Imagine this scenario: You're executing a flawless trading strategy, confident you'll pass a proprietary trading firm's evaluation challenge, when suddenly the platform crashes. Or worse—you're informed that the rules have changed retroactively, nullifying your previous progress. This frustrating experience has become alarmingly common in the world of prop trading.
Recent incidents highlight how traders must navigate not just market volatility but also the reliability and policies of their chosen prop firms:
- A prominent futures prop firm faced trader backlash due to frequent platform outages and execution issues, with its CEO publicly acknowledging the problems and setting a January deadline for resolution.
- Another futures prop firm drew widespread complaints after allegedly implementing retroactive rule changes affecting trade holding periods and profit splits—effectively penalizing traders for actions that were previously compliant.
Essential Terminology for New Traders
Before examining these risks, let's clarify key concepts:
- Challenge/Evaluation: A paid assessment where traders must achieve profit targets while adhering to risk rules.
- Live Account: The operational phase after passing evaluation (sometimes called "performance" or "professional" accounts).
- Profit Split: The percentage distribution of profits between trader and firm (e.g., 80/20).
- Drawdown: The maximum allowable loss, often the primary cause of account failure rather than profit targets.
- Scalping: Ultra-short-term trading targeting small price movements, typically holding positions for seconds to minutes.
- Minimum Holding Time: Rules mandating trades remain open for a set duration (e.g., one minute), particularly impactful for scalpers.
Two Critical Non-Market Risks
Risk 1: Platform Outages and Execution Issues
Technical failures can create tangible damage when traders:
- Cannot enter positions
- Cannot exit positions
- Cannot manage risk exposure
- Hit drawdown limits despite sound trading ideas
Key due diligence questions before purchasing a challenge:
- Does the firm rely on a single platform?
- Is there transparent incident reporting and resolution?
- Do they promptly acknowledge issues?
- Is there a clear dispute policy for outage-related losses?
Risk 2: Rule Changes (Especially Retroactive Ones)
While rule updates occur in any business, critical concerns include:
- Whether changes apply to existing accounts
- If past trades get reassessed under new constraints
- Frequency of core rule modifications (holding times, profit splits, withdrawal limits)
A Prop Firm Due Diligence Checklist
A) Technology and Uptime Verification
- Multiple platform options or single point of failure?
- Public incident reporting channels?
- Trader complaints about order issues or disconnections?
- Clear dispute resolution process for technical problems?
B) Rule Stability Assessment
- Explicit effective dates for new rules?
- Clarity about applicability to existing accounts?
- Frequency of fundamental rule changes?
- Public version history or changelogs?
C) Incentive Structure Analysis
Consider whether firms primarily profit from:
- Challenge fees and resets
- Data partnerships and platform economics
- Successful trader scaling
Action Plans for Critical Situations
During Platform Outages:
- Document with timestamped screenshots and screen recordings
- Export trade logs and account statements
- Save all firm communications about the incident
- Contact support with evidence and request remediation
During Rule Changes:
- Pause trading and review updated rules
- Clarify applicability to existing accounts
- Obtain written confirmation of policy
- Assess whether to continue under new constraints
Final Considerations for New Traders
Successful prop trading requires navigating both market conditions and firm-specific ecosystems. Prioritize companies with:
- Reliable platforms for risk management
- Stable, transparent rule structures
- Business models aligned with trader success
When industry incidents occur, treat them as educational opportunities to refine your selection criteria and risk management approach.