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Risking Your Capital

How to Trade Without Risking Your Own Capital

How often do we see traders wiped out from a market downturn? It’s all too common for traders to invest a large portion of their savings in the market. Unfortunately, the risks of speculating for profit are real and significant. It forces the trader into a delicate balancing act, where they either take on too much risk, looking for an outsized return, or too little risk, trying to protect capital. Doing too much of either will make it difficult to make the most of your trading strategy. This is especially the case during periods of high volatility. However, there are solutions for those looking to trade and gain an edge without risking their own funds. This article will explore opportunities for traders who want to trade without using their own capital.

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Different options available for trading

One popular way to start trading without using one’s capital is by getting a job as a trader at a company. There are various types of institutions that offer such opportunities.

Investment Banks

These are large institutions that have trading desks. The traders do not have to contribute to the capital and generally have access to advanced trading systems. However, there is a limit to the trader’s share of profits. These traders typically do not receive a fixed percentage of the profits earned. In fact, the profit the trader earns may be offset by the loss incurred by another desk, which may affect the overall payout.

Prop Shops

These are companies started by individuals who deploy their own capital and recruit traders. The hired traders generally have to put in a small portion of the capital and are given a share of the profits. Since the capital invested may be small, the targets set for traders can be very aggressive.

Hedge Funds

Again, traders do not have to risk any personal capital if they do not want to. Funds are generally sourced from high-net-worth individuals and institutional investors. The strategies used by hedge funds can be diverse, and the profit-sharing mechanism is also more generous than investment banks. Due to the use of leverage in these companies, the risk of failure can be high, but the trader is insulated from these shocks, and the variable pay is impacted. These funds also keep a large share of profit for themselves, so higher returns are generally required to be generated to meet individual expectations.

Mutual Funds

Similar to a hedge fund, a mutual fund pools money from investors. However, the amount invested is lower, and mutual funds generally do not take on high leverage. The strategies are also not as complex as the ones sought by hedge funds. The fees charged are also usually smaller, and the returns pursued through trading can be less aggressive since the capital preservation of these investors is of utmost importance. Like the organizations mentioned above, the trader is rewarded in the form of bonuses if company performance is good.

How Retail Trading works

So far, the options discussed involved companies that generally have a more extensive capital base. If one is willing to risk their capital, retail trading is the most accessible option. You can start retail trading simply by opening a trading account with a brokerage. These can be available for as little as $500. Brokerages provide traders with a data feed, contract clearing, and other basic services to facilitate trading. Trading using one’s own capital ensures that the trader does not have to share their profits.

Retail trading offers flexibility since it allows one to place trades without adhering to any company policy. The trader also has independence in choosing which assets to trade and which trades to place. There is no restriction on timing either, and the trader is free to choose their schedule.

On the flip side, when the trader suffers a loss, they have to bear all of it. The costs borne by a retail trader are also generally higher than that of institutions since the volume of trades is smaller. Investing institutions can often negotiate more favorable commissions simply by virtue of their sheer trading volume. A retail trader may also not have access to high-frequency trading technology to place trades with low latency. The risk management techniques adopted in retail trading are also rarely as sophisticated as those deployed by larger firms.

Proprietary Trading With The Trader Career Path

There are several pros and cons for both retail and institutional traders. However, retail traders have access to programs like Trader Career Path, which combines the benefits of retail and institutional trading. So, what makes Earn2Trade’s Trader Career Path such an attractive proposition?

The Trader Career Path is a funded trader program. For as low as $150, the individual is provided an opportunity to become a funded trader within a minimum of 15 days. Upon completing the evaluation part, the trader is guaranteed funding from the partner firm. After meeting the passing requirements without breaking the rules, one becomes a proprietary trader for the partner using the actual capital that the firm provides. Candidates even have the opportunity to upgrade their funded trading accounts as they withdraw their profits.

What if a trader breaks the rules? They can receive another opportunity to pass the test by resetting the account by paying a small fee. The trader can now trade in the simulated account using the original amount of capital for which he had earlier subscribed.

This program provides the safety of institutional investors as traders get access to the capital of a proprietary trading firm. The program does not require the trader to turn up at an office, and there is no compulsion to clock in a fixed number of hours per week. A noteworthy feature of the Trader Career Path is that the trader gets to keep 80% of the profits without investing his own capital. Few trading companies provide such favorable terms, and it is one of the most attractive features of the program. 

If you would like to learn more, reach out to us today to see how you can become a Proprietary Trader using the Trader Career Pat program.

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