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FXStreet recently put together some research about prop trading.
Livia Schneider, Senior Marketing and User Research Specialist at FXStreet, led the efforts, which was also supported by the company’s marketing team, headed up by Juan Pablo Ambrogetti.
The team spoke to traders from 10 different countries across North and South America, Africa, Asia, and Europe.
Why do people trade with prop firms?
The first area the team looked at was why people actually trade with prop firms. The key points here were kind of what you’d expect.
People see props as an opportunity to get access to a lot more money than they otherwise would.
What was also interesting here was that traders saw it as a way of avoiding the stress that comes with trading their own accounts. Surprisingly to me, they also found the rules that props apply as being a positive as they push them to trade in a more disciplined way.
Also striking here was that the traders did not see this as a form of gambling. A couple of them actually specifically differentiated between gambling and trading.
How do people find prop firms?
The next striking part of the report was on how people find prop firms. The key point here for me was that I’d always merged trust markers (eg. seeing a firm on Reddit) with someone actually choosing a specific firm.
It seems like the bulk of the traders FXStreet surveyed found prop firms via IBs, affiliates, or other traders that they followed.
Importantly, these were also people they trusted. For example, a lot of the traders had been in educational programmes or in trading communities. They had joined a prop firm because of recommendations from people leading those programmes or because other traders in the community used them.
Alternatively, some followed traders on social media platforms and joined a firm because of their recommendation.
Trust points
Maybe the most interesting part of the report for me was on how people evaluated firms.
As noted, a trader might go to a specific prop firm because it was recommended to them by someone they trusted.
However, the FXStreet report implies a big intermediary phase where the trader evaluates how trustworthy the firm is.
A number of different traders that FXStreet spoke to note that the first place they go to in order to do this is YouTube. This was true across Asia, LATAM, Europe, and Africa.
“If a trader has traded with [the firm you’re considering], you want to get his own experience of dealing with that particular company,” said one trader, who was interviewed by the team. “You go to YouTube to search for a review. What challenge did they encounter? What’s the best part about that firm? And that’s it.”
Other traders noted that they scan YouTube comments and other user feedback on sites like X and Reddit. Interestingly the implication here was that a lot of users would go to these sites directly or Google terms that would be more likely to bring them up.
Despite the fact that it’s been heavily manipulated before, users also continue to rank Trustpilot highly as well. They check both the number of reviews, the actual comments they leave, and the overall number of reviews on the site. Interestingly, users did also highlight obviously fake comments on Trustpilot – as well as other platforms – as a red flag for them.
Product
Beyond trust markers, traders also looked at other factors that were more related to the product to determine what firm to use.
Some key points here included customer service and localisation. LATAM traders, for example, wanted content that was in Spanish to feel comfortable using a firm.
Traders also seem to pay close attention to challenge terms to determine whether or not a firm is right for them.
Positively for the industry, they also looked at pricing and highlighted consistently low pricing as a red flag.
Overall this was not too surprising – basically pricing, challenge terms, and trading conditions were all things traders looked at.
Switchers and stickers
The final section of the report that would be interesting to firms was on retention.
One trader said they bought 8(!) challenges before they got to a funded account.
As we’ve looked at before, this shouldn’t be too surprising as traders appear to average 2 – 3 purchases.
More interesting was what made people stick to one firm or switch to another.
Traders cited a general feeling of being comfortable with a specific firm as part of that. They also cited being comfortable with the trading platform and tools it offers.
What made people switch? Better promotional deals and more attractive challenge rules. Not such a surprise there then.
