- What are prop funds?
- How to get funded?
- Pros and cons of getting funded
- When are you going to become a funded trader?
What are prop funds?
I have already uploaded an entire blog post on prop funds, so you can check that out if you want to know about it in detail.
But in a nutshell, prop funds are basically companies that provide traders with the capital they need to trade. So, if you are looking to get some capital to trade, then prop funds are where you should look at.
The process of getting funded by these prop funds isn’t easy. You need to pay a registration fee to get on to their tests, if you pass you get funded, and if you fail, your registration fee is gone, and you’ll have to start all over again.
If you are someone that’s seriously looking to get funded by a prop fund then read ahead carefully and don’t miss anything.
How to get funded?
So if you go on to any prop fund’s website and look at their funding programs, then you’ll see that each of them has its own verification process.
Some might expect you to generate an x% as returns in n number of months, while some may have different requirements.
But these verification rounds can sometimes be difficult to crack, but it is not impossible.
The first thing that I’d say you do is to compare different prop funds, list out their costs, verification process, payout split, and capital they would give for funding.
Once you have these details laid out on one spreadsheet side by side, you’ll be able to understand which prop fund you should apply to.
I have seen traders that apply to different prop funds at the same time and go through each one’s verification process together. You can do this too if you don’t mind shelling out money for each prop fund’s registration.
But after you have decided which prop fund you’ll be applying to, you need to understand their verification process properly.
Many traders don’t really understand these processes in the beginning and as they are already into it, they lose out because they weren’t prepared for it.
I’ll tell you some insider information here, these verification processes focus a lot on risk management and the easiest way to fail them is to lose a lot, and boom, your chance is gone and you’ll have to try again later.
So, if you already have a strategy, you should most importantly know its max drawdown. Once you know that, you can then decide your position size that’ll be in tune with the prop fund’s risk limits.
For example, say that you trade a strategy, risk 2% in each trade, and from backtesting, you know that the max drawdown that you can face with this strategy is say 20%.
Now, many prop funds will have strict rules according to which, you cannot have a drawdown of more than 10%, and if you do, you will fail the process.
So here what you would do is that you’d risk only 1% in each trade and with that, your max drawdown would be 10% only which is within the rules.
This is just one rule for which you’ll need to have a plan and make some changes, there are other rules too that you’ll need to take into consideration.
I had a student of mine that passed the FTMO process and got funded too, but he did not understand one rule that FTMO had, and unknowingly, he violated it, and he lost his account.
That’s why I’d say that, take your time, figure things out properly, and then only get into it.
Pros and cons of getting funded
You might see these funding programs as all pros only as they’re giving you huge capital to trade and the risk is theirs, but no, there are some cons of becoming a funded trader too and I’ll get to that later on.
One very underrated pro of getting funded is the verification process that traders need to pass. It teaches them a lot about risk management and protecting capital.
Many traders think that it’s not their capital and they can risk big to earn big, but that’s the wrong mindset to have. Think like it’s your own capital and that mindset change will make the journey better for you.
Now, these verification processes can be cons too as many traders get discouraged when they are unable to clear them.
If you read about prop funds on the internet, you’ll see that many people say negative stuff about these verification processes and they say that these prop funds make it so that traders only fail.
But the reality is that these prop funds run a business, and they need to reduce their risk. And it is not that traders haven’t passed these processes, many traders have, and the only difference between those that have passed and those that have failed is that the former had a plan and executed it properly.
So these were the pros and cons in brief of getting funded by a prop fund.
All of this also depends on how you look at it and how you approach it. If you approach it negatively then everything will look like cons, and if you approach it positively then everything will seem like pros only.
When are you going to become a funded trader?
So, when are you going to start your funded trader journey, and are you ready for all that you have to go through? Do let me know if you want any help.
I have helped students achieve their goal of getting big capital to trade with and a couple of them are still going strong.
Share this blog post with others and let them also know how to go through the funding process and trade with a fund’s money.
Feel free to reach out to me in the comments section below and I’ll make sure to get back to you at the earliest.