Countless articles can be found regarding trading CFDs online – from the top brokers to the best strategies, forex education, signals, strategies, spreads, leverage – the wealth of information today is endless. So, it’s refreshing to have the opportunity to introduce a new and potentially game-changing alternative provided by Ultimate Traders. It is known as proprietary trading (prop trading).
What is Prop Trading?
The premise of prop trading is simple: you don’t trade your funds; you trade using other’s funds and split the profits generated. Reaping the rewards of trading by risking third-party capital instead of your own may sound mind-boggling at first – but digging deeper, it begins to make sense.
Firstly, whilst firms such as Ultimate Traders making prop trading accessible to the public is certainly a new enterprise, prop trading itself is not. Banks, businesses, and high-worth individuals have always looked for investment opportunities to grow their assets rather than leaving them to stagnate or accumulate interest that barely breaks even against inflation. Property investing is one route; but trading is a popular option since it is faster, more liquid, and requires far less effort. To ensure the best outcome, they outsource the trading (and funds) to professional traders, agreeing for them to retain a cut for their efforts. Understandably, the investing party is extremely selective in which traders to grant such large funds to handle.
Ultimate Traders has expanded the prop trading concept to a wider audience, allowing the average trader to operate accounts funded with up to $400,000 – sums that most would not normally have at their disposal. The key difference in operation lies in the vetting process.
How does Ultimate Traders determine which traders to fund and what is the profit split?
To earn a funded account, traders must register for an evaluation. The evaluation exists to ensure that traders are adequately skilled to trade a funded account. Two evaluation types exist, a two-phase evaluation (The Classic Challenge) and a single-phase evaluation (The Speedy Challenge). The fee to register is proportional to the account size the trader wishes to obtain should they qualify. For example, via the Classic Challenge, it costs $99 to register for a funded account of $10,000 and $1799 to register for the maximum amount of $400,000. A range of account sizes exists in between.
Ultimate Traders collaborates with a host broker (T4Trade) who provides the MT4 accounts on which both the challenges and funded accounts run. The same servers used by retail trading clients are used by Ultimate Traders, ensuring that real market feed and objective pricing are observed. The instrument classes include currency pairs, indices, commodities, and cryptos, with forex leverage of up to 1:100 in the Classic Challenge and 1:30 in the Speedy Challenge.
The default profit share of the trader is 80%, with an option to increase to 90% by paying a premium upon registration equal to 20% of the original fee. The option to retain 90% of profits is a benefit that very few firms provide, with most being capped at 80%.
Rules of the Evaluation
The primary goal of the evaluation is to trade profitably on a simulated account, reaching the specified profit target within a minimum of 3 trading days. Alongside this, the trader must exhibit effective risk management skills by avoiding losses exceeding the allowed daily and overall drawdown limits. All genuine trading strategies are welcome, including the use of Expert Advisors. If successful, the simulated account balance becomes equivalent to the real funded account granted upon passing.
2-phase evaluation (The Classic Challenge):
Initially, the profit target is set at 10% of the starting balance, with an all-time loss limit of 12% and a daily loss limit of 6% of the day’s starting equity. Upon achieving this, the account balance is reset, and the process is repeated, with the profit target reduced to 5%. Success in the second phase results in the trader receiving the funded trading account.
1-phase evaluation (The Speedy Challenge):
The profit target remains at 10% of the starting balance, with an all-time loss limit of 6% and a daily loss limit of 4% of the day’s starting equity. Successful completion of this single phase grants the trader the funded trading account without the need for repetition. This expedited path to funding is justified by the more stringent drawdown rules.
Benefits of prop trading for a firm vs self-funded trading with a retail broker
The benefit of prop trading with a firm such as Ultimate Traders is undoubtedly the amount a trader can potentially profit by compared to when self-funding. The sticking point for most would be the barrier to entry since accessing the firm’s funds is conditional upon passing the evaluation. However, objectively speaking, if the alternative is to use the same amount required to register as the funds for self-trading, the chances of making significant gains are slim. Professional traders aim for an annual ROI of 10-20%. So even if the amount of $1,799 (the fee required for the $400,000 account) is directly invested into retail trading, a good year’s return following risk-averse trading would look like $350. Most traders are unlikely to be incentivized by this level of yearly return and so what is commonly seen is over-reaching, over-leveraging, and risky trading, which, in most instances, results in the loss of the entire starting balance. So, for the sake of a one-time fee, the opportunity to profit by $80,000 or even $40,000 in a year might make more sense for those with genuine aspirations and confidence in their abilities.
