or if the someone comes with any questions

Unregistered Company

We at TheTrustedProp mean it and take this one thing really into consideration that if a prop firm is operating then it has to have a full proof verified legal status, Although the numbers have been reduced but once in a while, we do find Prop firms who operates without any legal documentation and form an offshore entities in SVG or Caribbean Islands. Sometimes there are prop firm who does not even provide any legal name. 

Traders can find a prop firm’s legal details in the Terms & Conditions page or Privacy Policy page. 

Lack of Customer Service

Customer service is one of the crucial factors when it comes to being which prop firm is legit or not, Every firm has a community and everytime traders will have questions regarding any small or large detail related to either trading with the prop firm or rules and if a prop firm has an unresponsive or little to no communication with customer service then it can lead to frustration and confusion regarding the prop firm, A lack of customer service can be a red flag shows a lot about the quality of the prop firm and how much assistance they can provided in need.

Beware of Cheap Twitter Affiliates

Twitter is one of the main social media platforms where we can find prop firms, Brokers, Tech Providers, Traders and especially those who promote these Prop firms. Twitter provides the option of Affiliate Badge which traders can show off everywhere and advertise or mention the prop firms’ good sides. Having a huge number of affiliates may result in more reach but if the affiliates are those people who do not add any value in the trading community, prop firm space and are not knowledgeable enough in the community, they just raise more doubt about the prop firm’s integrity and if they actually care about traders. 

Conclusion

Before buying any challenge from any prop firm, these are a few things that a trader must take into consideration. A reliable prop firm is straightforward with their business model and tries to provide a supportive and fair trading environment. By knowing these basic rules and being cautious, traders can make a better choice at protecting their trading capital.