Basic Evaluation Parameters of Funded Trader Programs

Evaluation Parameters For Funded Trader Programs

Depending on how you evaluate funded trader programs, there are several important parameters that you should not overlook. These include account size, leverage, payout split, minimum trading days, maximum drawdown, and profit targets just to name a few. To draw a solid conclusion if the program is right for you, I would strongly advise you to read the fine print and because the devil is usually in the details.

In this article we will cover the most common parameters that funded traders will see when shopping for a funded trader program. Over time, we will add more and more of these parameters.

Leverage

What's leverage? Leverage is using a small amount of your money to gain control over a larger sum. You typically get the funds from your broker. Margin trading is another term for leverage. Be sure to know the maximum leverage you can use before opening an account with a broker. The higher the ratio, the greater your potential profit or loss. Brokers offer the most common ratios: 10:1, 50:1, 100:1, 200:1, and 400:1.

Before you trade, determine how much leverage you will need. For example, it might be tempting to trade larger if you've had a lot of profitable trades. If the trade goes well, doubling your risk on a single occasion might benefit a trader. If you do it wrong, however, you could lose a lot more than you would normally. Your risk management strategy will help you limit the risks of trading.

It's simple math. It is simple math. If you invest $ 1000 and your leverage is 1:50, then you have $ 50,000. Leverage is a great way to accelerate your profits if everything goes according to plan. Keep in mind, however, that leverage can accelerate potential losses and gains. Therefore, we recommend that beginner traders use leverage cautiously, as reckless usage can quickly result in an empty trading account.

Leverage is a popular term in Forex. Traders that use leverage properly when trading in Forex markets can make a lot of money without risking their own, but also lose a lot due to how quickly those margin calls can hit. What's leverage? Leverage is using a small amount of your money to gain control over a larger sum. You typically get the funds from your broker. Margin trading is another term for leverage.

Be sure to know the maximum leverage you can use before opening an account with a broker. The higher the ratio, the greater your potential profit or loss. Brokers offer the most common ratios: 10:1, 50:1, 100:1, 200:1, and 400:1. Before you trade, determine how much leverage you will need. For example, it might be tempting to trade larger if you've had a lot of profitable trades.

If the trade goes well, doubling your risk on a single occasion might benefit a trader. If you do it wrong, however, you could lose a lot more than you would normally. Your risk management strategy will help you limit the risks of trading.

Account Size

Unlike traditional trading platforms, funded trading programs allow you to trade with borrowed money and benefit from the profits. As a result, funded trading programs are a good fit for traders seeking to generate an income but need more capital to do so. They are also useful for experienced traders looking for a crash course in capital management.

The best-funded trading programs are not all created equal. Some companies offer a single-step funding process, while others require you go through an extensive evaluation process to qualify for an account. Some of the more notable funded trading programs for Futures trading are: Elite Trader Funding, UProfit, Bulenox, Apex Trader Funding, and Earn2Trade just to name a few. For Forex you could go with: Funded Trading Plus, My Forex Funds, Fidelcrest or Surge Trader.

Minimum Trading Days

To evaluate your strategy, consistency, and risk profile, prop firms usually have set a minimum trading time. According to the CME, a trading day runs from 5:00 PM CT (market opening) to 3:10 PM CT the following day (market close).

Funded Trader Programs need to be able to evaluate your consistency as well as your results. Therefore, trades must be at least ten days per month (lots of times they don't need to be consecutive). Take the time necessary to reach your account goal. Your monthly subscription is valid for a maximum of 30 trading days. After that, it will remain active until you cancel or move to Live.

What happens if You don't reach the profit target in less than ten days? Trades should be continued until at least 10 trading days have passed, even if you have already reached your target. Once you reach your goal and have traded the minimum number of days (10), contact the prop firm to initiate the review of your account.

Maximum Drawdown

Maximum drawdown is a measure of drawing down. It looks for the maximum movement from a high to a low point before reaching a new peak. It is important to remember that MDD only measures the loss of the largest amount. It needs to take into account the frequency of large losses. MDD measures the greatest drawdown and does not reflect the time it took for an investor to recover or whether the investment recovered.

Maximum drawdown (MDD), an indicator that measures the relative riskiness between stock screening strategies, is used to evaluate their relative riskiness. It focuses on capital preservation which is a major concern for most investors. Two screening strategies may have further outperformance, tracking errors, and volatility. However, their maximum drawdowns can be quite different from the benchmark.

This shows that investment losses were minimal, so a low maximum drawdown is preferable. The maximum drawdown for an investment without lost money would be zero. The maximum possible drawdown is -100%. This would mean that the investment is worthless.

Profit Targets

The profit goal is the profit target for the current stage. Profit is the total of all realized and unrealized positions, including swap charges and commission. Once the target has been met, traders are asked to close all trades and inform the fund. 

A lot of the profit target for the first stage of funded trading programs is 6-7% for low-risk programs and 12% for aggressive programs. After that, the profit target for all stages is 10% for low-risk programs and 25% for aggressive programs.

At various points in the investment period, profit targets can be set and re-evaluated. For example, a trade can be established to establish an initial profit target. This can be done using various techniques, including technical analysis of financial statements, fundamental analysis, and heuristics, such as after a 10% increase or after a certain dollar point.

A conditional order, such as a limit, can be used by an investor to establish a profit target. This is after they have identified certain forward-looking projections. Many investors/traders enjoy setting profit targets. This is because they want to plan for when new information or trades are made.

Profit targets are a great way to reduce the risk associated with high-risk investments. Often, high-risk investments require regular due diligence. However, investors can cash in on potential losses by following a profit target strategy and identifying it.

Payout Split

The deal with the prop firm involves you bringing the trading and them bringing all the capital. Prop firms take the full risk for trading losses, and in return they expect you to share the profits. There are many different profit sharing set ups. Some will give you 80% of your earnings and take 20%, while others will give you only 50%.

Then you have other funded trader programs that give you the full 100% of the profits for the first $10K-$20K to spice things up. Keep in mind that you will still need to read the small print, because a lot of times these promises come with a little note. You will not be able to withdraw your 100% of earnings until you have spent a few payout cycles with the company.