The Factors That Will Shape the Future of Funded Trading

By Osvaldo Guimaraes, Marketing Manager of Earn2Trade

In my life and career, I've always stuck to a simple Latin proverb – “A wise man learns by the mistakes of others, a fool by his own.” 

To make sure I am more of the former than the latter, I’ve kept a close eye on the journeys of the thousands of traders who have come through Earn2Trade’s programs over the past seven years. Watching different individuals with different approaches and trading goals navigate the evolving landscape of the funded trading industry has been an invaluable experience that has taught me two things. 

First, trading isn't for everyone. Many give up along the way and there can be plenty of reasons why—it can be stressful, challenging, time-consuming, or simply not your thing. And that's perfectly okay.

However, those who succeed as funded traders have one thing in common—they are adaptable and always try to stay ahead of changing market conditions.

From where we stand today, the funded trading industry is about to embark on a transformative journey, and traders should be ready for it. As Paul Tudor Jones said: "You adapt, evolve, compete, or die.”

The most important driver for this change will be technology. Nowadays, futures trading, for example, is vastly different from its golden era in the 1980s when the trading floors were electrifying arenas of human cacophony—traders shouting bids, waving hands, and using elaborate hand signals to execute transactions. And it will change further as market participants adopt advanced technologies like artificial intelligence (AI). Funded traders who get a head start and leverage AI for predictive analytics and risk assessment will be better equipped to anticipate market movements and make informed decisions swiftly and with higher precision. 

Prop trading firms have the opportunity to integrate AI into traders' evaluation process to ensure a more complete, in-depth, and accurate assessment, uncovering patterns and behaviors that humans may miss. Integrating real-time analytics and advanced data visualization tools that allow traders to understand complex market data at a glance and enable them to make quicker, more informed decisions will be another field where technology can make a difference in the niche. 

Technology will also unlock emerging opportunities for the industry to expand into new market realms. The increasing demand for digital assets and the growing importance of sustainability and ESG practices promise to cause tectonic shifts. As traders' interest in the new asset classes underpinned by this transition (e.g., cryptocurrencies, green bonds, carbon credits, and more) grows, prop trading firms not equipped to embrace it will face eroding market share and business continuity risks.

From a trader's perspective, due to the dynamic nature of markets nowadays, in the future, succeeding in the funded trading industry will become ever more dependent on the ability to properly read the pulse of the macroeconomic and geopolitical ecosystem. With tension increasing, war conflicts breaking out, and economic sanctions becoming an ever-more present tool in the arsenal of governments, currencies and commodity prices can face increased volatility. While this will be a challenge for many, the successful funded traders of tomorrow will be able to quickly adapt their strategies and turn the potential disruptions into strategic opportunities.

Last but not least, the future of the funded trading industry will also be defined by how well it manages to preserve its reputation and integrity. More specifically – channeling the wind of change back toward the transparent foundational model where the trader's efforts to earn their right to trade are supported, not hindered. Considering the recent scandals on that front, whether the industry will be able to self-regulate is a question that doesn't inspire me with confidence. As a result, regulatory intervention might be imperative. For example, oversight mechanisms that can help protect traders and preserve the industry's integrity can include introducing standardized challenge rules, transparent payout schemes that prevent payout denials and safeguard client funds, AML and CFT compliance guidelines, and measures to firms' ensure capital and liquidity adequacy. Such moves might either force consolidation across the industry, or make some prop trading firms go out of business. Regardless of the scenario, the bottom line is that the industry will become a better place where only those adhering to the highest standards and working to protect market integrity and traders' interests compete on equal ground.

As I consider these factors, I remember an Ed Seykota quote from Jack D. Schwager's book "Market Wizards" – “Markets are the same now as they were five or ten years ago because they keep changing—just like they did then.” 

In that sense, the future of funded trading, much like its past, will be shaped by our ability to innovate and adapt. As we look to the future, let’s do so with a commitment to not only succeed in the markets of today but to shape the markets of tomorrow led by the ideals of ethics, sustainability, and transparency.