I HAVE NO MONEY! 8 WAYS TO GET TRADING CAPITAL
Trading has to be the best business in the world — You have no employees, no bosses, no offices to rent and no product to sell. As an independent trader, the set-up costs and running costs are low; all you need is a computer, a desk, and inexpensive trading software. When trading is done thoughtfully and efficiently as a proper business – controlling the risks and managing the expectations — profit margins are high. Profit margins for trading businesses are among the highest in the world — no wonder why the investment bankers are so flush with cash.
In many ways, trading really is the perfect business. One thing, however, is as critical for that business as for any other company – and that is capital.
Without a sizeable amount of trading capital, it doesn’t matter how well you trade and how disciplined you are – the returns you make will not be life-changing.
What new traders usually do to overcome their small account sizes is to use high leverage on their accounts and take a crazy amount of risk – often as much as 5-10% per trade. That kind of trading inevitably ends up with blown accounts and shattered dreams.
Lack of capital is one of the main reasons that prevents traders from pursuing their trading careers. Countless times have I heard people say:
"If only I had money, I would trade for a living" or "My account is too small to trade effectively".
These arguments are no longer valid! For good traders, funding is never an issue and getting funded is now easier than ever.
“Serious money will not come from trading your own money but from managing other people’s money!”
All the major central bank's money-printing over the last decade has resulted in so much money being available, money that people are investing not only in the stock markets and real estate but also in talented traders.
To get funded, all you have to do is prove that you can trade with discipline and in a consistent way – even if it's on a small account!
Investors, in particular, like traders that use objective trading systems with well-structured and automated approaches (bots). This is because trading with bots and objective trading strategies means that you are not subject to the emotional rollercoaster that is often derailing even the most talented discretionary traders who are using subjective trading strategies.
If you can show solid and consistent trading where you manage your risk and achieve above-average returns, you will not need to worry about attracting capital.
A good rule of thumb is to aim for 24% annual return (~2% per month). This is considered a very good performance, and if you can match it with a 2/1 annual return to Drawdown ratio, you are sure to have investors knocking on your door. (Annual return to Drawdown ratio of 2/1 means that if you make a 20% annual return, your max drawdown does not exceed 10%. )
Even if you achieve this level of return on a small $1,000 account, this can actually be viewed favourably by investors as it shows that you can control your emotions and you are not greedy.
So remember: Trading can be an amazing business opportunity, but First, you need to learn to trade! Build a track record of consistent returns and you will never need to worry about funding.
Here are 8 ways to get funding and a regular monthly income as a trader —
I would recommend getting at least a 12 months track record first, but some investor programmes will accept you with as little as two months’ track record and trading records from demo accounts.
1 — SIGNAL SERVICE
Here you send out your trading signals to your clients, and they enter the trades manually, a service for which you charge a monthly fee. A typical signal service costs $50-$100 per month, so just 100 users can generate a regular monthly income of up to $10,000. You can send signals by email or, via messaging apps such as Telegram.
To set up a signal service you don't even need a website; you can do it through Telegram, TikTok, Youtube or Facebook page. A signal service is the simplest and easiest way to start getting some regular income while you continue to build your track record. There are millions of traders around the world looking for signals so finding just 100 users to send signals to is not a hard task. Plus, if you have good strategies that can be automated successfully, you can use DARA app to create a signal service using trading bots. When you create your DARA bots they can send your strategy signals directly to telegram. This can be a very successful business opportunity with very low-cost setup costs and no track record needed.
Pros
Quick and easy to set up.
Does not need a long track record.
Cons
High churn rate. You will find that a lot of clients will simply not follow the signals or they find a way to screw them up.
Depending on the country you reside in, providing signals might require you to be registered as a financial advisor.
2 — COPY-TRADING
With copy-trading, your account is connected to a copy account software that automatically mimics your trades to your clients’ accounts. There is a huge copy trading community online so finding copy traders and software that offers this solution is not an issue. If you decide to go the copy-trading route, I would encourage you to set up your own website and purchase or hire copy-trading software. It will be a bit more expensive and will take time to grow your customer base, but the alternative of using existing online copy-trading websites is not the way to go.
On these social trading platforms ( etoro is the most popular), 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. Traders use high risk, get high returns and quickly climb to the top of the ranking. Once there, they get some copy traders and, of course, most of them just blow the account because of the excessive risk used. Then they start over with another small account and the cycle just repeats itself.
If you want to grow a copy trading business naturally and keep the clients copying your signals, you have to set up your own website and trading copy software. You charge a monthly fee for traders to copy your trades, typically around $100 to $200 per month. For example, 100 users, will give you a regular monthly income of up to $20,000, before expenses. You continue trading as before and keep building your track record.
It is not that hard or expensive to setup copy-trading. DARA white label can provide this solution for you if you’re looking to build your own copy trading solution.
Pros
Does not need a long track record.
You can build your own brand online
Cons
Without using popular social trading platforms, it can take time for people to find you.
Depending on the country you reside in, Copy-trading might require you to be regulated as a money manager.
Creating bots with DARA is a cinch
Watch a video👇
3 — FAMILY AND FRIENDS
Whatever you do, don't take your aunt’s last $5,000! But if you have a wealthy family member or a friend, explain to them what you are doing and the risks involved. Show them your trading plan and your track record. For a lot of traders who then go on to manage larger accounts, their first customers are typically family members and friends. Since they will be your first investors and they are taking all the risk, you will need to be generous and offer them at least a 50/50 profit share.
Pros
Costs nothing.
Does not need a long track record; they just need to trust you.
Cons
If you promise returns and your family and friends lose money, you lose their trust – which may be more important than extra capital. Before you do this, make sure they understand the risk involved with trading.
You must keep it small. If you get more than 5 friends involved that can count as a money-managing service and you could be in legal trouble unless you have the proper paperwork.
4 — MAM ACCOUNTS
MAM stands for Multi-Account-Manager and is a service provided by your broker. Here other customers from the same broker give a power of attorney that allows you to execute trades on their accounts. All the clients’ funds are pooled into one large MAM account and you just trade on one account. Using MAM accounts is the first step into serious trading business, and you can have a MAM account with several millions of dollars, which will generate a solid six-figure income. MAM traders typically charge a 20% performance fee and a small spread (1-2 pips) markup to cover trading costs.
Pros
Can scale quickly and grow into a stable and regular five-figure monthly income.
Trade on a single account without worries about copy trading software.
No need to pay for 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.
5 — YOUR BROKER
Many traders treat their brokers as the enemy, but they really should not. In your trading business, your broker is your most important partner. Your broker will be the first to know when you are making or losing money. If you are serious about your trading, you should have a very close relationship with your broker — they should be on your speed dial! Call up your broker and ask for any opportunities that are available to you and explain that you are looking for additional capital. Your broker is well-connected in the industry and they can often open many doors for you.
Pros
Costs nothing to ask.
Can get you connected with investors and other money managers.
Can set you up with a MAM account for you.
Can get you, clients, for your MAM account.
Cons
None. The worst that can happen is that they say no.
6 — PROP FIRMS
Prop firms are private trading firms that trade their own capital and are not allowed to use outside money. Search for prop firms in your local city and call them up to see what the requirements are for you to get a seat with them. Prop firms typically work on a capital-share and profit-share module. This means that you may be asked to bring in $25,000 which they will match with $75,000 to give you a $100,000 trading account and a trading desk in their office. Any profits you make are shared 50/50. At first glance, it might not sound like a very good deal but remember that a 50% profit share in a $100,000 account is far better than a 100% profit share in a $25,000 account. But most importantly, you will get a great experience trading in a prop firm with other traders. You can use this as a springboard for further developing your career as a trader and money manager.
Pros
Great for building experience.
Great to grow your trading network and establish yourself, especially if you later decide to set up your own fund or prop firm.
Cons
Does require minimum 12-24 months’ track record.
It Does require collateral, typically around $25,000.
You might need to pay a monthly fee of up to $1,000 for the use of their trading desk and firms trading software.
They might not allow you to trade exactly how you want to trade and force their firm’s rules on your trading strategies.
7 — ONLINE PROP FIRMS or FUNDING FIRMS
This is a relatively new type of business gaining popularity in recent years. The idea is simple – it’s a prop firm (a firm that trades its own money) but its traders are not chained to the office and can trade from the comfort of their homes, anywhere in the world. The idea is pretty good, and I think more and more of these firms will spring up. You can get up to $200,000 in trading capital with a minimal track record, and the profit share for these firms is much better than traditional prop firms – up to 80/20 in the favour of the trader.
Here are some online prop firms with the best reputations:
Pros
Inexpensive to set up (they do require a small joining fee).
No recurring monthly costs (or very low compared to traditional prop firms).
You don't need a track record, evaluation happens in real markets.
Trade any markets you want with higher leverage since retail trader restrictions on leverage will not apply to these firms.
You don't need to bring any of your own capital.
You can apply for the capital multiple times if you fail the first time.
You can trade with multiple firms at the same time.
Cons
To get the capital they ask you to pass a test trading in live markets (on a demo account). Historical performances outside the test do not count.
Test criteria can be very hard to pass so make sure you read all the small print.
They will restrict some of your trading. For example, they will limit your risk levels and markets you trade or not allow you to keep trades open over the weekend.
Some firms are using shady practices and are out to get traders to fail the challenges so they can collect more fees for re-evaluation.
8 — YOUR OWN FUND
This is the dream of many aspiring traders and money managers. Running their own fund, managing billions, and spending the holidays with their family on a yacht in the South of France.
With the current market flooded with cheap money, it really is possible for traders to start their own fund. But this task should not be taken lightly and will require several years of track record and becoming an established authority in the industry. The regulatory landscape is changing a lot and is getting more strict, both through capital requirements and the kinds of clients that you can have. The minimum AUM (Assets Under Management) to consider opening a fund is around $10 million just to make it worthwhile and cover overhead costs. There is also a growing demand for Algo trading funds, which makes attracting capital easier if your trading is done by algorithms. A typical Algo fund would charge a 20% performance fee and a 2% management fee to cover the costs of running the business.
Pros
The pinnacle of the trading carrier.
Could make billions.
Cons
Requires a minimum of 5 years of audited track record.
Will cost at minimum $100,000 to set up and run per year
Requires at least $ 10 million AUM to make it cost-effective.
High operating costs.
Regulations.
Requires you to get a certification as a money manager, which can take years to get depending on the jurisdiction where you are opening the fund.
Requires an office.
Requires hiring staff.
Requires hiring lawyers.
TO SUM UP -
It has never been easier to get funding as a trader. The only question is: are you good enough? Prove that you can trade with discipline and achieve above-average returns and you will be able to attract capital from any of these 8 sources. Whether you want to start a signal service, a copy trading business, use an online prop firm to get funding or even start your own fund — the path is open for you. All you need to do is prove that you can manage the risk and make money.
Do you want to automate your trading? DARA can create no-code bot templates for you.
This 15-minute call gives you time to tell us your needs and see if DARA is the right fit for you.
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