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Funded Trading: 4 reasons most are designed to make you fail

A funded forex or futures trading account may seem like a great idea, but our Funded Trading Accounts review looked closely at the business models used by the funded trading firms and many have some major drawbacks and limitations you need to be aware of.

Let me be honest with you, my partners and I have been wanting to get involved with funding talented traders for some time. We’ve worked with so many traders over the years who need access to capital to reach their full trading potential. Traders who are great at reading the index, forex, futures, crypto, and gold markets.

As you would expect, this has involved us looking at all the companies offering funded trading out there, digging deep, and looking behind the curtain. Unfortunately, we do not always like what we see. Primarily we see an industry that is set up to encourage trader failure and provide a risk-free income stream to the funded trading firm at your expense.  

The industry is mostly set up so you fail and they benefit. Not sure I am right? Well here’s how they do it.

Reason 1: Fake account sizes

You think you’re going to get a large account, for example $150,000. That’s what the provider wants you to think.

Sounds amazing, right?  

Unfortunately, that’s not reality. You’re not getting that. You’re not even getting anything close to that. This is because of the drawdown limitations. These are a joke at your expense. It looks great on face value, but it falls apart when you look at the detail.

The ‘trailing drawdown’ is the catch here. This is the main thing that will make you fail.

Let us take the ‘professional’ $150,000 account as an example from one of our competitors. It has a trailing drawdown of $5,000. That means if you lose $5,000 and the account goes down to $145,000 the account is closed.

Take a few seconds to fully recognise what you just read.

Another way of putting it is, you are trading with a $5,000 account, not a $150,000 one. The account size may as well be stated as $100,000,000 for all the relevance it has.  

Think about it, how can you call $5,000, $150,000?

If your bank account said you had $150,000, but you could only ever have $5,000 of it, would you accept that? Of course not.  It’s just a number to make you feel good and trick you into thinking you’re trading with an account larger than you are. If this wasn’t bad enough, what makes this even harder is the drawdown trails.

Let’s say you make $1,000 profit, taking the balance to $151,000. The trailing drawdown moves up $1,000. That means you can only now drawdown to $146,000 before your account is closed! Your very limited drawdown allowance has been cut by a massive 20%!

Most funded trading providers offer trailing drawdown that is a small fraction of the theoretical account size. Look out for this when looking at them. We allow you to lose up to 50% of your account before we intervene. That’s somewhat larger than the typical 2-5% everyone else offers.

Reason 2: Unrealistic leverage or contract size for the account size

Sticking with the ‘professional’ account. 15 contracts may be the right size of trade for a $150,000 account but it’s far to big for a $5,000 account, and as shown in reason 1, your $150,000 account might really be a $5,000 account.

The fake account size encourages leveraging far too high, which means you’ll hit the trailing drawdown and pay the reset fee.

Reason 3: To do this full time you actually have to make a living trading and pay yourself

Point 3 and I need to revisit the hateful trailing drawdown.

If you want to make a living from trading you need to be able to withdraw profits on a regular basis. Let’s do some basic maths here.

Let’s use the fake $150,000 trading account, that, due to the drawdown limits, is actually a $5,000 account.

Let’s say you want to withdraw $10,000 a month to start with. That means you need to make $10,000 profit per month and also retain capital to allow you to trade in the first place.

That means you need to turn $5,000 into $15,000 in the first month.

That’s a 200% return!

You then withdraw it and do it all over again.

This will not happen.

You may think that you’ll build your capital at the same time e.g. turn $5,000 into $20,000 and withdraw $10,000, but again, this is the real world of trading.

That doesn’t happen.

Do you think institutional traders at banks and proprietary firms start off with small accounts and grow them into big accounts?

Of course they don’t.

They trade with big accounts and turn them into bigger accounts.

We can fund you with up to $500,000. $10,000 of that is just 2%. Do you think you can do 2% a month? Sounds a lot more realistic than 200% doesn’t it? We want you to earn $10,000 a month. Do our competitors?

Reason 4: Restrictive rules that work against you

Generally speaking statistically, the shorter-term a trader trades, the higher the chance of failure. Successful day traders may open and close many of their trades during the same day but most of their profits are made from the few trades they leave open for a longer period.

Most funded trading providers make you close your trades overnight. What this forces everyone to be a day trader, regardless of your trading style or how each individual trade pans out. This statistically significantly reduces your chance of success.

Why Funded Trading Plus is different from other firms

At Funded Trading Plus we used our funded trading accounts review to help create our business model. It is built from the ground up to be better than our competitors. Our business model is designed to benefit from finding and nurturing trading talent – that’s why we are the only funded trading firm that gives a $20,000 cash starting bonus to our successful traders. Learn more about how and why we work in this way here.

See our Compare forex and futures trade funding firms table here.

Your Turn

Please comment on this post, note anything you think this post is missing and we’ll update it. Here are some questions to help you:

Have you found other funded trading programs restrictive?

What do you dislike about funded trading programs?

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3 Responses

  1. Those are all valid points to consider when looking for a proprietary trading firm with which to do business with. Those things need to be researched and clarified before giving your money to any of them. Fortunately, there is now a significant number of competitors allowing for more flexible rules and an ability to choose who to do business with.

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