Lately, prop firm companies have appeared here and there.
Basically, you can pay to receive 5-6 digits of a trading account, prove yourself a consistently profitable trader by taking the evaluation, then be given “live” trading account (from $10,000 to $300,000), and any profit will be split with you (you get 70-85%).
But nobody actually knows about how they work since there isn’t any insider info coming out yet.
People say they actually made money by collecting registration fees, and the profit split to profitable traders is actually other people’s registration fees, since the number of profitable traders actually only count for 1%-ish. Something like a money game (variation of a Ponzi scheme?).
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Can’t make a general statement about these. It’s possible there’s some scams, but the ones I’m thinking of are “legit” in the sense they try to do what they state they’re trying to do. The business can be simplified to – trading has a lot of fixed cost – build a common company that amortizes the cost across multiple traders/trading teams. Then each trader will use their own strategy to trade. Because the strategies are independent, there’s a sense the aggregate risk will be reduced. Only keep the traders that seem to know what they’re doing/and somewhat consistently have a positive return. The traders provide the strategy and the labor, while the firm provides the book capital and the supporting services; so there’s some split of both the risk and the profits.
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