Most Funded trader programs are legitimate. Below, we will show you how to identify legitimate funded trader programs ensuring you don’t fall victim to scammers.
INTRODUCTION TO FUNDED TRADER PROGRAMS
Funded trader programs are an innovative way for traders to access capital to trade in the stock market without using their own money. They are usually connected to proprietary trading firms, which designed them to help talented traders with the funding they need for larger volumes of trades that may potentially provide them with bigger profits.
The funded trader program enables traders to trade stocks using the capital of a proprietary trading firm. In return, traders must share a portion of the profits earned. That way, the financial risk a trader faces is less because they don’t use their money to trade. In most cases, such programs will have an evaluation phase or “challenge” where participants prove their stock trading skills and follow rules on risk management.
LEGITIMATE FEATURES OF FUNDED TRADER PROGRAMS
Here are ways to tell whether a funded trader program is legitimate.
ACCESS TO CAPITAL
The legitimate funded trader programs are designed with generous capital for stock trading; this allows traders to take larger positions without exposing their capital to the markets. Several firms make accounts available, from tens of thousands to several millions of dollars, wherein traders can very easily capitalize on market opportunities.
PROFIT SHARING STRUCTURE
Most funded trader programs are based on profit sharing, and the trader retains a large percentage of the profits that they make. Common splits range from 70/30 to 90/10, with the trader taking the higher percentage. This arrangement encourages traders to perform well while benefiting the firm, too.
STRUCTURED EVALUATION PROCESS
The reputable firms have a step-by-step challenge or evaluation process that traders need to pass to get funded. In general, this would involve the evaluation of stock trading skills and/or adherence to the risk management rules. As a result, a one-step or two-step evaluation can ensure that only capable traders are funded.
Structured Evaluation Process
RISK MANAGEMENT GUIDELINES
Legitimate funded trader programs implement rigid risk management rules, including daily loss limits and maximum drawdown percentages. This is essential in terms of orderly trading discipline to protect the trader’s and firm’s capital.
EDUCATIONAL RESOURCES AND SUPPORT
Many genuine funded programs offer education, mentorship, and community support for traders to improve their skills. This access to senior traders, along with structured learning, will greatly enhance a trader’s probability of success in trading stocks.
Educational Resources and Support
FLEXIBLE TRADING TERMS
Most funded trader programs allow different trading styles and strategies, accommodating the different preferences of the traders. It can also mean the availability of multi-asset class access and trading platforms for the successful execution of a trader’s strategy.
TRANSPARENT FEE STRUCTURE
Some of the programs charge an initial fee to participate in the evaluation process. Reputable companies detail their costs and what traders should expect in terms of returns and the profit-sharing formula very well. Clear communication about the fees helps to build trust between the firm and its traders.
REPUTATION AND COMPLIANCE
Any funded trader program should have a good name amongst the trading fraternity. A trader should know the background of the firm, reviews, and compliance with regulatory standards before committing to any program. Firms recognized by any reputable financial publication or award winner may indicate higher legitimacy.
Reputation and Compliance
COMMON RED FLAGS TO WATCH OUT FOR
Although there are legitimate funded trader programs, this does not prevent scammers from posing as legit firms to swindle traders. Below are red flags that will inform you whether the funded trader program is a scam.
UNREALISTIC PROMISES OF HIGH RETURNS
Be wary of companies that promise unusually high returns for relatively low risk. If it sounds too good to be true, then it probably is. Financial markets are by nature, unpredictable and risky. No legitimate company would promise to generate consistent profits without mention of the possibility of a loss.
EXCESSIVE FEES OR HIDDEN COSTS
You should avoid programs that charge unusually high entry fees or subscription costs for which the costs are not relatively up-front. A legitimate firm should be open about all of the costs of their programs, and they should include things like evaluation and training fees.
UNCLEAR/CONFUSING CONTRACT TERMS
You can witness a lack of transparency through contracts that are either hard to understand or ambiguous. Legitimate companies will have clear-cut terms that describe the responsibilities and rights of the parties involved without any hidden clauses.
BAD ONLINE REVIEWS AND REPUTATION
A pattern of negative reviews or consistent complaints from former participants can give a significant red flag. Though every firm may get some criticism, an outpouring of negative feedback often indicates systemic problems within the firm. You might want to avoid such firms.
PRESSURE TO ACT QUICKLY
Be cautious about companies whose sales representatives employ high-pressure techniques, compelling you to register immediately because the offers are offered for a limited time. The pressure can be a way through which fraudsters discourage prospective clients from studying well before investing.
UNPROFESSIONALISM
A sign of no credibility could be unprofessional behavior in communications, website design, or overall presentation. A reputable firm should ensure professionalism not only through its activities but also its website or through contact with traders.
POOR CUSTOMER SERVICE
If the firm does not respond to inquiries or treats customers poorly, then that is an indication that traders’ interests are not a priority to them. A reputable firm will regard its clients and provide practical channels of help and support.
NO EVIDENCE OF SUCCESSFUL TRADERS
Be wary of companies that do not post successful traders or have testimonials from previous members/trainees. Although privacy is important, a legitimate firm should be able to share with prospective traders some success stories they have had. The lack of success stories whatsoever could also signal an untrustworthy program.
NONEXISTENT SOCIAL MEDIA PRESENCE
In the modern world, any serious firm maintains an active presence on social media. If a prop firm does not show up on popular sites such as YouTube or Instagram, that may be a signal of suspicious activity.
EXAMPLES OF LEGITIMATE STOCK PROP FIRMS
Legitimate stock prop firms offer legitimate funded trader programs. These stock prop firms exhibit all the characteristics of legitimate funded programs that we have mentioned above.
FTMO
FTMO is one of the most popular stock prop firms. The firm has a very robust reputation among traders. Traders who are interested in the firm can have access to accounts ranging from $10,000 to $200,000 with profit splits of up to 90 percent. Before you can access these accounts, you have to pass a two-phased evaluation. If you make it past the verification stage, the firm will refund your trial fee.
FTMO
The firm offers traders state-of-the-art trading platforms to ensure you get the most out of stock trading. Moreover, FTMO has numerous educational resources and support systems such as performance coaches, comprehensive trading tools, and community engagement. This shows the firm’s commitment to ensuring its traders are up to date with the best stock trading practices. Lastly, FTMO has a proven track record having paid over $130 million in profits to traders around the world.
TRADE THE POOL
TradeThePool is another renowned stock prop firm that offers traders legitimate funded programs. The firm’s main aim is to provide traders with funding to trade in the stock market. Like most other prop firms, a trader must pass an evaluation before being funded.
Trade the Pool
Trade the Pool has a one-step evaluation process. If you pass this phase you will have access to accounts of upto $160,000 with profit splits as high as 80 percent. Trade the pool has invested in trader education by offering coaching and access to educational services.
Trade the Pool
CONCLUSION
Legitimate funded trader programs do exist. The challenge is that there are scammers who try to portray them as legitimate proprietary firms. It is, therefore, your duty to do enough research into the stock prop firm you are interested in. This will ensure work with legitimate firms and get a fair chance to take your trading career to the next level with Funded trader programs. Join Trade the Pool or FTMO and get access to funding for your stock trading needs.
