First-Loss Model

The first-loss model — also called the leveraged trader capital or trader-deposit model — has the trader post an initial deposit that absorbs the first dollar of losses. The firm supplies amplified trading capital on top, typically with leverage multipliers of 5–20x the deposit.

The structure shifts risk economics meaningfully. Because the trader's own money is at risk first, the firm can extend higher leverage and looser intraday risk parameters than it would on a pure firm-capital evaluation account. Profit splits also tend to be more trader-favorable — often 80–95% — because the firm's downside is partly insured by the deposit.

The model attracts traders who already have proven strategies and want amplification without the structural constraints of an evaluation challenge. It is structurally riskier on a per-dollar basis than an evaluation model because the deposit can be lost in full, but the absence of arbitrary consistency rules and EOD drawdown gates makes it a better fit for some systematic and discretionary styles.

When evaluating first-loss firms, confirm: deposit-to-leverage ratio, what happens when the deposit is exhausted (account termination or top-up), whether the firm holds segregated trader funds, and the regulatory jurisdiction. The first-loss model has historically attracted both legitimate institutional desks and less reputable operators.