A funded trading account is a financial arrangement where a proprietary trading firm (or “prop firm”) provides traders with capital to trade in financial markets. In this setup, traders are not required to deposit their own money but instead must prove their trading skills through evaluations or challenges set by the firm. Once approved, traders receive access to the firm’s capital and typically share profits based on a predetermined split.
Benefits of a Funded Trading Account
- Reduced Financial Risk: Traders use the firm’s capital instead of their own, minimizing personal financial exposure.
- Access to Larger Capital: Funded accounts allow traders to manage larger sums than they might have access to personally, enabling potentially higher profits.
- Professional Growth: Many prop firms provide educational resources, mentorship, and advanced trading tools to help traders improve their skills.
- Profit Sharing: While traders share a percentage of their profits with the firm, they still retain a significant portion (often 70% or more).
- No Personal Liability: Losses incurred on funded accounts are absorbed by the firm, not the trader.
Average Allowed Risk and Profit Targets for Challenges and Funded Account Levels
Challenges
Prop firms typically require traders to pass evaluation challenges to qualify for a funded account. The parameters often include:
- Profit Target: 8% to 10% of the account balance, achieved within a specified period (usually 30 days).
- Maximum Drawdown: 10% of the account balance.
- Daily Drawdown Limit: 4% to 5% of the account balance.
- Trading Days: A minimum of 10 trading days to complete the challenge.
Funded Accounts
Once funded, traders are subject to slightly relaxed rules, but risk management remains critical:
- Profit Target: Typically not required, but consistent profitability is expected.
- Maximum Drawdown: 5% to 12%, depending on the firm’s policy.
- Scaling Opportunities: Profitable traders may receive increased capital allocations over time.
Most Popular Funded Account Sizes
Funded account sizes vary widely, allowing traders to choose based on their experience and goals. The most common sizes include:
- $10,000
- $25,000
- $50,000
- $100,000
- $200,000
Higher account sizes often come with stricter rules and higher challenge fees.
Top 3 Funded Account Companies
Here are five of the most reputable funded account providers:
- FTMO: Known for its comprehensive evaluation process, competitive profit splits (up to 90%), and excellent trader support.
- Offers a wide range of account sizes with strict but achievable trading rules.
- Provides access to advanced trading tools, analytics, and a user-friendly interface.
- Regularly praised for its transparency and quick payouts.
- The5ers: Specializes in low-risk trading strategies and provides long-term support for traders to scale up.
- Focused on swing and low-risk trading, ideal for conservative traders.
- Provides traders with extensive flexibility in choosing their strategies.
- Long-term scaling plans for consistent performers.
- E8Markets: A newer entrant with innovative features like no minimum trading days and rapid funding.
- Offers dynamic and flexible trading conditions, appealing to active day traders.
- Features straightforward profit-sharing models with competitive drawdown limits.
- Prioritizes trader support with educational resources and real-time assistance.
Conclusion
Funded trading accounts are an excellent opportunity for traders to access significant capital and advance their careers without risking their own funds. By understanding the rules, risk parameters, and opportunities provided by leading prop firms, traders can make informed decisions and potentially achieve substantial success in the financial markets.