Why consider a Trader Evaluation & Funding provider?
The most important factors to success as a trader are consistency and discipline. With the introduction of Micro E-mini futures, a trader can open an account with a reputable futures broker with a $100, receive a free trading platform and day trade a single contract with $40 margin. It is easy for an aspiring trader to open an account with limited funds, trade without consistency and discipline and blow up the account. It is then a matter of time until they run out of money or experience enough pain to develop their skills.
Trader Evaluation & Funding providers can be a way to enforce this discipline. They operate evaluation schemes with enforced rules. If you are successful in passing their evaluation, they will provide a funded account (this may be a live or a simulated account) which will typically have a revenue share element. The business model is smart. More traders will fail than pass and failing traders fund the risk of successful traders. Successful traders are building their funded account equity through their trading so the provider’s risk is ultimately limited.
The benefit for a new trader that has never been exposed to a professional trading environment is that you have an external supervisor that is enforcing rules. If you break a rule, you fail the evaluation and either stop or pay to reset the evaluation. The financial pain of paying for an evaluation reset should be lower than the financial pain of blowing up your own futures account. We recommend Trader Evaluation & Funding providers in our coaching for traders that are struggling with discipline and have a lack of consistency. We also recommend that they put a $100 bill (or €100 or £50 note) under their monitor. If they break a rule and reset they must tear this in half to experience real pain rather than a reset appearing on their credit card bill. The torn bill remains under their monitor until they pass or break a rule requiring another reset. If they need to reset again, they need to strongly consider what is causing their lack of discipline – it has nothing to do with trading – it is generally a desire to make money quickly rather than a desire to become a good and consistent trader.
For experienced traders, Trader Evaluation & Funding providers can be an efficient way to build equity with which to fund a larger trading account. Using the smallest evaluation programs (typically $100-$150 per month) with parameters that require 15 days’ trading with up to 3 contracts to generate between $1500 and $2000 P&L it is very feasible to use order flow to trade with a disciplined and low frequency approach and a high success rate to generate $100-$300 per day during the evaluation. This enables a funded account from the provider which can be traded in the same way. Trading in this way ($100-$300 per day with minimal trades) means that within 2-3 months, the trader has the potential to generate around $5000 with which they can open their own account and apply the same trading methods, hopefully with an embedded disciplined and consistent approach to trading.
Another approach for disciplined traders is to open a small (c. $500) account and trade a single contract of Micro E-mini futures using the same disciplined approach as used to pass an Evaluation Program. For every incremental few hundred dollars generated, an additional contract can be traded using the same methods. This also allows account equity to be built and the trader can then switch to the regular size E-mini contract with no change in methods.
Any of these approaches will protect a trader from burning their savings while they learn. Ultimately the right approach depends upon the individual’s self-discipline and their ability to learn from failure.
We are happy to recommend these Trader Evaluation & Funding providers – we do as part of our client coaching! We have experienced both and regard each as fair and reputable. By clicking the links below you may receive a discount on their regular funding program packages through our referral.
TopstepTrader offers Trader Evaluation & Funding programs starting at $150/month. Revenue share is 80% with the first $5000 paid at 100%. The smallest evaluation program requires a minimum of 15 days of trading in two stages. A minimum 5-day stage followed by a minimum 10-day stage to generate $2000 in each stage using up to 3 contracts.Learn More…