How do prop trading pyramid schemes work?

Hey Traders,

this article’s for anyone thinking of getting a funded account from a prop trading firm. Here, you’ll learn how these firms work and form your own opinion.

How prop trading firms work?

Right now, there are about 40 retail prop trading firms. Many focus on forex trading using platforms like MetaTrader 4 or MetaTrader 5. They team up with broker companies providing trading data, and some have their own brokers.

When you sign up for a funded account, you’ll use a MetaTrader demo account. You’ll aim for a profit target and meet other trading conditions. Some challenges are tough, some easier.

Once you pass the challenge, you stay on the demo account and earn a percentage of the profits. 

But where does that profit come from? 

It’s from fees paid by other traders taking on challenges.

For instance:

Say you get a $1000 payout today. On the same day, three other traders pay for a funded challenge, and the prop trading company sends that money from to you.

But here’s the catch: even though you’ve got your payout, there’s more to it!

At this point, remember two important things:

  • You’re not trading with real money.
  • You’re trading against your prop trading firm.

When you make money, the prop trading firm loses, and they have to pay you. That’s their problem because they’d rather keep the money for themselves. Your loss is their profit; they earn when you lose.

What do prop trading firms do after you’re ‘funded’?

They have strategies once you’re in. Here are a few:

  • They might increase trading fees and commissions on platform. You traded on a fee-free demo, but now you face higher fees. It’s common among trading platforms. Your ‘funded’ demo account might have worse conditions.
  • Some firms use special software to execute your orders at worse prices than you saw when placing them. MyForexFunds used this, and others do too. You can find more about it here:
  • They might close your account without a specific reason. It’s a common tactic to get rid of traders.

These are just some tactics they use, and guess what? It’s not legal!

How to choose the right prop trading firm?

Only a few prop trading firms are genuine. Most just want your challenge fee and don’t care about you.

Many traders want quick payouts. They pay the challenge fee, dream of trading big, and making fast cash. But that’s not how it works. Real trading takes time, maybe 1-2 months to get a funded account.

What’s important to check before buying a trading challenge?

  • Check the challenge. If a firm offers low profit targets and easy conditions, it’s likely a scam. Passing an 8% profit target doesn’t make you a real trader. Don’t fall for it!
  • Look at the trading platform and brokers. Always check which broker the firm uses and the conditions on the ‘simulated account.’ You might get a funded account easily but face the worst trading conditions.
  • The challenge price matters too. If it’s too cheap, it’s a sign to stay away. A $300 fee for a $100K account? That’s not realistic!
  • Check the country the firm operates in. Some countries restrict pyramid schemes. Be careful with firms from the US/Canada; regulations there are strict.

How does HyroTrader crypto prop trading work?

We’re different. We’re after real traders and offer real capital to them. Our challenge might be tougher, but here’s what we provide:

  • We work with ByBit, a transparent platform. Our traders face no slippage, no swap fees, and no crazy commissions.
  • Traders can trade USDT Futures, USDC Contracts, Spot trading, and USDC Options.
  • After a successful challenge and a few payouts on the demo, we provide real capital on a ByBit sub-account.

We don’t want lucky random traders. Our focus is on real, skilled traders. If you’re after a quick buck, HyroTrader might not be for you. You might prefer a pyramid scheme or the casino – the odds are similar.

We aim for long-term cooperation with real traders. If your skills need improvement, we can help and teach you.

If you’re profitable and done with prop trading schemes, apply for a funded account and join a real prop trading firm.

Join our team of
successful Hyro Traders