What is a Funded Trader Program – Professionalize Your Trading:
Funded trader programs provide opportunities for individuals to prove that they can consistently generate profits in the market while properly managing risk. If accomplished, the firm rewards them with a funded account – typically in the range of $25K-$150K+.
What’s great about funded trader programs is that they offer a chance for pretty much anybody to pursue trading at a professional level. It doesn’t matter what you look like or what your background is – all that matters is your ability to trade responsibly.
Basically, if you can pass an objective tryout with specific profit targets and rules, then you earn funding. From there, you can use the tens or hundreds of thousands of dollars you are funded with to generate substantial profits – possibly even a full-time income.
For individuals who don’t have the capital to fund their own trading account – or simply don’t want to risk their own money, funded trader programs present an amazing opportunity to potentially turn a passion for trading into a financially-meaningful endeavor.
The unfortunate reality is that many talented individuals simply don’t have the available cash to give trading a real shot. If you only have a few thousand dollars to work with, for example, even an incredible 100% yearly return won’t produce a worthwhile income.
But with a $50,000 account, that same 100% yearly return becomes a lot more interesting. The larger account size opens the door for turning trading into a career. With the small $3,000 account, it would take several years to even reach the $50,000 level.
Pros and Cons For Funded Trader Programs – Are They Worth Pursuing?
When you choose to pursue a funded trader program, there are certainly some trade-offs that need to be made.
First – in exchange for the funded account, you have to follow the rules put in place by the firm. These rules are typically related to risk management, like position size maximums and daily/weekly loss limits. If these rules are broken, you might lose funding.
While some people view such rules as restrictive, you have to understand that these rules are in place for a reason. What I’ve found is that many people who use funded trader programs actually welcome the rules for the structure and safety they provide.
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To a certain degree, it essentially takes the implementation of risk management out of the individual trader’s hands – which most people really struggle with. Having to create structure and follow self-imposed rules is a major reason why so many traders fail.
You also have to understand that the firms offering funding are running a business – and they’re essentially taking on all the risk involved with your actions. It’s their money at stake, so they have to have limits in place to endorse proper risk management.
Second – there will definitely be some sort of profit-split on the gains you capture within the funded account. The split is usually in the ballpark of 70/30 – meaning you keep 70% of your trading profits while the firm gets 30%. Some sort of profit-split is unavoidable.
No firm is going to fund you without the opportunity to share in your profits. This is their reward for the risk of funding you.
Top Rated Funded Trader Program – Topstep Trader:
There are a handful of funded trader programs currently available online, but Topstep is one with an incredible track record.
Showing consistent growth for roughly a decade, Topstep has thousands of funded Futures and Forex traders who have withdrawn millions in profits this year alone. 97% of funded traders say that the Topstep Trader experience has improved their trading.
Of course this doesn’t mean that Topstep is a great fit for everyone. There will always be individuals who complain about the costs associated with the Combine or the fact that there’s a profit-split. But this is how funded trader programs make money.
They’re not just going to test traders with absolutely nothing on the line and then fund them with multi-thousand dollar accounts without charging tryout fees or keeping a portion of funded account profits. They’d be taking on insane risk for no return.
Those who have a problem with the tryout fees should fully prepare themselves before diving in. In all reality, it shouldn’t take more than two or three months to hit the profit targets and get funded. If it takes longer than that, you’re probably just winging it.
Those who have an issue with the profit split can always avoid funded trader programs altogether and use their own capital instead. But since the typical new trader doesn’t have a large account, most would actually be better off with profit splits out of funded accounts.
For example, let’s say you’re a new trader with a $20,000 account. With a 100% return, you can make $20,000. But with a Topstep funded $50,000 account and 80/20 profit split, all you would need is a 50% return in order to make the same $20,000.
So Should You Try to Get Funded Through a Funded Trader Program or Not?
In my personal opinion, there aren’t really many instances where a top-rated funded trader program like Topstep wouldn’t be beneficial.
The only time when it wouldn’t serve much of a purpose is if you’re already a consistently profitable trader with plenty of your own capital to trade. But even then, funded trader programs can be preferable in order to risk firm capital instead of your own.
The unfortunate reality is that many new traders simply don’t have the funds necessary to make trading financially interesting – at least in the beginning. And even if they do, most traders don’t have the self-awareness and self-control to appropriately manage risk.
As a result, many hopeful traders either never really get started or quickly fail due to lack of discipline. But these are two critical areas where funded trader programs like Topstep stand out. They offer large funded accounts with risk management at the forefront.
Overall, funded trader programs provide an opportunity for virtually anyone to become a professional-level trader and earn a full-time income doing it – regardless of age, race, IQ, etc. As long as you manage risk and capture profits, you can earn funding.
Learn More in the Trading Success Framework Course
Written by Matt Thomas (@MattThomasTP)
Related Pages:
- What is Active Day Trading – Explained in Detail
- Topstep Trader Review – What Exactly is Topstep Trader?
- What is a Trading Guru – Real Educators vs. Marketers
- What is Training For Trading – Breakdown of Required Skills
- What is a Statistical Edge in Trading – Expected Value Explained
Hi Matt, Thanks for a super helpful post. I didn’t know funded trader programs existed and I appreciate the detail you’ve gone into in explaining how they work.
I completely understand the profit split if a company like Topstep is fronting the money to trade. The rules make just as much sense because I agree, it would make me more comfortable as a new trader knowing exactly what my parameters were.
I do have two questions
1. What is the upfront cost for a new trader to get started?
2. Do they have to be an experienced trader before they apply or do they get on the job training at Topstep?
Hi Lauren – great questions.
For Topstep specifically, the cost of the Combine (which is the tryout process in a simulated account) ranges from $125 to $375 per month depending on the market you choose to trade (Futures or Forex) and the starting account size you’re looking to earn. For example, trying out for a $50,000 futures account is $165 per month, a $100,000 account is $325 per month, and a $150,000 account is $375 per month. The profit targets, loss limits, and max position sizes also vary depending on the account size chosen. The cost of the Combine goes away once passed and a funded account is earned – which should only take a few months at the most if traders go in prepared.
There’s no experience required in order to start the Combine, but individuals without strong risk management skills and a legitimate edge probably won’t pass. The Combine – trading in a simulated account based on live market data – is definitely a great experience for new traders, but there are cheaper ways of demo trading for beginners who have a low chance of passing. Instead of paying $125 to $375 per month to demo trade, beginners can use TradingSim to practice for $25 to $50 per month instead. Both of these demo trading options are certainly safer and more cost-effective than jumping straight into the markets with thousands of dollars of your own money completed unprepared (which many people unfortunately do and end up losing it), but the Topstep Combine should only be pursued, in my opinion, once a trader is confident in his/her trading skills.
While Topstep does offer some great free resources for new traders to learn from (funded trader interviews, blog posts, podcast episodes, group coaching, and more) – there isn’t a specific course that they provide to help traders build a strong foundation. I personally think they should create one in order to help more traders get funded, but it’s not a small undertaking. In the meantime, I think individuals with limited trading experience should be focused on legitimate training first – through Thomas Kralow’s trading program, for example. Only after learning, acquiring skills, and developing their own personal trading algorithm (as well as the proper tools to tweak it over time) should traders pursue a program like Topstep.
Overall, Topstep provides an amazing opportunity for traders to earn large accounts to trade with, but beginners can’t just go in and “wing it” and expect to make ridiculous amounts of money. The Combine and funding process is for individuals who can prove they can manage risk and capture consistent profits. The Combine is just the start, so new traders should make sure they have the knowledge and skills necessary to continue growing their accounts once funded.
I was reading a bit about funded trader programs and opinions were generally positive. Also looking on your post it seems its great starting point for all beginners. It allows to limit risk, they offer support and active community and costs are acceptable for the opportunities they seem to offer. Looking forward to test them in practice.
I definitely agree that funded trader programs offer great opportunities – especially well-established ones like Topstep. The Topstep Trader Combine might cost a few hundred dollars per month, but that’s peanuts compared to blowing up your own one thousand, five thousand, or ten thousand dollar (or more) account by diving into the markets unprepared. If nothing else, it offers a great opportunity to test your abilities for capturing profits and managing risk in a simulated account based on live market data – for a reasonable fee.
I think funded trader programs are a great learning experience for new, intermediate, and even some advanced traders because of the risk management rules that they strictly enforce. There’s no specific course to help solidify each trader with a strong foundation (which is one of the only downsides to Topstep in my opinion), but it’s still an amazing platform for traders of all experience levels trying to professionalize their operations.