The Dangers of “Passing a Prop Firm Challenge Services”

  • September 19, 2022

As the online prop firm and funded trading account space has grown massively over the last few years, opportunists have found many ways to game the system for their financial gain. This exploitation, along with the impatience of many new traders has led to an explosion of companies and individuals offering ‘prop firm passing services’. In short, these services are designed to take the prop firm challenges on behalf of the trader, then provide the trader with an ‘out of the box’ funded account. Are these services too good to be true?

Well, yes.

In this article, we are going to look at everything you need to know if you’re considering using a third party to obtain a funded forex trading account on your behalf. Let’s get into it…

Prop Firm Challenge Passing Services

If you’re active in the online forex trading community, you would have noticed the surge in prop firms over the last few years and now the surge in firms offering to pass your prop firm challenges for you. In essence, the large majority of prop firms in the industry will require traders to pass either 1 or 2 challenges, to test their profitability. This will typically last between 30-60 days and require traders to make around 8-10% profit, per challenge. On average, 90% of traders will fail to hit the required profit targets without violating the drawdown and maximum loss limits.

Shown here is just one of the many companies online offering to pass your challenge for you, with a money-back guarantee. The idea being you will be able to pay a simple $400 for stage 1 and an additional $200 for stage 2. Once paid, you connect your account to their copy trading system and let it run – simple as that. Although this may seem like a good idea, there’s a saying “shortcuts get cut short” and it couldn’t apply more to this practice in the industry.

The Dangers Of Paying For A Passed Prop Firm Challenge

Now, if you’re looking at this article, I’m going to assume that you may have been thinking about engaging one of these vendors to help speed up your funded account. I would strongly advise against doing so, for the following reasons:

1. t’s against most prop firm Terms and Conditions

By using a third party, or even automated trading in some cases, you’re most definitely violating the terms of service for the prop firm you’re engaging with. From their point of view, they are unlikely to actually honor your payout if you have been dishonest and broken their rules. I’ve seen numerous instances now where people have been given funded trading accounts and payouts have been declined for this reason. The term “rules are meant to be broken” doesn’t really ring true in the financial services industry.

 For instance, with our Elite Traders Club, we give our funded traders live trading capital. We aren’t looking for people that cannot trade, we are looking to fund real forex traders with 6-7 figures of capital and grow their trading careers. We aren’t looking to fund traders that simply bought a challenge pass!

2. There is no guarantee of a pass

Simply put, there is no guarantee that the firm will be able to obtain you a funded account. Even profitable traders who are professional fund managers will have a bad month, a bad quarter, etc… and fail to obtain the results needed to pass a challenge or verification. With that in mind, there is very little chance that a company popping up out of thin air with a fake address and phone number has what is needed to pass a funded account challenge. Not only that, companies offering a ‘guarantee’ should be viewed as a large red flag – nothing is guaranteed in such a liquid market. Let’s say that the company fails to pass the challenge for you. You have paid £800 to the prop firm and another £600 to the shady company. This leaves you £1400 in the hole with nothing to show for it. You wouldn’t trust a stranger with your live trading account, would you?

3. There is no guarantee of a refund

A lot of newbie traders seem to be hooked on the promise of a refund. Firstly, there is very little chance of actually getting a refund from these companies. They’re completely nameless companies popping up overnight, with fake addresses, fake numbers, and no visible owners. When paying for challenge passes, you’ll notice that many companies will push you to pay via Crypto, further destroying your already limited chance of ever seeing a refund. Even if you were to be given a refund when the company blows through your funded account in 3 days, you’ll notice in the Terms and Conditions that they will never refund the prop firm account value, of course. So, even if they do refund you, you’ll still have lost the money you spent on signing on with the prop firm.

4. You’ll still lose the account within a few weeks

Let’s assume that you’re one of the lucky ones – you paid for a challenge passing service and the company actually delivered on the service. Let’s then assume that you’re working with us and we have provided you with a $100,000 funded trading account, with live funds, to get you started. After the first few weeks, there’s a 90% chance you’re going to have violated the drawdown limit or max loss limit and we have had to take the account from you. 

Why? 

Well, if you are using a passing service, it’s clear that you are not confident in your ability to trade forex. And if you cannot trade forex profitability during a demo challenge, you don’t stand a chance of trading profitably in a live environment once you obtain the funded account.  You’re really just kicking the buck down the road and wasting your own time. You’re much better off learning to trade, working with us to get your trading to the level it needs to be at, then taking one of our funded forex accounts off the back of your own work. 

5. You’re ignoring the reality

Highlighting the point we made above, you’re ignoring the reality that you aren’t yet a profitable trader. This is nothing to be ashamed of but it’s crucial to be honest with yourself and be aware of your trading ability. If you aren’t yet at the stage where you can pass a challenge on your own, funded trading accounts shouldn’t be at the forefront of your mind. You should be more focused on upskilling, progressing in your trading career, and learning to trade the markets. Then, the money will follow.

What To Do If You’re Struggling To Pass A Prop Firm Challenge

If you’re looking to purchase a challenge passing service, there’s a good chance that you’re struggling or have struggled to pass a prop firm challenge on your own. This is fine, it’s normal!

Is it time to give up forex trading? Absolutely not! 

So, what can you do to help you pass, without relying on a third-party service?

1. Continue the learning process

 Even if you are a profitable trader, your trading style might not fit the requirements for prop firm trading in the online retail arena. For instance, I know many profitable position traders that would struggle in trading with a shorter-term prop firm setup. It’s crucial to be honest with yourself and where you are in your trading journey. By this point, you should have collected a lot of data on your trading performance and be able to accurately assess whether or not you’re profitable. It may be that you need to tweak your trading strategies to a lower time frame, to fit the profit targets and drawdown limits. It may be that you need to decrease your risk profile and look at scaling into winning positions, rather than going in with full risk.

Or, it may be that you just aren’t ready to be a funded forex trader just yet and you need to spend another few months learning and refining. It does take a long time to learn to trade forex, it’s not an overnight process.

Whatever the case, if you aren’t ready, continue putting the work in, instead of engaging third parties to cut corners for you.

2. Consider working with a prop firm that wants you to succeed

This is something that is massively overlooked by traders seeking prop firm funding. It’s not widely known but there are 2 different types of prop firms… 

Type A – Is paid purely off traders failing their challenges. Payouts get delayed and traders are treated unfairly. These prop firms work like offshore brokers, they’re incentivized by you failing. It’s common for these prop firm challenges to be very tough to pass.

Type B – Is paid purely off the profit share, meaning they need you to succeed, for them to get paid. These firms have your best interest at heart.

Being one of the Type B prop firms mentioned above, at Lux Trading we work with our traders and mentor them, give them free resets on funded accounts, and provide them a risk desk and all of the training needed to succeed. We are much more lenient than a lot of firms and actually have our funded traders using live money accounts. We only get paid when our funded traders get paid!

If you’re struggling to pass a prop firm challenge, it’s worth taking a look at the firm you’re working with. It may be that they’re making the prop firm challenge impossible to pass.

We have a full article here, looking at the dangers of trading with forex prop firms that trade against their clients.

In Summary – Using Prop Firm Passing Services

In conclusion, if you’re on the fence about using a passing service to obtain a funded account, I’d highly recommend against doing so for the following reasons…

  1. You’re breaking the TOS with the prop firm in question
  2. You have no guarantee of getting funded
  3. Your chances of a refund are very slim
  4. You’ll lose the account straight after obtaining it
  5. You won’t make any profits

It’s a shady practice that is plaguing the online prop firm industry but it certainly won’t stand the test of time. The reality is, when the FCA and other governing bodies take a deeper look at the online prop firm space, the majority of the firms you see today and the service firms are going to disappear overnight. If you want to become a funded trader, do this properly and obtain the trading accounts off your own hard work and merit.

 If you are interested in being a funded trader, work with Lux Trading Firm now!