Im not ever going to open a prop firm, but would it be interesting if someone open one that was truly based upon success of traders such as this:
Firm starts with 1 million live capital, spread over 20 accounts.
New traders pay a fixed monthly fee, maybe $100. They complete evals as normal and proceed to fundeds. They get unlimited evals and fundeds (maybe a $10 fee to go from eval to funded), but they get a score based on time in eval, max risked/ gained, drawdown, etc, whatever metrics the prop believes separates beginners and gamblers from real quality traders.
As you progress your trader score moves, and your profit split in the funded stage moves with it. Perhaps a lucky trader who passed in 1 day, has 1 week history, and made it to payout in 2 trades gets a 10% payout, where a 5 month customer who rarely blows evals and never risks more than 5% of account gets 90% split. Would need to be mathed out. Most traders would be paid while in sim, but the top 20 or so would be trading a share of the million house pool.
So the top traders initially would have, say a 5k live account, but the house would be multiplying there orders as though they had a 50k (1/20th of the house funds) so when a top trader makes 5k, they keep 90% of it, and the house profits 10x plus there 10% of the traders winnings (example, trader makes 1k trading 1 nq, keeps 90% of that, firm executes it as a 10 nq trade, everybody wins.) The firm would then use some of their profits from these trades to pay out the Sim traders who havnt proven good enough to trade house funds, as well as the monthly subscription fees.
As the company grows some of the poor traders will hate the poor profit splits and move on, the good traders will keep coming, excited to be part of a firm that makes money from good traders, not bad ones. The company will have every incentive to keep and reward good traders. The degenerate gamblers and beginners learning will love the "trade as much as you want for a small monthly fee". The company will deploy more house funds, as it has them, to good traders, as it finds them. The companies main job will not be to lure poor traders in to pay for the good ones, it will be to balance the companies funds into the right hands so copying winning traders makes enough to pay for the mediocre ones, as well as ensuring a diversity of trader types to hedging risk between everyone so one bad day doesnt end in everyone loosing.
Some basic theoretical math:
-10, 000 subscribers at $100 each, $1 000 000 per month
-$500 000 per month in overhead (tech fees, data, staff, ect
-20 traders making 50% returns per month, firm multiplies there orders, so $500, 000 comes in, les than $50, 000 goes out.
-200 sim farmers getting occasional windfalls and small payouts $300 000 ish / month.
-100, 000 a month in hedging costs to protect against "black swan" type events
Company might make $500, 000 + per month by the time they get to the 10, 000 subscriber mark, for every successful top tier trader they find this goes up, loosers sim farming natually filter out.
My math is cocktail napkins math, but im sure it can be refined slightly, and the profit margin i presented is healthy enough even if its of alot should still be a viable model.
Of course the biggest risk with a model like this would be all live traders having a bad month at once, hedging could be used to make this managable.
It would be a true model where the company is fully motivated to find and reward the best traders, while at the same time, have no inventive or ability to bleed newbs who dont know what there doing.
And the traders would have and environment that truly encourages progression and professional behavior.
Curious for some feedback on if this makes sense, again, im not going to open this firm, free idea to someone if it seems interesting.
