Guide to funded trader programmes. How the assessments work. The pros and cons of trading company funds. Is anyone successful long term? LeeLooTop Step Trader.

Funded trader programmes have exploded in popularity in the past 5 years. One of the pioneers was Top Step Trading, a company that was one of the first to offer amateur traders an assessment, in order to earn the opportunity to trade live in the stock market with company funds.

I have always been skeptical of these funded trader schemes, as they essentially make money from failed traders. Their main income is not derived from taking a share of trader profit. The business models works on the fact that the overwhelming majority will fail the assessment and keep paying monthly fees. In fact they are so confident that you will fail, many of these companies will now put you on a simulator if you pass the assessment. If you earn money on the simulator, they will pay you that money, so for the trader it seems like live trading. They don’t even bother to put you into the live market with company funds, because they know statistically you will blow the “live” account within a short period of time.

Having said all this, there are still major advantages to traders in using these funded programmes.

  • Your risk is a fixed monthly fee.
  • There is the possibility for unlimited earnings if you are successful.
  • You can feel the “pressure” of trading live money, without the substantial financial risk.

So, I do feel that these programmes are a good way to develop trading strategies, with minimal risk. However they are not necessarily the best way to earn a living if you have a proven system and want to trade in the most optimal way for you.

There are now many funded trading programmes available, and a huge differential in quality and service. the key things to watch out for is how these companies try and get you to pay more fees. Essentially the more you fail, the more they can charge you. Some traps to watch out for are:

  • They say (for example) “maximum 5 lots can be traded”. However they do not set any physical barrier to you trading more ots (which could be easily done if they wanted to). So you can accidentally trade more than 5 lots, for which they will immediately close your account as a fail, and charge you a restart fee.
  • Trailing drawdown. Most of these firms will have a trailing drawdown,. Which means your drawdown is always the same (or reduces in size) no matter how successful you were previously.
  • Trading times. Some do not allow trading during news announcements or after close of business for the day. If you do, you will fail the assessment, and have to pay fees again.

Every company will have different rules, and it is very important to check these before entering the assessment. Remember these firms want you to fail, so if you want to win the game, it is important to know how the rules are set beforehand.

So once the risks have been established, it is now time to turn these programmes to your advantage. They can be a good way to get into the stock market and really reduce risk. Some key guidlines of how to survive the assements, and funded trader stages

 

  • Always trade very low size compared to what is allowed. They deliberately give you high leverage, and small drawdown limits, so you blow your account quickly. You should never need to trade the full lot amount, unless your strategy has extremely tight stops. The smaller the size you trad the longer you will survive (no matter how tempting it is to trade big size).
  • Focus on the drawdown limits. Survival is dependent on having enough capital to trade. The capital you have to trade is equivalent to the size of your permitted drawdown. If you are having a bad run, reduce trading size, so you do not get closer to that drawdown limit.
  • Only enter the best trades into the assessment. It is always tempting to trade every opportunity you see. However it is better to sit in “simulator mode” on your trading platform, until you see a really good opportunity and then enter this into the assessment account. This way only your very best trades are being assessed, and all the rest is kept in your simulator.

 

When choosing a funded trader programme, I generally ignore all the flashy videos, training programmes, statistic services, and chat rooms. This is because I know these companies earn money form trader failures, so I am not interested in the add-on services they might offer. Really what I am looking for is the best value for money, and the most fair rules. This way I know that all that matters is my performance, and I don’t have to worry about ridiculous rules that are designed to make me fail.

One of the best I’ve found is LeeLoo trading and these are the key reasons why:

  1. Good target/Drawdown size ratio. The targets are not too huge comapred to the size of the allowable drawdown.Making hitting target more achievable.
  2. One step process. If you hit the target you are entered into thte funded trader programme
  3. Cheaper rest fee at $75 (most otheres charge $100)
  4. Reasonable subscription fees compared to others in the industry
  5. Many special offers and discounts available.
  6. Can trade during news hours.
  7. No lengthy scaling plan once successful. you can pretty much trade the full size from the assessment, straight away.

However there are some drawbacks:

  1. No other services included, it is simply the assessment
  2. Once successful their payout structure is staggered, so you can not withdraw all of your profit in month one
The member's area is very basic, but functional.

I have used pretty much every funded trader programme out their. Some of them are absolutely dreadful, and give you no hope for success. LeeLoo seems to be the most fair in terms of rules and cost, and gives the trader a better chance of success than most others.

About the author

Trading and Investment

Traded the markets for over 15 years, including Commodities, Bonds, Currencies, Equities, and Indices. I have also worked as a Chartered Financial Planner.
CeMAP, CeFA, DipFA, AdvDipFA, Ba(Hons) Economics, Chartered ALIBF

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