Traders often think that large capitals are needed to earn big profits (they are not wrong), but not having them available, it happens that they risk more than they should on their accounts. This happens because they are not aware of the great opportunities offered by the Forex world.
The first option is to participate in contests organized by Brokers and various investment companies, but here too you need to know how to skim the real opportunities, because often there are contests that only benefit Brokers to advertise themselves and they carry them out with demo accounts. Start by excluding the latter, those who have to entrust you with money want to see you working with real money!
To find these types of opportunities, search the internet for the various contests that exist and also visit the MyFxBook site. There you will find the contest section, click on it and you will find many, but remember to make the right choices. The last contest I saw gave the first place winner €200,000 to manage, the second €100,000, and the third €50,000; among all the participants, only the first two places were assigned while the third remained empty, why? Simple, the winner wasn't the one who made the most Gain, but the one who had the best Sharpe ratio, which is the most common measurement to assess how much return there is for the risk borne. This measurement takes into account risk-adjusted returns (standard deviation). A Sharpe ratio of 1.0 is considered a strong performance.
The second option, the nicest and most reliable one, is to create a business card for yourself. No, I don't mean the classic card with name, email address, etc. But rather a history of your personal account. To create a business card, it is not enough to be profitable in the long run, but you must respect many parameters and rules so that you can present it to investment funds, banks or Brokers. Let's analyze them:
Control the Drawdown
The first parameter we will analyze is the DRAWDOWN, it is measured as a percentage of the initial capital and serves to determine the risk and efficiency of the strategy. I'll give you an example, if we have a capital of €10,000, and you suffer a loss of €1,000, your drawdown will be 10%. Pay close attention though, because the drawdown is always measured on the maximum capital reached. If from an initial capital of €10,000 we obtain a profit of €2,000 and then again a loss of €2,000, the drawdown will be calculated on €12,000 and not on the initial capital of €10,000. Now how much should the maximum drawdown be that we can allow ourselves to manage large capitals?
What you should try to keep low, especially if you are just starting out, is a drawdown of less than 15% and then gradually try to keep it under 10% and finally under 5%. For those who manage to maintain a drawdown of less than 5% in the long run, every fund, broker, etc. will be ready to finance you with €1,000,000 and this capital will increase over time; obviously it is not easy, if you can't keep it under 5% but let's say you can keep it under 10%, you can still present your history, obviously they will start financing you with small amounts of capital but the important thing is to give life to this opportunity, since with that little money you will have to prove your worth.
Each fund or broker is different. Some require a threshold lower than 3%, some 2%, some even require a maximum of 0.5%. If you can maintain an average of 3%, you're golden; trust me, you will improve over time. My advice for keeping a low drawdown is to risk no more than 0.2% per day with respect to capital, and to do this you will need to have an effective trading system.
A Winning Profit Factor
The second parameter they will look at is called Profit Factor, which is the profit factor, which serves to determine how strong your strategy is and indicates how many times the gross profit (sum of all winning transactions) exceeds the gross loss (sum of all losing trades). The higher the value, the better. A highly appreciated value is usually equal to 2 or higher.
Let's not forget about the profitability of the strategy; a value higher than 80% is very good and means that out of 10 operations, 8 are profitable. In this case your strategy is stable. A fundamental rule for when you operate with your account are STOP LOSSES; they must always be in place and must never be removed under any circumstances. This is a very important aspect that will be analyzed by institutions in the management of your strategy. If you have never thought about it, even the time you remain in the market is important; the less you are exposed, the better.
But how much capital is needed to create a track record?
Let's say it varies greatly from the possibility of each individual person, the more funds there are in the account, the better. But even a small account of 1000 euros is enough if you respect all the rules I have written and manage to be profitable for at least 6 months/1 year. Some doors will open for you and they will start financing you maybe with €10,000. They will see how you react and over the months those €10,000 could become €100,000, then €500,000 and so on, but it will take time, perseverance, a lot of sweat and a lot of psychology; nobody gives you a lot of money right away, you will have to earn their trust. It could only happen if you are a Money Manager who has already worked for funds or brokers. Yes, MONEY MANAGER is what those who manage funds are called.
Here is an example of a track record:
If you are a trader and have a track record with the Drawdown and Profit Factor parameters as mentioned in this article, write us an email from our contact page and we may be able to get you funded by investment funds, banks or Forex Brokers.
----- Article published by Entony Geluardi - Professional trader and contributor to La Piccola Wall Street.
