Prop trading or proprietary trading is getting popular day by day due to the benefits that it provides to traders. These firms provide traders with a solution to start trading without even personal investment. Traders can start their trading journey with the funded account provided by the firm. Many firms now prefer one-step challenge programs that help traders get the chance to access large trading accounts after a single evaluation phase. These firms simplify access but there are some hidden charges that can affect the trader’s profit. If you are going to start your trading journey then it is important to understand the complete process of how one-step challenge prop firms work. Let’s see in detail about these firms and their hidden costs that you should need to know.
How do One-Step Challenge Prop Firms Work?
Best prop firms require traders to complete an evaluation process to get access to their funded trading account and prove their skills. One-step challenge prop firms make it simpler and provide traders with a single phase of evaluation rather than muti-step or two-step evaluations. Traders do not need to invest all their time into evaluation instead they can get access immediately to funded accounts and start their live trading more quickly. These firms have very clear profit targets that traders can easily understand and achieve. But there are some hidden charges associated with one-step challenge prop firms so it is important to know all these costs so your profit does not affect.
Upfront Fees and Retakes
One of the most common but sometimes underestimated costs associated with one-step challenge prop firms is called the initial challenge fee. Traders pay a fee to take the challenge but what many do not consider is the cost of retakes. These challenges have very strict rules regarding drawdowns and profit targets. This means that if traders fail to meet them they will retake the challenge and pay additional expenses.
Hidden Cost: Repeated Fees
- If a trader fails multiple times then it directly shows that it ends up paying significantly more than expected.
- Some firms provide discounts on retakes but others require full payment for each new attempt. So must consider all these costs before trying any challenge.
Challenge Expiry and Time Limit Pressures
Some one-step challenge prop firms have strict time limits on their evaluations. If a trader does not reach the required profit target within the given timeframe then hey fail the challenge and must pay again to retake it.
Hidden Cost: Psychological Pressure and Extra Fees
- The pressure to perform within a limited timeframe causes traders to rushed decisions and have higher chances of failure.
- Traders will end up paying for multiple challenges due to the inability to meet targets in a short period.
Inactivity Fees and Account Maintenance Costs
When traders pass the challenge and receive a funded account then mostly they assume they are free to trade at their own pace. But some firms also charge inactivity fees if a trader does not actively place trades over a certain period.
Hidden Cost: Forced Trading and Unnecessary Losses
- Traders feel pressured to place trades even in unfavorable market conditions just to avoid inactivity fees.
- Paying inactivity fees over time can ultimately reduce a trader’s earnings.
Profit Split Discrepancies
Most one-step challenge prop firms attract traders by advertising generous profit splits more than their expectation like 80/20 or 90/10 in favor of the trader. However, some firms also apply conditions that effectively reduce a trader’s share of the profits.
Hidden Cost: Unclear Profit Split Structures
- Some firms apply hidden fees or commissions that reduce actual payouts.
- Withdrawal fees and restrictions can make it harder to access earnings.
Spread and Commission Manipulation
Spreads and commissions play a very important role in trading costs. Some prop firms inflate spreads or charge higher commissions that make it more difficult for traders to achieve profitability.
Hidden Cost: Higher Trading Costs
- Having large spreads means traders need to hit higher price targets to break even.
- High commissions reduce net profits and make it difficult to pass the challenge and withdraw earnings.
Restricted Trading Conditions
Some one-step challenge prop firms also have restrictions on trading strategies like bans on news trading, scalping, or holding trades over the weekend. If traders break these rules then their account can be terminated.
Hidden Cost: Limited Strategy Flexibility
- Traders need to follow their strategies which can lead to lower success rates.
- If violate these rules then they can lose their account as well as challenge fees.
Final Thoughts:
Traders can choose one-step challenge prop firms if they think that they can easily pass their evaluation process in a single phase. It is important for traders to choose firms that provide them clear fee structure and do not charge any hidden fee.
