Do Prop Firms Actually Pay Out?

The best instant funding prop firms understand the importance of a positive symbiotic relationship between traders and the firm itself. The former receives capital to trade forex, and the latter receives expertise, unique approaches, and unique strategies.

It is essential to bring this up because whilst the topic of this article could be answered with a single word, and in the spirit of not “burying the lede” the answer is of course that yes prop firms do pay out, the question is one that is worth exploring further.

Prop firms work on a profit-sharing system, one that starts off with a reasonable split commensurate to the experience of a trader in the system before providing increasing payouts and ratios that are more generous to the trader as they build their skills.

Often, when people ask about whether prop firms pay out, this is not necessarily about the specific process of requesting withdrawals, targets and payout schedules, but also about the expectations a firm places on a trader and how to both acquire a live account and keep hold of it.

With that in mind, this guide hopes to answer the question of payouts comprehensively and then go further.

What Does A Payout System Look Like?

FTUK utilises a payout system that uses a Payout Locker, all of which is integrated into the trading dashboard used to manage accounts.

Payouts can be made to a wide range of currencies via Rise Works or via the stablecoin USDT, a cryptocurrency token pegged to the United States Dollar, in a process that takes up to two working days to process and is reflected in a wallet in three working days.

In order to qualify for a payout, a trader has to have spent 14 calendar days (typically ten working days) in their current trading level, have achieved their profit target, be approved for scaling up and have enough of a profit share to qualify for a payout.

The latter point can often be a point of confusion, but can usually be easily explained with an example; it is not enough to have an account in profit by the $250 minimum amount but this has to be the total of your share.

For example, a Two-Step Evaluation account has a flat profit share once you pass the two test account rounds of 80 per cent, which means that you need to have a profit of at least $312.50 in your account before you get a payout.

Meanwhile, if you have a One-Step or Instant Funding Account, where the profit share scales once you reach progressively higher funding levels, you need to have at least $500 profit in your account, a figure that will decrease to $416.67, then $357.15, and finally to $312.50.

Generally, you can take out a payout once every two weeks, although this can be increased to weekly payouts with the purchase of an optional extra, so make sure to factor that into your decision to payout your profits.

Finally, there is the Payout Locker to consider, which adds an extra risk management step to your account.

How it works is that the first withdrawal at any given level increases the static drawdown limit from the starting capital minus the percentage drawdown allowed (10 per cent for Two Step, 6 per cent for Instant Funding) to the starting funding balance for that level.

For example, if you have a $10,000 Instant Funding account, the first funding stage has a drawdown limit of $9,400, meaning that the account cannot dip below this figure otherwise it can trigger a hard breach that can lead to account termination.

Once you make your first withdrawal, the drawdown limit increases to $10,000 until you reach the next funding level, in which case the drawdown limit reverts to the starting balance minus the percentage drawdown, which in this example would be $19,800.

All of this will be made clear on the trading dashboard, and an explanation of the Payout Locker system is shown whenever it applies, which is the first withdrawal of every funding level.

This is the mechanics of how the payout system works in general for FTUK, and many prop firms use similar systems to ensure strong risk management practices so that traders do not make a withdrawal and immediately enter a drawdown system that could risk their account and the capital of the firm.

In practice, the further a trader progresses and the more funding they have available, the lower the likelihood that they will struggle with or even notice the Locker, but it helps to encourage trading strategies which are designed with long-term, sustainable gains in mind and put risk management first.

Why Do Some Traders Not Reach A Payout?

Funded prop firms employ these systems because they want to create a system of responsible trading with individuals who play the long game. This is part of the reason why evaluation systems are put in place and why bigger profit splits are available faster for those who pass the Two-Step programme compared to the One-Step or Instant Funding schemes.

The evaluation system is in place as a mutually beneficial arrangement; traders build up their skills and prepare their long-term trading strategies ready for a live account, and the timescales for payouts encourage longer plays rather than rolling the dice.

At the same time, it is also the case that a not-insubstantial number of people who take the challenge do not reach the point of getting a payout, which is often why the question gets asked of whether there is any gain at all from applying for a prop firm.

As we have established above, there is very much a firm system of payouts, so why do so many traders, even ones who pass evaluations, seem to fall at the first hurdle? The answer is more psychological than financial.

Evaluation systems try their absolute hardest to simulate live environments without any money on the line, but the fact remains that they are safe environments and everyone who uses them knows that subconsciously.

This means that, whilst any egregious risk-taking will be almost immediately spotted, some traders are perhaps not as au fait with effective risk management as they need to be once the keys to a live account are given.

As well as this, there are two emotions of the market that sway every trader but can particularly harm brand-new traders.

Many traders, particularly those unfamiliar with prop firms, are vulnerable to fear and greed, and as soon as that freedom is available, it can sometimes lead to relatively rash decisions.

Obviously, this is far from everyone, but a number significant enough to establish payout policy either pass the test or pay for an Instant Funding account end up in a hard breach situation before they reach the first payout opportunity.

There are a few reasons it can happen. The first is a matter of self-selection; it is extremely unlikely but possible to gamble your way to passing an evaluation round and possibly even two if you end up on a lucky streak.

However, whilst you can sometimes hit the jackpot, you can’t hit the jackpot twice, and if you go into a live account expecting reckless trades to work out, then within days you will end up at your drawdown limit.

Of course, the number of people who fluke their way into a live account is tiny and they get found out almost immediately unless they change very quickly.

The more common cause of lost payouts is people who do establish a trading plan, make strong fundamentals and develop a risk management scheme but throw all of that out of the window as soon as they get a live account.

There are many personal accounts of people who talk about the first time they got a live account, had a very strong win rate on trades and realised that if their mindset is one of arrogance and an assumption they can overleverage because they cannot possibly lose, they end up in a bad situation very quickly.

What can make this worse is when such a trade goes badly and a trader focuses not on sticking to their trading plan but on chasing losses. Like most gamblers who do this, the losses can quickly spiral out of control.

All of this shows that the key to successful trading is not just a matter of skill, although very few people will pass an evaluation without some degree of fundamental knowledge about trading, the markets and the unique vagaries of markets such as forex, but also about mindset and mentality.

This is something that some prop firms can exacerbate by having strict time limits and attendance requirements, both of which can spook traders into making rash and reckless decisions.

The more common trend is to focus on the long game; FTUK has no time limit on any of its evaluation phases nor on its funding tier levels, removing the temptation to risk it all before the clock strikes midnight.

Ultimately, by taking it slow, focusing on consistency, trading plans and treating the scaling target as something to stick close to rather than try to massively exceed, a prop firm will pay out a profit split that gets better as a trader does.