Prop firms have become so desirable in the forex trading industry, to the point where most retail traders are either aiming to become funded or have undertaken a prop firm challenge already.
Signal providers are trying to capitalize on this boom within the industry by providing signals to help traders pass funded account challenges. This seems like a good idea on the surface, right? Passing a funded trading account challenge without needing to put any time or effort into trading. Wrong!
It is not possible to become a prop firm funded trader by copying signals from other traders. This is because it’s banned in Terms and Conditions of most prop firms. Even if it wasn’t banned, 99.9% of signal sellers are unprofitable traders so copying their trades would not lead to success.
In this article, we’ll be looking at everything you need to know if you’re considering trying to pass a funded account challenge using signals. So, let’s get into it!
Becoming A Prop Firm Trader by Using Trading Signals
Many newbie traders have seen huge payouts from prop firms online. This leads to new traders wanting to fast track the journey, cut corners where possible and start pulling profits out of the markets overnight.
Sadly, this is where many traders go down the route of purchasing ‘trading signals’ from trading groups that showcase their extravagant lifestyles and earnings online.
Many traders are applying for prop firm funded challenges, to just copy the signals onto the funded account challenge in the hopes of becoming a funded trader with no effort.
What Are Trading Signals?
Trading signals were extremely popular a few years ago. Essentially, you would pay a ‘trader’ to add you to some kind of group chat or distribution list. The trader would send you trading setups in real time with exact TP, SL and entry prices.
The idea is that you would copy these trades into your own MT4/MT5 platform and make a profit.
It sounds too good to be true, right? Well, that’s because it is! These signal groups are usually run by unprofitable scammers providing unregulated financial advice to newbies.
The Drawbacks of Trading A Prop Firm Account Using Signals
There are a huge number of drawbacks traders will face when trying to become a funded trader whilst using trading signals.
These include:
- Signal vendors are rarely profitable. 99.9% of signal providers in this space are just failed forex traders looking to cash in and make some money from the industry. Most of these ‘traders’ don’t even use real accounts as they know they’ll just lose money.
- Prop firms ban the use of trading signals. Most prop firms ban traders from using signals. This is due to the fact that most signal providers are essentially unprofitable traders just scamming other traders. Being profitable because you are copying and pasting numbers into MT4 requires no skill and should not be rewarded.
- You cannot manage risk effectively. You have no way to gauge the true past results of the strategy and therefore, you cannot manage risk effectively. You will just be trusting a stranger with your financial success and rolling the dice.
- You will not always have access to signals. If the signal seller changes the strategy or decides to close shop, you’ll have a funded account with no way to make money.
- You’ll miss signals due to commitments. Traders that copy other traders’ signals will often enter trades late or miss trades completely, due to being busy with other commitments. This greatly decreases the likelihood of being profitable.
The Benefits of Trading A Prop Firm Account Using Signals
There are a few potential benefits of using signal services to give you trades to be taken on a funded trading account. However, these benefits rarely exist in the real world.
Candidly speaking, 99.9% of signal services are unprofitable. Even if the signal supplier is somewhat profitable, the trader will rarely make money due to a lack of risk management understanding and delays in taking each trade, which eat into the profits.
With that in mind, we can confidently say that there are no benefits/upside to looking to becoming a prop firm funded trader by using signals. This will not work – you’ll be wasting your time and money.
Do Prop Firms Allow Signal Trades?
Most prop firms will not allow traders to copy signals from other traders. This is due to the risks associated with doing so. The trader nor the prop firm have any control over the results, or the strategy being used.
This often leads to the traders blowing through accounts due to unprofitable signals and no risk management strategy in place. These losses cost both the trader and sometimes the prop firm, depending on the business model the prop firm operates.
As a general rule, most prop firms are only willing to work with traders that trade their own strategy. If many traders are copying the exact same signals with a prop firm, this will flag within the prop firm’s risk management system and many of those traders will be warned not to copy trades.
It’s incredibly hard for a prop firm to manage the risk associated with one trading strategy if there are hundreds of traders trading that exact same strategy – hence why signal trading is often banned in the Terms of Service.
In Conclusion – Can You Really Become A Funded Trader By Using Signals
In summary, you aren’t going to become a funded trader without any effort. You are not going to ‘copy’ your way to financial freedom or any amount of substantial profit.
Instead of trying to shortcut your way, you’re much better of learning to trade forex yourself and growing as a trader – instead of placing your financial future in the hands of a stranger on the internet.
If you’re looking to become a funded trader, work with Lux Trading Firm today!
