Why do traders use prop trading firms?

FXStreet recently conducted a study on the growing popularity of prop trading.

Livia Schneider, Senior Marketing and User Research Specialist at FXStreet, led the study, which also received support from the company's marketing team, headed by Juan Pablo Ambrogetti.

The team interviewed traders from 9 different countries across North and South America, Africa, Asia, and Europe.

Why do people trade with Prop Firms?

The first question the team asked was why people trade with Prop Firms. The key points here were fairly predictable.

People see proprietary trading firms as an opportunity to access significantly more money than they could otherwise.

It's also interesting to note that traders saw it as a way to avoid the stress of trading on their own accounts. To my surprise, they also found the rules in place to be positive, as they encouraged them to trade in a more disciplined manner.

It's also striking that the traders didn't consider this a form of gambling. Some of them even made a clear distinction between gambling and trading.

How do people find proprietary trading firms?

The next part of the report that struck me concerned how people find proprietary trading firms. The key point for me was that I had always associated trust indicators (e.g., seeing a company on Reddit) with someone actually choosing a specific firm.

It seems that most of the traders surveyed by FXStreet found Prop Firms through IBs, affiliates, or other traders they followed.

It's important to note that these were also people they trusted. For example, many traders had completed training programs or been part of trading communities. They joined a Prop Firm on the recommendation of the people who ran these programs or because other traders in the community were using them.

Others followed traders on social media and joined a firm based on their recommendation.

Trust Points

Perhaps the most interesting part of the report for me concerned how people evaluate companies.

As noted, a trader might choose a specific firm because it was recommended by someone they trust.

However, the FXStreet report highlights an important intermediate phase in which the trader assesses the firm's trustworthiness.

Several traders interviewed by FXStreet indicated that YouTube was their primary source of information in this regard. This was true for Asia, Latin America, Europe, and Africa.

"If a trader has already traded with [the company you're considering], you want to know their experience with that particular company," one trader interviewed by the team said. "You go on YouTube to look for a review. What challenges did they face? What's the company's biggest strength? And that's it."

Other traders indicated that they browse YouTube comments and other user reviews on sites like X and Reddit. Interestingly, this implies that many users go directly to these sites or search on Google for terms likely to bring them up.

Despite having been heavily manipulated in the past, users also continue to give Trustpilot a high rating. They check both the number of reviews, the actual reviews they leave, and the total number of reviews on the site. It's worth noting that users also highlighted that obviously fake reviews on Trustpilot, as well as on other platforms, are a red flag for them.

Product

Beyond trust indicators, traders also considered other, more product-related factors when deciding which company to choose.

Key factors included customer service and location. Latin American traders, for example, wanted Spanish-language content to feel more comfortable with a company.

Traders also seem to place great importance on challenge terms when determining whether a company is a good fit.

On a positive note for the industry, they also examined pricing and highlighted consistently low prices as a red flag.

Overall, this wasn't very surprising: traders were primarily interested in pricing, challenge terms, and trading conditions.