What is really up with the Funded Programs?
Before we go any further, I want to state that
1) This post is NOT PROMOTING ANY prop firms/funded trader programs,
2) I do not hate or have anything against any prop firms/funded trader programs, I am just sharing my understanding from what I have read and experienced, and
3) Info here is not complete. If you choose to embark on any programs, please make sure you do your own due diligence.
Traditional Prop Firm
Typically refers to a group of traders that focus on buying and selling financial assets with the firm’s capital. The trader uses that firm's money to trade and in exchange receives a small wage and a large percentage of the profits. In practice, proprietary trading firms provide the capital, proprietary technology, training, coaching, and mentoring for you to become an elite trader.
Funded Programs
There has been an ever-increasing number of funded trader programs, marketing to retail traders about the huge profit-sharing potential (75-90%) when they become "a funded trader." And all that is required is paying for and passing an evaluation/testing period. You would pay anywhere from $84 to $184 for a $10,000 account and it could go as high as you want (almost)
A trader in the evaluation/testing period would have
- Profit target of 8-10% in phase 1 (typically 30 days)
- Profit target of 5% in phase 2 (typically 60 days)
- Daily drawdown of no more than 5%
- Overall drawdown of no more than 10-12%
From my experience coaching retail traders, newbie or average trader has an account size of no more than $10,000. This makes the idea of being funded to trade become really attractive, limiting the downside while almost maximizing the potential. However, there has also been a lot of negativity about these funded programs;
- the evaluation and actual trading accounts are demo accounts
- the company makes more money from traders failing than from profitable traders
- some traders claim to have never received their payouts
Are funded programs scams?
Again, I have not evaluated ALL funded programs to say this, but probably not. (Do your own due diligence!)
Companies running funded programs are likely just deploying a good business model, addressing a pain that most retail traders have (funding their account) and filling that gap.
Should you jump into a funded program?
There is a lot more information (more than discussed above) that needs to be considered before you jump in. A brief checklist:
1) Do you have a profitable trading strategy to deploy? (if you don't have a profitable strategy, keep reading, learning & testing)
2) Have you used it for at least a year? (avoid using funded programs as a testing ground, it can get costly! do it on a demo or even a $1,000 account first)
3) Does the strategy meet the max drawdown conditions? (5% a day, 10% total? For example, a martingale strategy is not likely to work)
4) How likely are you to bend your trading rules? (rules set by the programs are set in stone, a breach even by the slightest and you would have failed)
5) Is it the right time to start? (are markets in consolidation, on a holiday period, or super volatile with no clear trend)
Remember that the average annualized return of the S&P500 is 11.88% (1957 to 2021). Trying to make 8-10% in 30 days and then 5% in 60 days just to pass, tends to put the trader under a lot of stress. How do you perform under significant pressure?
What are your views of the funded programs? Share it with me in the comments
I have never thought much about the funded programs. But recently have been considering giving it a shot and live-streaming the trading process daily. Would you join me on the stream?
Stay tuned, it might just happen.
1) This post is NOT PROMOTING ANY prop firms/funded trader programs,
2) I do not hate or have anything against any prop firms/funded trader programs, I am just sharing my understanding from what I have read and experienced, and
3) Info here is not complete. If you choose to embark on any programs, please make sure you do your own due diligence.
Traditional Prop Firm
Typically refers to a group of traders that focus on buying and selling financial assets with the firm’s capital. The trader uses that firm's money to trade and in exchange receives a small wage and a large percentage of the profits. In practice, proprietary trading firms provide the capital, proprietary technology, training, coaching, and mentoring for you to become an elite trader.
Funded Programs
There has been an ever-increasing number of funded trader programs, marketing to retail traders about the huge profit-sharing potential (75-90%) when they become "a funded trader." And all that is required is paying for and passing an evaluation/testing period. You would pay anywhere from $84 to $184 for a $10,000 account and it could go as high as you want (almost)
A trader in the evaluation/testing period would have
- Profit target of 8-10% in phase 1 (typically 30 days)
- Profit target of 5% in phase 2 (typically 60 days)
- Daily drawdown of no more than 5%
- Overall drawdown of no more than 10-12%
From my experience coaching retail traders, newbie or average trader has an account size of no more than $10,000. This makes the idea of being funded to trade become really attractive, limiting the downside while almost maximizing the potential. However, there has also been a lot of negativity about these funded programs;
- the evaluation and actual trading accounts are demo accounts
- the company makes more money from traders failing than from profitable traders
- some traders claim to have never received their payouts
Are funded programs scams?
Again, I have not evaluated ALL funded programs to say this, but probably not. (Do your own due diligence!)
Companies running funded programs are likely just deploying a good business model, addressing a pain that most retail traders have (funding their account) and filling that gap.
Should you jump into a funded program?
There is a lot more information (more than discussed above) that needs to be considered before you jump in. A brief checklist:
1) Do you have a profitable trading strategy to deploy? (if you don't have a profitable strategy, keep reading, learning & testing)
2) Have you used it for at least a year? (avoid using funded programs as a testing ground, it can get costly! do it on a demo or even a $1,000 account first)
3) Does the strategy meet the max drawdown conditions? (5% a day, 10% total? For example, a martingale strategy is not likely to work)
4) How likely are you to bend your trading rules? (rules set by the programs are set in stone, a breach even by the slightest and you would have failed)
5) Is it the right time to start? (are markets in consolidation, on a holiday period, or super volatile with no clear trend)
Remember that the average annualized return of the S&P500 is 11.88% (1957 to 2021). Trying to make 8-10% in 30 days and then 5% in 60 days just to pass, tends to put the trader under a lot of stress. How do you perform under significant pressure?
What are your views of the funded programs? Share it with me in the comments
I have never thought much about the funded programs. But recently have been considering giving it a shot and live-streaming the trading process daily. Would you join me on the stream?
Stay tuned, it might just happen.
Join my mailing list jindaotai.com/joinme
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.