The following post was authored by Michael Buchbinder, a member of Prop Traders Club, as well as the co-founder of Tradiac and a partner at Scandinavian Markets.
In this article, we will look at the risks and rewards of trading your capital vs participating in a funded trader program. The concepts are simple but very powerful when you put numbers into the equation.
Limiting your downside risk and maximizing your upside risk and the effects on your portfolio from taking risk.
Let’s say you have a portfolio of $500,000 that you have saved up through a lifetime of hard work and being responsible. You decide to begin trading in the markets with your own trading account and you put in $100,000. Whatever money you put into your trading account is capital that is at risk. As an example, if you were to experience a loss of $100,000 in your trading account that would be 20% of your overall portfolio that you just lost. How long did it take you to make that $100,000 in savings? Probably a respectable amount of time. That kind of loss to your wealth really hurts.
Now let’s examine trading $100,000 via Tradiac. To purchase a $100,000 account with a 10% max drawdown and a 90% profit split would only cost you $950. That is only 0.0019% of your portfolio that you just put at risk. Less than 1% of your wealth is at risk to trade $100,000.
If you make $20,000 on your live account, you can keep all of that. However, if you make $20,000 with a Tradiac funded trader account, you get to keep 90% which is $18,000. But the risk: reward of your total portfolio is much more in your favor with a funded account $100,000 (at risk) : $20,000 (reward) which is a risk factor of 5. Versus $950 (at risk) vs $18,000 (reward) which is a risk factor of 0.05. That means trading with a funded trader account is 100 times less risky than risking your own capital.
Making $20,000 on a $100,000 account is 20%. But making $18,000 on a $950 at risk is 1,894% return on your capital. I think you can see how the numbers are starting to make sense and why more and more people are choosing to opt in for a funded account.
Risk of ruin.
The risk of ruin is the probability that an individual will lose substantial amounts of money through trading to the point where it is no longer possible to recover the losses or continue (according to Investopedia).
So this basically means, how likely are we to recover from a substantial loss to our portfolio.
This takes into effect your win / loss % rates, average profits, max drawdown, risk per trade.
Here is a great link to learn more: https://tradingstrategyguides.com/risk-of-ruin-calculator/ (The calculator is available below.)
When you use a prop trading account, the only amount of money at risk is your assessment fee.
With Tradiac, we have different tracks with different daily and max drawdowns that allow you to trade your strategy freely.
Tracks:
Tradiac – Max DD and Profit Target = 10%
Max daily trailing DD = 5%
Brainiac – Max DD and Profit Target = 20%
Max daily trailing DD = 10%
Maniac – Max DD and Profit Target = 30%
Max daily trailing DD = 15%
Each one has 90% profit share and you can choose to start with $10,000 / $20,000 / $50,000 or $100,000
With no time limits, minimum/maximum trades or trading days.
Examining returns on a modest $3k investment vs a funded account.
The hardest part for any trader is getting access to more capital. The average retail trader has a trading account between $3,000 – $5,000.
Making 20% on $3,000 is about $600 in profits. How long did it take you to make that money? Probably a while. And how much risk did you take to make it?
Whereas for $950, 1/3 of the $3,000 you can access $100,000 with Tradiac and making 20% is $20,000. Keeping 90% is $18,000. That is 1900% vs 20%.
Let the numbers do the talking. Ditch your trading account and try a funded trader account with www.tradiac.com. Ask us any questions on our live chat or join our growing Discord community.
Next time, I’ll discuss how we have the best scaling programs to $1,000,000 and our redemption program that lets you keep your progress instead of starting from the beginning.
Disclaimer: This article is for information purposes only. Before purchasing an assessment make sure you have the risk capital to do so. All trading is risky and proper due diligence should be done before getting involved.
