How to Get Trading Capital

How to Get Trading Capital

Trading is one of the best businesses in the world today. Usually, a trader has no employees, bosses, offices to rent, products to sell, and more. Furthermore, typically, apart from the capital, the set-up and running costs are low; since all you need is a computer, a desk, and inexpensive trading software.

However, as for other businesses and companies, capital is a critical thing that boosts your trading. Conversely, lack of capital is one of the main reasons that prevents traders from pursuing their trading careers.

Are you a trader looking for easy ways to navigate the complex process of getting trading capital? This article is for you, as it comprehensively discusses the top 7 tips on how to get trading capital and if taking loans to fund your trades is advisable. But first, let’s define trading capital.

What Is A Trading Capital?

Brokerages and financial institutions use the term trading capital to describe the amount of money allocated to an individual or a firm to buy and sell various securities. Generally, trading capital is critical to running a trade daily and financing its future growth.

Enough of the big words: as the name suggests, trading capital is the amount of money you need to start trading.

Top 7 Ways to Get Trading Capital

1.      Joining a Proprietary Trading Firm

Tying up with a proprietary firm is one of the easiest ways of getting trading capital. Although these firms don’t pay you much base salary, they provide trading capital so you can take home a cut of what you make.

With good track records, you stand a much bigger chance of getting into proprietary firms and negotiating a better deal. You can do this by convincing them of your successful trading strategy, which must be of good performance metrics.

2.      From General Public

You can also raise capital from the general public by gaining their trust if you market the trading strategy to the public via social media platforms, etc. However, to seek the general public, you must keep a few things in check to ensure you are perceived as an authentic individual and a trader.

You may be required to get licenses like Alternative Investment Fund (AIF), Hedge Fund, etc., based on the asset class, jurisdiction, or the type of investors from whom you are raising the capital. Also, your friends and family can vouch for your authenticity in your4 social community to help the public, usually strangers, be sure of your identity.

3.      Agreement with a Broker

Like tying up with a proprietary firm, you can raise the capital for your successful trading strategy by getting into an agreement with a broker with whom you can trade the securities on a partnership basis.

So often, traders see their brokers as the enemy, but the truth is brokers are your most important partners. Also, ensure you ask your broker for available capital opportunities since they are well-connected in the industry and can pave the way for you.

4.      Copy Trading

With copy trading, your trading account is connected to a copy account software that automatically mimics your trades to your client’s accounts. To grow a copy trading business naturally, raise trading capital, and keep the clients copying your signals, you have to set up a website and trading copy software that allows you to charge a monthly fee for traders to copy your trades.

For instance, with 50 users, charging around $200 monthly gives you a monthly income of $10,000 before expenses. So, copy trading, also known as signal trading, is another way of getting trading capital.

5.      Ultra-High Net-Worth Individuals (UHNWI)

Sometimes, rich people like to put their idle cash to good use, and as a trader, an excellent way to earn their trust is by designing a collaboration where they don’t have to worry about you carting away their money.

A possible workaround is to be an employee of any UHNWI. Then, the UHNWI sets up the trading accounts in their company’s name and a variable compensation based on your performance. This way, you eliminate the elements of mistrust, as they don’t have to worry about moving funds to accounts under your name.

6.      Online Investor Marketplace

The online investor marketplace is yet another way to get trading capital, as it allows you to raise capital via winning contests, selling signals on online platforms, and many more. Some popular platforms for winning contests are Quantiacs, Numerai, Quantopian, etc. These platforms host algorithmic trading competitions, and winners of the competition get allocated capital.

7.      From Family and Friends

This is the most convenient and quick source for raising trading capital. But, of course, this doesn’t mean you should take advantage of their emotional bond and compel them to fund your strategy; it only means you can convince a family member or friend.

You can base your convincing talk on the facts by showing them how your trading strategy holds minimum risk and more probability of maximizing the returns. Ensure you explain all the risks and be generous by offering them a good share of the returns.

As a trader, you might wonder if taking loans from the bank to fund your trading strategy is right; let’s dive into that in the next section.

Should You Take Loans to Fund Your Trades?

Undoubtedly, loans have several benefits for traders, but looking at the other side is essential to get the complete picture. There are inherent risks associated with taking loans for your trades.

Negative returns will affect your investment portfolio and make it harder to repay the loan. Therefore, it is advisable to have a sound knowledge of the market before taking a loan to invest in your trades.

In addition, your choice of lender should be sound. Some might offer unfavorable loan terms or impose hidden charges. Therefore, deeply research the lender before applying for the role.

Conclusion On How To Get Trading Capital

Although getting funds for your trading strategy might be complicated, it is not impossible. With this article, I believe you know some of the best ways to raise your trading capital. Do you have other questions, thoughts, and ideas? Please leave them in the comment section – I’ll be glad to hear from you.

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