To make real money trading, you need adequate capital. Fortunately, funded trading accounts offer traders the opportunity to trade larger amounts of capital than they would typically have access to on their own. Anyone with the skills and a few bucks for an evaluation has the potential to make it happen. What a time to be alive!
A funded trading account opens a new door that could lead to a great side income. But have you ever considered the benefits of having multiple funded trading accounts? In this comprehensive guide, we'll explore the advantages, and disadvantages, of this strategy and why it might be a great tool in your quest for trading success.
The Power of Funded Trading Accounts
First, let's take a moment to understand what a funded trading account is. A funded trading account is an account provided by a prop trading firm or a prop firm or trader funding company, which allows traders to manage a portion of the firm's capital. The profit made from trading is then shared between the trader and the funding firm. It's an effective way to access larger amounts of trading capital without the need for significant personal investment.
But why stop at one? Having multiple funded trading accounts can open doors to a multitude of opportunities.
Benefits of Multiple Funded Trading Accounts
- Diversification: With multiple accounts, you can diversify your trading strategies, mitigating risks associated with a single market or asset class. Different accounts can be used for different trading styles or markets, allowing for more extensive and diversified trading activity.
- Spread out Blowup Risk: Every funded account has limits of how much you can draw down before you "blow up" and lose the account. having multiple accounts lets you trade more capital while reducing your risk of blowing up an account.
- Increased Earning Potential: Trading multiple accounts allows you to scale up which can lead to greater earnings (or losses).
- Greater Capital Access: More accounts mean more capital. This enables you to place larger trades or cover more positions, which could lead to higher potential profits (and don't forget, losses).
- Flexibility: Multiple accounts offer the flexibility to test different trading strategies simultaneously. This allows you to experiment and find the most profitable approach without risking all your capital.
- Increased Learning Opportunities: Managing multiple accounts can provide a valuable learning experience, offering insights into different markets and trading strategies.
How Does it Spread Blowup Risk?
Let's say you want to make $1,000/day and risk $500/day. Your account has a $1500 drawdown limit.
- You can try doing it all in one account. But if you lose three days in a row from the start, you blow the account.
- You can do it using 10 accounts, and you only have to make $100/day, risking $50. At that rate you can lose for 30 days straight before blowing the accounts.
How do you do this easily, though? Trading 10 accounts at once is nearly impossible.
Simple: use a trade copier. Select one of your accounts as the leader, and set the other 9 to follow it. Or you can trade them separately if you want, either manually or with automated trading.
How Does it Increase Earning Potential?
Spreading out risk allows you to scale up without changing individual account risk. If you want to earn significant weekly income while limiting your risk of blowing up an account, this method is the way to go. For example, let's say you have a drawdown limit of $5,000 and you're trying to earn $5,000/week:
P/L: | $5,000/wk | $10,000/wk | $25,000/wk |
|---|---|---|---|
1 Account | $1,000/day per account | $2,000/day per account | $5,000/day per account |
5 Accounts | $200/day per account | $400/day per account | $1,000/day per account |
10 Accounts | $100/day per account | $200/day per account | $500/day per account |
20 Accounts | $50/day per account | $100/day per account | $250/day per account |
With one account, you have to consistently earn $1,000/day without much deviation. (5,000 / 5). If your r/r is 1:2, you're risking $500/day to make that. If you have 10 losing days, you're at your max drawdown and blow the account.
Once you have 6 losing days, you're more than halfway to blowing the account. Once you're halfway there, you may have to size down to limit your risk of blowing up the account - and then it will take longer to get back to your starting point.
This is oversimplified, but we know there will be down days or smaller profit days that will lower the average, and we need to be able to have a losing streak without endangering our account or having to size down.
With ten accounts, I only have to earn $100/day per account - copied across those 10 accounts. (1,000 / 10). Of course, you can see the potential for scaling larger, and I'll get to that. But the amount of risk I have to take to make $100/day is much smaller - $50. Assuming I stick to $50 as a daily loss limit, I could have a 100-day losing streak before I blow the account.
Can you make $100/day consistently? Keep in mind that if you're not consistently profitable, more accounts will often just multiply your poor results.
Downsides of Using Multiple Funded Trading Accounts
Nothing good comes for free, of course. Trading with more size makes all numbers bigger, whether they're winners or losers. If you're diversifying strategies across accounts, this may not affect your outcome as much.
- If you risk $1000 and spread that risk across 20 accounts, your risk is still $1000
- If, instead, you risk $1,000 per account across 20 accounts, your risk is $20,000.
Keep this in mind and don't get carried away. Sizing up too quickly is a mistake many traders make. Also, if you don't have a winning strategy to begin with, making it bigger is only going to mean you lose more money. Learn to be consistently profitable, first, then size up.
Choosing the Best Firm for Multiple Funded Trading Accounts
Not all trading firms are created equal. Therefore, choosing the best firm for multiple funded trading accounts is crucial. Consider factors such as the profit split, trading rules, drawdown rules, and payout requirements.
For an in-depth look at one of the best prop trading firms for multiple accounts, check out this Apex Trader Funding Review. Apex Trader Funding is known for its generous profit splits, minimal rules, affordable evaluations, and lots of payouts.
For a comparison of different firms, take a look at this guide to the Best Prop Trading Firms. It will give you a better understanding of what different trader funding companies offer and help you make an informed decision. If you're just getting started, you might want to check out the best prop trading firms for beginners, too
Conclusion
In summary, multiple funded trading accounts can be a powerful tool in a trader's arsenal. They offer diversification, greater capital access, flexibility, decreased blowup risk, and increased learning opportunities. However, the key to maximizing these benefits lies in your trading discipline, and choosing the right trader funding companies. So do your research, consider your options, and take your trading to the next level.