In recent years, proprietary trading firms, or “prop firms,” have gained popularity, particularly among retail traders seeking capital without risking their funds. Firms like Supertrade have attracted attention by offering instant access to funded accounts, high profit splits, and innovative tools for risk management. As more traders turn to these firms, questions naturally arise: How do prop firms generate revenue, and can they truly afford to fund thousands of traders? Are they a legitimate opportunity, or just another scam?
To answer these questions, it’s helpful to understand how the model works. Supertrade and other reputable prop firms operate on a shared-profit basis, where traders use the firm’s capital and earn a percentage of their profits. In return, the firm benefits by taking a portion of the profits, charging fees for account access or evaluations, or by hedging and replicating the successful strategies of traders. While the specifics vary from firm to firm, the general model is well-established, and when done transparently, it’s entirely legitimate.
How Prop Firms Generate Revenue
Prop trading firms don’t rely on a single source of income. Instead, they typically earn revenue through several key channels, depending on how they structure their services and funding process.
1. Profit Sharing from Funded Traders
The most straightforward way a prop firm makes money is by taking a percentage of the profits earned by its traders. For example, if a trader generates $10,000 in profit on a funded account with a 20% firm share, the trader keeps $8,000 and the firm earns $2,000. This aligns the firm’s interests with the trader’s success, which encourages the provision of better training, tools, and support.
2. Evaluation Fees and Subscription Models
Some firms operate on a pay-to-qualify model, where traders must pass an evaluation phase to prove their skill. These evaluations usually require traders to pay a one-time or monthly fee. Whether or not the trader passes, the firm earns revenue from these fees. This model is utilized by firms such as FTMO and MyForexFunds. Supertrade, by contrast, offers instant funding, meaning traders pay to access live capital upfront, without lengthy evaluations.
3. Hedging and Strategy Replication
Advanced prop firms will closely monitor successful traders and may use their strategies to open parallel positions in the real market. This is known as strategy mirroring or internal hedging. If the trader performs well, the firm profits twice, once from the trader’s success and again from the firm’s own mirrored position. While not all firms disclose whether they hedge trades, this is a common and legitimate way for firms to leverage trader talent.
4. Technology and Platform Licensing
Some larger prop firms develop proprietary platforms, trading dashboards, or analytical tools, which may be offered to external users or firms for a fee. While not the main source of income, tech licensing can supplement their earnings, especially for firms with strong internal infrastructure.
Are Prop Trading Firms a Scam?
With any growing industry, there are inevitably both trustworthy players and shady operators. The key to distinguishing legitimate prop firms from potential scams lies in understanding how they treat traders, manage transparency, and structure their business model.
Why Prop Firms Are Generally Legitimate
Reputable prop trading firms make their money by working with traders, not against them. Their goal is to fund profitable traders and share in the earnings. This creates a win-win environment where both parties benefit from the trader’s success. Firms like Supertrade are built on this model. They are upfront about how their funding and profit-sharing work, and they provide clear rules for risk, withdrawals, and account scaling.
A legitimate prop firm also provides:
- Transparent trading rules
- Realistic profit targets and drawdown limits
- Consistent, on-time payouts
- Accessible customer support
- Fair dispute resolution policies
These are all signs that a firm operates ethically and aims to maintain long-term relationships with serious traders.
Red Flags to Watch Out For
While many prop firms are genuine, there are some warning signs that a firm might not be operating with good intentions. Be cautious if you notice:
- No clear funding structure or payout policy
- Exaggerated marketing promises (e.g., “guaranteed profits”)
- Hidden fees or surprise charges
- Unrealistic trading rules that make it easy to fail
- Lack of contact information or legal disclosures
Scam firms often rely on a high volume of failed evaluations or hidden rules to avoid paying out profits. If most traders lose their accounts due to unclear or shifting guidelines, the firm might be profiting more from trader fees than trading success.
Can You Trust Instant Funding Models?
One of the more recent developments in the prop trading space is the rise of instant funding, where traders skip the traditional evaluation phase and trade live capital right away. Supertrade is one of the pioneers in this model, which has become especially popular among experienced traders who don’t want to waste time proving their skills.
Instant funding models are not scams, they simply take a different approach to risk. Traders pay for access to live capital and agree to certain drawdown limits and rules. If they stay within the rules and trade profitably, they earn a high share of the profits. This upfront-payment model is legitimate, provided the rules are clear and the firm honors payouts.
As with any financial service, traders should read the fine print. Make sure you understand what happens if you violate a rule, how the firm handles losses, and how quickly you can withdraw profits. A solid firm will be transparent about all of these areas.
