The internet didn’t ruin proprietary trading. If anything, it solved one of its biggest problems. For a long time, getting access to a prop firm depended heavily on where you lived, who you knew and whether you happened to end up in the right room. A talented trader sitting hundreds of miles from Chicago, London or New York could quite easily go unnoticed.
Online prop firms changed that. Someone anywhere in the world could pay for an evaluation, sit down at a computer and at least have a chance to show what they could do. That was a pretty big improvement. But something else happened at the same time. The evaluation became a product, and once that happened, the relationship between the trader and the firm started to change.
Traditional proprietary trading was built around a fairly obvious problem. The firm had capital and wanted people who could make that capital productive without doing anything stupid with it. So you found traders, watched how they performed, controlled the risk and gave more capital to the ones who proved they could handle it. The trader wasn’t really the customer in that relationship. The trader was the asset.
That idea hasn’t disappeared from prop trading. There are firms today that still care enormously about finding genuinely good traders. But online distribution added another business model on top of it, and the incentives of the two models are not always the same.
The Evaluation Became Something You Could Sell
Online prop firms made access much easier, but they also discovered that access itself could be monetised. You could sell an evaluation. If somebody failed, you could sell them another one. You could sell resets, larger account sizes, add-ons and different programmes. Discounts could increase conversions, affiliates could bring in traders and creators could promote firms to enormous audiences.
Again, none of that is automatically a problem. Every business needs customers and every business needs some way of finding them. What becomes interesting is what happens when customer acquisition starts becoming more important than talent acquisition, because they sound similar but they’re really not.
One asks how you find more people willing to buy an evaluation. The other asks how you find people who are actually very good at trading. You obviously hope the same person can be both, but there is no reason they always will be.
Once a firm becomes very good at acquiring paying participants, it is possible to build an enormous business before you have necessarily built an equally good system for identifying trading talent. That is quite a strange outcome for an industry with “proprietary trading” in the name.
It Changed the Trader Too
The incentives changed on the trader’s side as well. If somebody gives you a meaningful amount of real capital to manage, survival suddenly becomes quite important. You probably aren’t thinking about how quickly you can hit an arbitrary target. You’re thinking about not losing the capital.
Size matters. Drawdown matters. Bad trades matter. Sitting out when there is nothing worth trading matters. You need the edge to survive for long enough that somebody can tell whether it was actually an edge in the first place.
An evaluation can create a slightly different psychology. Say a trader has access to a large notional account but their actual financial exposure is the relatively small amount they paid for the challenge. If they fail, they can buy another one. Then another one. At some point it becomes very easy to think in attempts.
Push the size, try to hit the target, fail, reset and go again. That doesn’t mean everyone trading an evaluation is gambling. Plenty of very disciplined traders use these firms. It just means the structure can make certain behaviour easier to justify. If the account is disposable, treating it as disposable doesn’t feel completely irrational.
And that is quite different from the mentality you would ideally want from somebody being trusted with capital. A talent system should probably make survival boringly valuable.
Passing Something Isn’t the Same as Proving Something
This might be the biggest distinction that got lost along the way. Getting funded became the achievement, which makes sense because it is a very clear moment. You were trying to pass something and then you passed it. There is a certificate, there is an email and there is normally something worth posting.
But passing an evaluation and proving you can manage capital are two completely different things. A trader can have a brilliant week. They can catch a market environment that happens to suit them perfectly. They can take much more variance than they normally would and it can work. Someone could probably pass an evaluation with one enormous trade if the rules allowed it.
None of that tells us very much about what happens over the next twelve months. How do they size after three losses? What happens during a bad month? Do they start increasing risk because they want the money back? Can they adapt when the market stops behaving the way their strategy likes? Do they keep blowing accounts? Can they actually sit there and do absolutely nothing when there isn’t a trade?
Those are much harder things to turn into a screenshot. They’re also probably much closer to what a serious capital allocator actually cares about.
If you gave us the choice between a trader who reached a profit target in four days and somebody who had quietly produced controlled results for two years, we know which record we’d be more interested in looking at. The problem is the four-day story is much easier to market.
We Got Very Good at Finding Marketers
The affiliate side of prop trading is another strange part of all of this. There is nothing wrong with affiliate marketing. There are good creators in this industry and there are creators who genuinely help traders understand products before they buy them.
But social media made one form of value incredibly easy to measure: attention. You can see how many followers somebody has, count views, measure referral clicks and see how many customers a creator sends to a firm. Trading ability is much more annoying.
Someone can post a $15,000 payout, but what happened before it? How many accounts were involved? What happened afterwards? What does the previous year look like? Did the trader make $15,000 or did one account make $15,000 while five others disappeared quietly?
We’ve written about this problem before because it keeps coming up. Social media is very good at showing moments. Trading skill tends to reveal itself over much longer periods.
So the industry ended up with a slightly odd situation where somebody could become extremely valuable to prop firms without anybody really knowing whether they were an exceptional trader. They might be. They might not be. Their ability to acquire customers is measurable either way.
Then you have the complete opposite trader. They have 600 followers. Their profile picture is some anonymous cartoon. They post approximately once every six weeks. They have no affiliate link and seem actively uninterested in building a personal brand. But they might be an unbelievable trader.
Right now, the industry is much better at discovering the first person. That seems backwards to us. A big audience can be valuable. It just shouldn’t be confused with a track record.
What Happens When the Trader Actually Wins?
There is probably a simpler way to look at the whole debate. Forget account sizes and discount codes for a minute and ask what happens to the firm when one of its traders becomes consistently successful. That tells you quite a lot about the incentives.
If a good trader becomes economically valuable to the firm, both sides have a reason for the relationship to continue. The firm can give them more capital. Maybe they get better conditions. Maybe the firm can use what it learns from proven traders in other parts of the business. Maybe appropriate exposure is routed or hedged differently.
The exact structure will vary from firm to firm, obviously. But the important part is that success becomes useful. The trader makes money and the firm benefits from having found them. That relationship makes sense.
Things become more awkward if successful traders are mainly a cost while unsuccessful traders are mainly a source of revenue. We don’t think that means every simulated prop model is fundamentally broken. That would be far too simplistic.
But eventually you would hope the best traders become valuable. Otherwise the firm has built a talent discovery system where discovering talent is financially inconvenient. That’s a fairly obvious tension.
A Prop Firm Should Hate Losing a Great Trader
This is the part of the industry we find much more interesting than another account size. Imagine somebody has traded with a firm for two years. They’ve had losing periods, but they didn’t implode. They manage drawdown well, their position sizing is sensible and their results have held up across different market conditions.
You now have quite a lot of evidence that this person might actually know what they’re doing. What happens next?
At the moment, there often isn’t much of an answer, and that feels like the opportunity. Finding somebody willing to buy an evaluation isn’t the same problem as finding somebody who can produce good risk-adjusted results over a long period. The second person is much rarer.
So if a firm actually finds one, surely the logical response is to try very hard not to lose them. Give them more capital. Improve the conditions. Give them a reason to stay. Create some kind of progression where two years of evidence means more than buying another account.
That seems much closer to how talent works in almost every other competitive industry. You become more valuable as the evidence gets stronger, not less.
If a genuinely exceptional trader leaves a firm and nobody particularly cares, we think something has probably gone wrong with the model somewhere.
Trading Could Probably Use Scouts Again
Sport is an obvious comparison here. Not because trading needs to pretend it is football, but because sport has spent a very long time figuring out how to find people who are unusually good at something.
Clubs scout, compare, track performance and watch development over time. One good game obviously gets attention, but nobody seriously thinks one good game tells you everything about a player. Once a club finds someone exceptional, keeping them becomes rather important.
Prop trading used to have much more of that mentality. The online industry became incredibly good at the other side of the business: funnels, affiliate programmes, discount campaigns, conversion and customer retention. All of that became extremely sophisticated.
Maybe the next big improvement is making talent discovery just as sophisticated. Not who has the biggest audience. Not who posted the biggest payout this week. Not who passed an account fastest.
Who keeps performing? Who controls risk? Who survives? Who improves? Who performs across different firms and different conditions? Who had one incredible month and then spent the next eleven giving it back?
Those are much more useful questions if you’re actually trying to find traders. Ideally, the best unknown trader shouldn’t have to spend three years learning how to make YouTube thumbnails before somebody notices them. Their trading record should be able to do some of that work.
We Definitely Shouldn’t Go Backwards
None of this means the old prop world was better. In plenty of ways it was worse. Access was limited. Geography mattered enormously. Connections mattered. Credentials mattered.
There were probably extraordinary traders who never had a realistic chance of getting near meaningful capital because they lived in the wrong place and knew the wrong people. The internet fixed a lot of that, and we shouldn’t undo it.
What seems more interesting is combining the useful parts of both systems. Keep the global access and let somebody sitting anywhere have a route in. But once they’re in, start caring much more about what happens over time.
Build verified records. Measure risk. Make longevity visible. Let traders carry a reputation between firms instead of effectively starting again every time they open another dashboard. Give stronger traders access to better opportunities and give firms a much easier way to find them.
That feels like a much better version of proprietary trading than simply recreating an old trading floor online.
Access Was the First Problem
Online prop firms solved access incredibly well. Maybe too well, depending on how many evaluation adverts you’ve seen this week. But access was only one problem.
The next one is selection.
Who is actually good? Not who had a good week. Not who passed the most accounts. Not who has the best content. Who has built a record that becomes more convincing the longer you look at it?
Then comes the part we think the industry hasn’t really explored properly yet: retention. Once you find that person, what do you do with them?
The strongest prop firms in the future might not be the ones capable of selling the most attempts. They might be the ones that become unusually good at identifying talented traders early, figuring out the difference between skill and a lucky run and then giving those traders a reason to stay.
The strongest traders shouldn’t need to become gurus to get noticed either. If somebody has quietly traded well for years, that should mean something. Their record should become their reputation.
Because underneath everything that has changed about proprietary trading, the original idea was actually pretty simple. Find people who can trade. Protect the capital. See who keeps doing it. Give the good ones more and try not to lose them.
The trader wasn’t the customer.
The trader was the asset.