Following our story earlier this week that a new proprietary (prop) trading firm called Tradiac was being launched, FNG received quite a number of inquiries as to what prop trading / funded trader firms do, how they fit in to the overall online trading landscape, and how Tradiac was aiming to be different.

So we thought we would go to the source, and speak with Scandinavian Capital Markets Managing Partner and Tradiac co-founder Michael Buchbinder. He was kind enough to provide us and our readers with the following guest editorial on the topic.

In the rapidly evolving world of trading, access to capital and risk management are two critical factors that often determine a trader’s success. Traditionally, proprietary trading firms have required traders to deposit substantial amounts of capital, often ranging from $25,000 to $250,000, as a security deposit. While this model provides traders with access to larger amounts of capital, it also exposes them to significant financial risk, as any trading losses are deducted from the trader’s deposited capital.

However, the landscape of the trading industry is changing, and a new model is emerging that offers a more accessible and less risky alternative: the funded trader program. This model, exemplified by firms like Tradiac, provides successful individual traders with access to larger amounts of capital without risking their own money.

A New Approach to Trading

The funded trader program model is a significant departure from traditional prop firm models. It requires a much lower cost of entry, making it accessible to a wider range of traders. Traders are given access to the firm’s capital, allowing them to make larger trades and potentially earn more profits without the risk of losing their personal funds (minus their assessment fee).

The process clients experience with most firms is the assessment phase. There they are given a demo account and asked to hit a certain profit target while adhering to certain risk management criteria. If and when they hit those targets they are then moved to a funded account where they are eligible to earn a portion of any profits they are able to generate. As they hit certain targets they are awarded more funds to trade as well, which is known as scaling your account in the industry.

One of the unique features of this model is the introduction of redemption tests. Unlike other programs where risk management failures often lead to instant disqualification, firms offering funded trader programs provide traders with the opportunity to retain their cooperation after passing a performance review. This innovative approach allows traders to return to trading at their previous successful funding level and continue scaling their account up, providing a safety net that is often missing in traditional trading programs.

The Power of Partnership

The funded trader program model also benefits from strategic partnerships. For instance, a partnership with a hedge fund ensures that the trading firm is well-capitalized, providing the financial backing necessary to fund its clients’ trading activities and pay out profits to its traders. This financial strength instills peace of mind and confidence among traders, knowing that their trades will be executed and their profits will be paid out promptly and reliably.

Catering to Different Risk Profiles

Another innovation in the funded trader program model with Tradiac is the creation of different trading tracks for different risk profiles. This approach allows for more flexibility and personalization, catering to the individual needs and risk tolerance of each trader. It contrasts with traditional models that often squeeze all traders into one risk profile, offering a more tailored and trader-centric approach.

Looking Ahead

The funded trader program model represents a significant shift in the trading industry, offering a more accessible and less risky alternative to traditional prop firm models. By providing access to more capital, reducing personal financial risk, and offering redemption opportunities for traders who encounter risk management failures, this model is poised to reshape the industry. If the typical deposit in retail FX is 2500 Euro and a client is able to make 50% on their funds, they can make 1250 Euro on their deposit. With a funded trader program for less than 1000 Euro a trader can get access to $100,000. If they can make 50% on a $100,000 and get to keep 90% of the profits, that is just under $50,000 they can make vs 1250 Euro trading their own funds. Numbers don’t lie and it is clear to see how risk:reward can skew to the traders favour.

As we look to the future, it’s clear that the trading industry will continue to evolve, and firms that embrace innovative models like the funded trader program will be at the forefront of this evolution. By prioritizing trust, transparency, and trader success, these firms are not only changing the way trading is done but also empowering traders to succeed in this dynamic industry.