Ways a Funded Trading Account Can Help You Reduce Your Risks
Getting your hands on a funded trading account is the most accessible way to becoming a professional trader and typically more affordable than opening up a trading account independently. Programs like Earn2Trade’s Gauntlet™ Mini can guarantee the funding you need if you can show off what you can do. It also provides a valuable learning experience along the way. Moreover, the test comes with various perks, including live data for trading simulator accounts, access to professional trading platforms, a flexible schedule, the highest rated customer support in the industry, and more.
Still not sure whether a funded trading account is the right choice for you? Let’s look at three ways how becoming a funded trader can help reduce the risks you take in your day-to-day trading.
Reduces the Capital You Are Personally Risking
Funded trading accounts give you the rare opportunity to trade with someone else’s money while keeping most of the profits for yourself.
After completing Earn2Trade’s evaluation program and receiving the offer to become a funded trade, you will be able to enjoy a profit share split of 80/20, where you will keep 80% of the profits you make. Earn2Trade’s funding offer is one of the better ones on the market since some funded trader companies can keep up to 50% of what you earn.
For example, with the Gauntlet Mini™ program, you will use virtual capital to ease your entrance cost into the futures market. Once you pass the exam and receive a funded trading offer from Earn2Trade’s partner prop trading firm, you will get the chance to trade without risking any personal capital. The prop firm bears the entire risk of potential losses, while you have the comfort of retaining a significant portion of your profits.
Paired with the free educational material they offer during your subscription makes this evaluation a convenient opportunity for everyone who has the skill but lacks the capital to make it in futures trading.
Less Psychological Pressure
While trading may be a viable career for many people, it can be relatively risky and stressful. The pressure associated with risking your capital, pursuing profit targets, or the fear of missing out on a tempting trading opportunity often take their toll on novice traders.
However, being a successful trader isn’t just about having a hunter’s mindset of chasing down each opportunity to make money that comes your way. It’s just the opposite. The traders with a good sense for picking the right time and asset are usually the most successful at trading. Alternatively, it’s those that stick to their strategy and don’t get carried away by tempting opportunities outside of the plan.
Funded trading account programs like the Gauntlet Mini™ give you the chance to experience exactly that – to have the comfort of trading without feeling constant psychological pressure. Earn2Trade’s team believes that a trader is at his best when focused, and psychological pressure is the most fierce opposition to this.
They allow you to focus entirely on your strategy. Furthermore, Earn2Trade gives you a big enough trading account to avoid making you feel pressured into overtrading and pursuing gigantic returns to hit profit targets. The starting account sizes are enough to help you apply a steady-performing trading strategy per your risk profile while also avoiding making you feel stressed about losing too much.
Larger Accounts Give Traders More Options
A significant benefit of funded trader programs is that they allow you to trade with substantial amounts of virtual capital. The Gauntlet Mini™, for example, comes in several different account sizes. The smallest option is the $25,000 account balance, and it’s suitable for the more conservative traders or small-scale market participants. However, there are several other account options, up to $150,000. It is an excellent opportunity for more aggressive or sophisticated traders.
Among the advantages of Earn2Trade’s larger accounts is that they give you the freedom to better hedge and diversify your trades. For example, you can easily apply several spread trading strategies on various instruments with the flexibility that smaller accounts often lack. You can buy and sell instruments as a unit or take larger positions in individual trades to expand the scope of your strategy without worrying as much about the capital at stake.
Successful traders will often advocate the so-called 1% rule. The rule states that you should avoid risking more than 1% of your total trading balance on a single position. For example, if you have a $25,000 account, the maximum you can risk on a single trade is $250. On the other hand, if you go with the account option with $150,000 virtual capital, you can risk up to $1,500 on each trade.
The 1% rule puts the difference between the smaller and bigger trading accounts into perspective. For example, you can place more contracts on any one position with the larger accounts.
Following Rules Set by a Prop Trading Firm Will Make You a Better Trader
Funded trader programs have one primary goal – to prepare you in the best possible way for when you enter the market and start trading with real money. Aside from the trading fundamentals and advanced strategies you might feel are necessary from the get-go, the test will help you build up your confidence and. Most importantly, it will teach you discipline.
That last benefit, in particular, will significantly contribute to your trading success. Even so, it will still depend on your ability to control your emotion. Funded trader programs can set the foundation for becoming more disciplined. The way they do that is through a set of different rules and requirements. These include developing a trading plan, trading with consistency, aiming for a specific profit target, staying afloat by avoiding loss limits specific for your account, and more.
Outlining a specific trading plan will help better evaluate your trading profile and strategy. Furthermore, it helps you build up your self-discipline and prepare when you start trading in the real world, where the losses aren’t only on paper.
On the other hand, the maximum drawdown requirement serves as a reminder that you prioritize minimizing your potential losses before maximizing your returns. For example, let’s say the maximum drawdown on your account is 10%.
If your losses exceed that limit, your account is terminated. This limit aims to help keep traders on their toes and prioritize their risk management strategy. If you manage to follow the 10% drawdown rule, you will be well-prepared for trading in the real world. On the other hand, if you find it challenging to keep your losses below that threshold, then you will know that it would be better to rethink the risk exposure of your current trading strategy. In the end, if something doesn’t work with paper trading, it surely won’t start working in the live markets.
Thanks to rules like these, Earn2Trade will teach you how to avoid doing severe damage to your trading account with a single trade. It’s the leading and most important principle to follow if you want to become a successful trader.
Common Risk Management Rules for Funded Traders
Proper risk management is one of the essential skills Earn2Trade’s funded trader programs will teach you. By getting a clear grasp of the necessary tools and rules you need to navigate futures trading successfully, you will be able to build a better-performing and more resilient trading strategy.
For example, one of the critical things you would have to consider when designing your trading strategy is the importance of the trailing drawdown. It’s a mechanism pegged to your positive account performance. It tracks how you perform in terms of your highest balance. For example, if you increase your balance by $10, your trailing drawdown will also move up by $10. Think of it as a type of stop-loss. The idea of a trailing drawdown is to motivate you to trade responsibly and protect your virtual capital. One of the best practices to avoid breaking the rule is using take-profit orders.
Another equally important rule is the daily loss limit. Daily losses are calculated based on the daily P&L of your account. Think of the daily loss limit as a safety net that protects your account every day and helps you remain on track to your profit goals without risking too much of the capital in your account.
There are also additional rules like the maximum contract limits or not trading outside of market hours. Finally, the requirement to maintain consistency helps put you in a frame of mind where you don’t risk everything on one or two good trades.
Conclusion
Funded trader programs come in all shapes. They are targeted mainly at mid-level traders with some experience. These are generally individuals fascinated by the financial markets and the drive to succeed yet can’t meet the high minimum capital requirement. Alternatively, it’s for people who’d instead enjoy the benefits of a large trading account sooner rather than later. Check out what Earn2Trade has to offer.
The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.
