Introduzione
The world of Trading was recently rocked by shocking news: True Forex Funds (TFF), one of the largest and most popular Prop Firm globally, has closed its doors. This event raised a number of questions and concerns about the stability of the industry and the future of other Prop Firms.
For those who do not know , Prop Firms are companies that”finance” traders, offering them accounts from 100,000 euros and up . The trader takes a portion of the profits generated, sharing them with the Prop Firm, but without taking losses (within a certain threshold supported by the Prop Firm).
A trader, who could be anyone, must pass a challenge in order to access this capital, based on trading performance and meeting certain parameters set by the Prop Firm.
To participate in the challenge, the trader pays an entry fee (on average $500 for a $100,000 account ). If he loses the challenge, he also loses the fee.
Prop Firms thus present themselves as solutions to the big problem of retail traders: the lack of large amounts of capital to start trading. But is this always true and sustainable, or are there risks involved?
In this article, we will analyze the situation and market of Prop Trading in 2024, the status of the major players in the industry, and discuss new emerging business models.
The Incredible Revelation about the Closing of True Forex Funds.
True Forex Funds was considered one of the pillars of Prop Trading, with a large base of traders and a solid reputation. The news of its closure took everyone by surprise, creating a wave of panic and uncertainty among traders who depended on this platform for their financial transactions. The reasons behind the closure are extremely clear and outlined.
According to an officialstatement on Twitter by TFF CEO Richard Nagy, the closure was inevitable due to a major conflict of interest that paints “the Reality of the Prop Firms world ” as well as talking about” insurmountable financialchallenges “
The big conflict of interest in the world of Prop Trading is simple: the business model is based on fees paid by traders to participate in challenges. Most traders fail these challenges and lose the fees. The money collected from fees is used to pay the few traders who manage to make profits on funded accounts, which represent only 1-3% of participants. This creates a conflict of interest: traders want payouts, but for Prop Firms , paying them represents a significant cost.
True Forex Funds’ problems began a few months ago when the CFTC, the U.S. regulator that had already shut down MyForexFunds in 2023, marked True Forex Funds as a potential risk, undermining customer confidence. In early 2024, MetaQuote, a well-known financial market software provider, revoked True Forex Funds’ license for inconsistencies with regulations. This forced traders to migrate to other less popular platforms such as DXtrade or CTrader, destabilizing customers accustomed to Metatrader and discouraging new users from buying new challenges with True Forex Funds.
This change created a large gap in the Prop Firm, preventing it from attracting enough new users to pay off old customers. In just three months, True Forex Funds declared financial insolvency and closed the platform. The loss of good reputation made it impossible for the Prop Firm to recover from the crisis.
Are Other Prop Firms at Risk?
With the closure of True Forex Funds, many are wondering whether other prop firms are at risk. It is a legitimate question since these firms operate in a highly competitive environment and often under strict regulations. An analysis of the main competitor, The Funded Trader, shows that this company is also facing serious challenges. For The Funded Trader comes a temporary shutdown in March, and Payout freeze in April and May .
Despite strong growth , it must strike a balance between gaining the trust of traders and ensuring financial sustainability . Recently, Surge Trader also filed for bankruptcy, increasing concerns in the industry .
According to the Global Prop Trading Firms Market Analysis 2023 report, 60 percent of prop firms have shown signs of financial stress, with many struggling to maintain sustainable operations in an increasingly competitive market.
The Direction of Market Leaders
In the midst of these uncertainties, a new hybrid business model emerges that could revolutionize the prop trading industry. This model allows traders to obtain funded accounts without having to overcome typical prop firm challenges , thus avoiding stringent rules and high costs. Using these innovative models www.fintech.global, traders can directly access funds without the need to demonstrate their skills through conventional methods. This approach helps reduce barriers to entry for new traders and offers greater flexibility and financial security.
According to recent research by FinTech Global, the hybrid model has the potential to increase trader participation by 25 percent over the next five years, simultaneously reducing the failure rate of prop firms by more than 30 percent.
Conclusion
The closure of True Forex Funds has deeply shaken the world of prop trading, raising questions about the stability of the industry and the future of prop firms. This crisis, however, is also spurring innovation with companies like FTMO investigating new business models to remain competitive. The new hybrid model represents an interesting breakthrough, offering traders a more accessible and secure way to participate in financial markets. As the industry continues to evolve, traders must stay informed and adapt to changes to successfully navigate this dynamic and uncertain environment.
