Arguably, the whole trading educational services industry is a big dream factory. That’s because in 99% of the cases you have self professed trading ‘professionals‘ without any proof of them ever having traded successfully (or even traded at all) purporting to teach others how to do this for a living. I believe this is an unique feature of the trading world. There are a lot of pitches these salesmen use in order to get gullible persons to part with their money, but as you can guess from the title of this article, I’m only going to deal with one of them today: the ‘get funded’ pitch.
There are a couple of firms that I’m aware of (certainly they are not the only ones) which use the ‘get funded’ pitch : Topstep Trader and Apiary Fund. What they basically do is sell the standard (we’re the best, we’ve trained hundreds, we have decades of trading experience bla bla) trading education but with an added promise: if you turn out to be a good trader, you’ll get funded by us. Not only that, but you’ll get to keep 60-80% of the profits realized on our capital. You don’t have to contribute any money and therefore there’s no risk of losing your own capital. Now, doesn’t it sound like a trader’s nirvana ?
Actually, it isn’t. The ‘get funded’ sales pitch has more holes in it than Swiss cheese:
- as with any trading education coming from someone with no trading credentials (verified track-record) it can at best have some quality. It could be much cheaper though to go with the free resources on the internet or several inexpensive books on Amazon. In a worst case scenario, it’s just costly rubbish.
- the criteria used to define what a good trader is and who will ultimately get funded is specifically designed so that hardly anyone would qualify. Their answer to this is usually that they are only looking for the best traders out there, but that’s just a smoke screen. Let me give you one example of a bullshit condition from Topstep Trader that has nothing to do with profitable trading: ‘Achieve an Average Net P&L greater than $0 for each product traded ‘. (emphasis mine)
- the fact that these firms don’t disclose the number of traders that got funded and with how much – even though they’ve been in business for several years – speaks volumes. I see it as a tacit admission that they haven’t funded anyone – for more than a few months and few thousand dollars anyway.
- the fact that once funded, the trader would get 70-80% of profits flies in the face of the whole managed assets industry where the standard payout is 1-2% admin fee and 15-25% of profits with just a few superstars like Steve Cohen getting away with 3% and 50%. So either has the industry been doing charitable work for their investors all these years, or the idea of getting 70-80% of profits is just a nice dream.
I hope it’s clear by now what the ‘get funded’ pitch is all about. How come firms of this type are still in business after all these years then, some readers might ask ? It’s because human nature never changes. There will always be people out there who think they can get something for nothing.
“The pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes.” – Jesse Livermore