How To Get Funding as a Forex Trader
Regardless of whether you’re able to generate a 1% monthly return, or a 10% monthly return in the forex markets, having access to capital is a key to success in this industry. Getting funding for forex trading is becoming easier than ever before. Previously, it took connections, years of track record, and even face-to-face meetings to secure any kind of forex trading capital. These days, it’s a much easier process!
In this article, we cover exactly how you can obtain funding as a forex trader and rapidly scale your assets under management by leveraging the tools at your disposal.
In this article, you’ll learn:
- Your funding options as a forex trader.
- How to scale your assets under management.
- The pros and cons of becoming a funded forex trader.
Before we get into exactly how to get funding as a forex trader, we need to look at the challenge that forex traders face…
You’re reading this because you’re looking to become a funded forex trader. This alludes to the fact you have a lack of trading capital, thus hindering your potential progression within the industry. You aren’t alone in this challenge. In fact, one of the main challenges forex traders face is a lack of trading capital. Why is this such a challenge, you may be wondering? Well, forex trading is a game of percentages. It’s as difficult to make a 1% gain on a £100 account, as it is on a £100,000 account. This means that once you reach a level of profitability as a forex trader if you’re still trading low volumes of capital, you’re massively hindering your potential profits within the markets. Your 5% monthly return of £500 could be worth £50,000 to you, from the same output on your side. Having very little trading capital also forces traders to abandon their trading plans and gamble on their trading accounts as the money isn’t significant. This also holds traders back and costs many traders their dreams of becoming full-time forex traders. The issue lies then, in finding a way to be trading hundreds of thousands of dollars in trading capital, with no track record or formal experience in this industry.
Luckily, this is no longer an issue. Follow the steps below and find out exactly how you can overcome this challenge and become a funded trader…
Your Forex Funding Options
When it comes to increasing your assets under management, in all other industries, this would be done with funding rounds. The online forex space works differently. Below are your two options, with the pros and cons of each…
Option 1 – Private Investment
The traditional way to obtain funding for forex trading would be through private investment. Where does this come from?
- Family or friends.
- Business relationships.
- Small investment firms.
- Alternative prop trading firms.
I don’t know about you but I wouldn’t know where to start if I had to ask a business acquaintance or someone in my network for a large sum of money to invest in my forex trading journey. Even if you happen to know a few high-networth individuals, or a few firms whose doors you’re happy to knock on, you would need a minimum of 2 years’ track record to be able to prove your ability within the markets. That track record would need to be third-party audited, through MyFxBooks, KPMG, etc.
The benefit of seeking funding yourself would simply be that you’re able to dictate the rules. There would be less strict drawdown rules and potentially high-profit splits whilst working with a private investor. This, of course, takes some of the pressure off and allows you to focus on what you’re good at, the trading. However, there are many cons to seeking private investment. Firstly, it’s incredibly hard to find a high-networth individual that is willing to invest in your plan. Then, you need to have years of track record, which very few forex traders actually have due to changing strategies every 10 minutes. Thirdly, all of the legal and contract fees would be very expensive and potentially eat away at the first months of profit. Lastly, with private investment, you’re unlikely to see any scaling of the capital and the investor will most likely want to see their returns as quickly as possible to reduce the potential risks of doing business with you. This is not conducive to growing your trading portfolio.
This is where your second option is presented, the much better option, in my opinion.
Option 2 – Online Prop Firm Funding
The easiest and most effective way to scale your forex trading funds is by engaging an online prop firm.
What do online prop firms do?
Well, as an online prop firm ourselves, we can certainly answer this. We fund forex traders. At Lux Trading, we offer forex traders the ability to trade up to $10,000,000 of live capital, in exchange for a profit split. Of course, in order to obtain funding, we assess our traders’ capabilities in managing risk and drawdown by setting fixed criteria on the trading accounts. For example, a 4% daily drawdown limit is in place for all of our traders. If you’re unfamiliar with this industry or how prop firms work, this may sound a bit too good to be true! Keep reading below as we answer all of the most common questions we are asked when talking about prop firms…
How Do You Get Funded?
This question depends on the prop firm you’re looking to work with. For Lux Trading, we ask our traders to pass a challenge. This challenge has multiple possible resets, should you fail, and a modest profit target, maximum daily loss, and drawdown limit. Once this challenge is passed, we are able to see that you’re a profitable trader, able to manage risk and protect our trading capital. At this point, we would award you a funded trading account for you to start trading in the live markets. The previous evaluation account will be with demo funds.
How Do You Get Paid?
As a funded trader, you would be paid 75% of the profits you make each month. It’s your choice as to whether you withdraw these funds, or compound them. We always encourage our funded traders to withdraw profits.
How Do The Prop Firms Make Money?
This question varies from company to company, and prop firms make money in various ways. We have a profit split with our traders. This means, we provide them the trading capital and we receive 25% of the profits they generate, in return for us fronting the funds. Profit splits are where we generate revenue, hence why we love working with profitable traders. If you profit, so do we!
Are The Accounts Live Funds?
We only use live, real money-funded accounts for our traders. We are partnered with Global Prime and Audited by KPMG, for full transparency. You can read more about this, here.
Many prop firms in the industry offer funded demo accounts and operate a different business model. We prefer to use real capital!
How Much Trading Capital Could I Have?
Each firm sets a limit on the maximum trading capital. For us, our Elite Trading Club traders have access to up to $10,000,000 in forex trading capital. Obviously, no traders start with that much funding. At every profit milestone, we look to increase the funding our traders have access to.
What Are The Drawbacks Of Prop Firm Funding?
This question, like many others, depends on the prop firm you’re receiving a funded account from. Many prop firms like to pressurize traders with very short duration limits, in order to force mistakes. However, as Lux Trading is only making money from profitable traders, we are in the business of making it as easy as possible for our traders to succeed. For this reason, we offer resets, a risk desk, KPMG audits, Trading Central, and a personal mentor to meet with online, each week. For these reasons, I wouldn’t say there are any drawbacks of prop firm funding. You’ll be held accountable for your results, and risk management must be taken seriously, but if you’re serious about becoming a trader, this is a necessity, prop firm or not.
When Should You Become A Funded Trader?
Is it the right time in your trading career to get funded? As you’ve stumbled across this article, I’m assuming you think it is…
We have a lot of traders coming to us for funding whilst questioning if it’s the right time or too early into their trading journey. The answer is slightly vague, but I’ll explain. If you’ve reached a few months of profitable results in the markets, with a trading strategy, I would say it’s the perfect time to attempt funding. If you don’t yet trade with any kind of strategy and just throw trades around until something works, I would argue that more learning needs to be done before looking into taking on more capital.
Likewise, I don’t think it’s right to apply for funding if you’re within the first few months of your forex trading journey and aren’t looking profitable.
With that being said, the decision is ultimately yours, and obtaining a funded forex account does massively help traders grow, by holding them accountable, developing risk profiles, and building consistency within their trading strategies.
If you’re interested in becoming a funded trader, have a look at our offering!
Without forex trading funding, it’s incredibly hard to scale your earnings within the markets and reach any stage where you would be able to become a full time trader. You want to grow your assets under management as quickly as possible, whilst maintaining low levels of risk and exposure – this is what good forex trading is all about.
In this article, you’ve learned:
- Where to get forex funding
- What to avoid doing when obtaining funding
- The pros and cons of becoming a funded forex trader
- The time you should start looking for capital
Implementing these tips and becoming a funded trader will help ensure you’re able to maximize your earnings from the markets, without incurring more risk.
If you’re looking to understand more about how our funded forex accounts work, get in touch with our team at Lux Trading.