Best 8 Ways To Get Funding For Forex Trading? Personal or Prop Firms?

Looking for how to get funding for forex trading? In my previous post 9 Key Forex Trading Factors That Will Determine Your Initial Capital, there are several factors that you will need to consider and determine the size of your trading capital.

Now, to answer the question most new forex traders face and sometimes faced by experienced traders “Where can I get funds to trade”. From the previous post, we can conclude that you can start your trade journey with as low as $100 depending on your broker, strategies, and goal.

In this article, I will be explaining 8 several ways you can explore to acquire the necessary capital to start forex trading.

Personal Savings

This is by far the most common source of capital for new forex traders. However, I will advise before you start trading from your personal savings, you should have at least 6 months – 1 year of living expenses saved up before you start trading.

Pros

• The reason this method is common and recommended is due to the fact that it does not come with interest or repayment obligation
• You actually trade at your own pace; since there is usually no pressure to make a profit and your losses usually serve as a lesson to develop yourself
• 100% of profits made are yours, you do not have to share your profit
• Initial capital can be withdrawn back into your savings account while you trade with your profits.

Cons

• The biggest disadvantage is access to low capital since most people have less to nothing in their savings
• Easy to run out of your savings if you do not learn risk management and know when to stop or have a break

Loans

This is one of the not recommended sources of capital. Often times traders rely on capital from bank loans, lines of credit, and credit cards. This method is often used by experienced traders especially when they experience drawdown and needs a buffer to stay in a trade they believe might turn around.

Pros

• Readily available capital from a reliable source of capital

Cons

• You are obliged to pay back the loans with interest which might lead to unnecessary pressure.
• It is crucial to keep in mind that using this particular funding method could exert unnecessary pressure, which may negatively impact your decision-making ability and result in financial losses in your trading choices.
• More losses mean you get into more debt and the circle continues

Trading Contests

Brokers often create trading contests to encourage forex traders to trade more, work on their strategies and risk management, and at the end of the contest reward the top traders with more capital or money.

Pro

• All you need is to adhere to the rules of the contest, which are often less stringent
• Access to more capital while trading
• Profits made during the contest period are often yours. It is important to read your broker’s policies and regulations before joining any contest

Cons

• There are no cons, since the initial capital is yours, and you earn points just for trading normally as you would. However, it is important not to give yourself unrealistic targets due to the fact you want to win the contest, this could set you back and lead to the loss of your own capital. Traders should be aware that trading contests are highly competitive, and winning is not guaranteed

Family and Friends

This is a tough one, whatever you do, don’t borrow your family and friends’ last money or savings meant for upcoming events. If you have wealthy friends or family members, you can explain to them what you are doing and the risks involved. It is important to have a trading plan and your track record handy while presenting your proposal for capital.

Pros

• Cost nothing, if they believe in you they will help you out
• You could in fact get potential useful advice from them
• Does not need a long track record but winning their trust

Cons

• Trust could easily be lost if you lose their money
• Do not borrow large sums of money, keep it small and reasonable. Borrow only money you can pay back over a period of 1 year.

Forex Trading Signals

This is a method used by experienced traders with positive track records to get more capital. Here all you need to do is to send our trade signals to your subscribed clients or base, and they enter the trades. This could be done through emails, telegram, discord, or other messaging apps. A typical trade signal cost $50 – $150 per month, if you have a total of 100 clients you could earn $5,000 – $15,000 per month.

Pros

• Easy to set up
• Does not need a lot of work to gain clients as long as you have a track record of your previous analysis, strategies, and results
• Stable source of capital

Cons

• Most signal subscriber does not follow the rule. You could send a signal that requires a 0.10 lot for a $1,000 account. However, most of the subscribers with $100 could enter the trade with 0.10 rather than reduce the lot size to 0.01.
• Since most subscriber does not follow the rule, they ended up blowing up their account and this leads to a negative feedback
• Subscribers expect you to provide signals even when there is no movement in the market
• Subscribers expect you to be right 100% of the time, which is impossible since there are several factors that determine price movement in the market

Check out how to get FREE 1 month access to Forex Signal Group on Telegram Here

Copy Trading

Several brokers provide a feature where you can register to be a Copy Trader. Your account is linked to a copy account software that will replicate your trades to any other member that subscribes to you. This is a different version of the forex trading signal, the only difference is you do not actually send out a signal, but subscribers copy your trades and you earn commission on their profits.

You will be competing against thousands of traders all trying to climb up the leaderboard. I have nothing against the competition, but sadly, the only way to rise to the top of the rankings on these websites (and get people to copy your trades) is to use excessive risks. What you see on the copy-trading websites is that the lead copy traders change almost on a monthly basis.

Pros

• You earn a commission on all the profits made through copy trade
• You do not share any losses made on any transaction copied from you, therefore you are not liable for any losses incurred.
• If you have a good track record, you are likely to earn more money even than what you trade
• You can build your own brand and reputation online

Cons

• You need a proven record to use this service from your broker.
• Since this is a broker in-house feature, other subscribers who can see your track record will only subscribe based on your winning rate.
• Depending on the country you reside in, Copy-trading might require you to be regulated as a money manager.

MAM Accounts

The Multi-Account Manager (MAM) is a service provided by brokers that allows customers to authorize someone to make trades on their accounts. By consolidating the funds from multiple clients into a single MAM account, the trading process becomes simpler and more efficient. This service is ideal for serious traders who deal with large capital amounts, often reaching several million dollars, which can lead to significant six-figure earnings. Typically, MAM traders charge a performance fee of approximately 20% and a small spread markup of 1-2 pips to cover trading expenses.

Pros

• With this strategy, you can easily achieve a stable and consistent monthly income of five figures by scaling up quickly.
• Additionally, you can trade on a single account without any concerns about using copy trading software.
• Best of all, there’s no need to pay for any copy trading software.

Cons

• Requires a track record of at least 12 months on a minimum $10,000 account.
• Some brokers may ask you to get at least 5 clients with $10,000 each before they open a MAM account.
• Depending on the country you reside in, MAM accounts might require you to be regulated as a money manager.

Online Prop Firms or Funding Firms

Online proprietary trading firms, also known as online prop firms or remote prop firms, are companies that allow traders to engage in proprietary trading remotely through online platforms. These firms provide traders with the opportunity to access capital, trading tools, and infrastructure to execute trades in various financial markets.

Online prop firms typically have a structured evaluation process to assess the trading skills and potential profitability of prospective traders. Once accepted, traders gain access to the firm’s trading accounts and platforms, often with the ability to trade multiple asset classes such as stocks, forex, commodities, or options.

Online prop firms include the provision of capital, which allows traders to trade with larger positions and potentially generate higher profits. They also offer access to advanced trading technologies, research resources, risk management tools, and support from experienced professionals.

In return for the capital and resources provided, online prop firms require traders to share a portion of their trading profits, often in the form of profit splits or performance fees. Traders are typically subject to certain risk management guidelines and may have specific profit targets to meet to maintain their relationship with the firm.

Pros

• Inexpensive to set up (however require a refundable evaluation fee, if you pass the evaluation)
• No monthly cost
• You have access to large capital based on your scaling plan
• You can trade with multiple firms at the same time
• If you fail the evaluation process, you can always try again
• Trade remotely from any part of the world

Cons

• Even if you are an experienced trader, you are required to go through the evaluation process
• The criteria to pass are usually strict.
• Restrictions on trades are often placed i.e. low-risk level
• Restriction so some trades i.e. indices and commodities
• Some firms are often using shady practices like wide spreads to get traders to fail the challenge so they can pay more evaluation fees
• Most firms are not regulated

TO SUM UP –

Getting funding as a trader has become more accessible than ever before. However, the question remains – do you possess the necessary skills? Displaying disciplined trading techniques and achieving exceptional returns will allow you to attract capital from any of the 8 available sources.