Many traders out there, even those with lots of experience, may be surprised to learn about funded trading accounts. “Wait,” they say, “you mean to tell me that I can trade with someone else’s money?!”
In essence, that’s the simple answer to “How do funded trading accounts work?”
In reality, though, there’s a lot to them. After all, no proprietary firm (or “prop firm”) will lend money to just anyone. Traders typically must prove their abilities first (or put up a larger sum of their own money first). There are also plenty of rules the prop firms put in place to help protect their capital. Finally, they charge varying fees and take a certain split of their profits, numbers that can vary greatly.
So, for more details on how funded trading accounts work, read on for our comprehensive overview, which will also include a look at leading prop firms if you’re curious about earning your own funded account.
Funded Trading Accounts Overview
Proprietary firms are a great way for traders to access additional capital to trade with. The main reason why this is appealing is because the more money you’re trading, the larger the profits. For example, a 10% profit on $500 is $50, while a 10% profit on $500,000 is $50,000. Many prop firms allow eligible traders to trade with accounts of this size, even scaling up into the millions!
But what does it take to get a funded account exactly? It depends on the given prop firm, though they tend to function in similar ways.
The classic way funded trading accounts work is that the prop firm will provide accounts to traders who successfully pass what’s often referred to as a “challenge” or “program.” This may have one or more phases, such as a “Challenge” phase of 30 days and a “Verification” phase of 60 days. Typically speaking, they want to see that you can make consistent profits and follow their rules for at least a month or two.
These challenges generally come at a cost, which is usually a one-time fee that many prop firms will refund upon successful completion of the challenge. Some prop firms refund half after you pass the first phase, then the other half after the second phase.
To get a better understanding of how funded trading accounts work, let’s take a look at common features of funded trading accounts and the prop firms that offer them.
Funded Trading Account Features | Prop Firm Features
Prop firms can vary widely, but they also tend to share many common features. Here are some key features to take into account:
- Trading platform – Not all prop firms are equal when it comes to the trading platform they offer or integrate with. The best prop firms have great trading platforms, whether proprietary ones or through integrating with leading options such as MetaTrader 4 or 5.
- Tradeable assets – Some prop firms specialize in forex while others may specialize in commodities or indices. You want to ensure that you work with a prop firm that supports your trading strategy or strategies.
- Minimum deposits – Prop firms are—or should be—all about helping aspirational traders secure funding. High minimum deposits can thus defeat the purpose. If you are hoping to get started at a low cost, be sure to consider any minimum deposit requirements.
- Trading capital – Some prop firms start funding at $25,000 or $50,000 and go all the way up to $1,000,000 or more. Depending on your preferences and comfort level with managing large sums, you may prefer the flexibility in account size offered by certain prop firms.
- Educational resources – Some prop firms have fantastic educational resources, including community forums, chats, and even ebooks that can help you become a better trader. Others, however, may offer nothing at all in the way of educational support.
- Customer support – Is there chat support? Email? Phone? All or none of the above? Depending on your preferences, it’s a good idea to see what level of customer support they have.
Prop firm rules and regulations
There are other important aspects when it comes to funded trading accounts. After all, you can only earn and maintain the account if you follow the prop firm’s rules and regulations. So, here’s a quick breakdown of some common rules and policies to keep in mind to earn and maintain your own account:
- Profit targets – Most prop firms require that you meet a certain profit goal in a certain timeframe. If you don’t, then you can’t secure or maintain funding. Aim for a profit target that’s reasonable for your trading strategy and preferences.
- Daily loss limits – Loss limits are equally important to observe and follow as failure to adhere to them can mean losing your funding.
- Withdrawal policies – Want easy access to your trading profits? Well, some prop firms have more flexible options than others, so you will want to verify this if it matters to you.
- Fees – When it comes to fees for prop firms you want to be keeping the vast majority of your profits. You also want to pay a relatively low monthly fee and any and all fees should be transparent.
Which Are the Best Funded Trading Accounts?
Now, let’s take a quick look at some of the leading prop firms that provide funded trading accounts for eligible traders.
One of the most popular prop firms is TopStepTrader. One aspect that sets TopStepTrader apart from some other prop firms is the flexibility they offer. For example, you can select a Day Trader account or Swing Trader account depending on your preferences.
As with most (if not all) prop firms, you have to meet certain criteria in order to receive and keep your funding.
FTMO is another prop firm offering funded accounts to traders who meet their eligibility criteria. The process to gain eligibility, as with TopStepTrader, involves two parts.
FTMO has a strong track record, including receiving repeated placement among Deloitte’s Technology Fast 50. If you want to explore FTMO’s offerings and take advantage of a free trial, simply click here.
Earn2Trade is another popular prop firm that supplies funded trading accounts to eligible traders. The Trader Career Path program offered by Earn2Trade involves undergoing an educational program. This positions aspirational traders well so that they have a better chance of passing the evaluation process.
Whether you’re a beginner or an experienced trader, Earn2Trade’s educational program is a robust and wide-ranging offering that covers a lot of ground. You’ll learn about forex trading, stock trading, the psychology of trading, and much more.
OneUp Trader, as its name suggests, aims to have a leg up on its competition. A fast-growing prop firm, OneUp provides a variety of funded trade accounts, from $25,000 to $250,000.
While many prop firms require a two-part or three-part (or more) evaluation process, OneUp Trader has a straightforward one-step process. This enables eligible traders to get up and running quickly. Once you start trading, you need to trade at least fifteen days to meet your profit target. Once you do so, you’ll receive placement with one of their funding partners.
Fidelcrest offers funded accounts where traders can access a huge variety of assets, including stocks, indices, commodities, and forex. Initially started by forex traders, Fidelcrest aims to fund promising traders so they can start generating significant profits.
Top features of Fidelcrest include the ability to scale up to $2,000,000 and the fact traders keep 80-90% of their profits. The account pricing is also competitive with other prop firms.
City Traders Imperium
City Traders Imperium is the final prop firm on the list but certainly not the least.
While many prop firms dangle the idea of getting rich quickly in front of prospective traders, City Traders Imperium has robust educational resources and is transparent about expectations.
One way that City Traders Imperium stands out is through their free consultation call. On this call you will get access to a trading professional who will analyze your trading approach and psychology to see how you can improve your trading performance.
So, how do funded trading accounts work? In essence, they are provided by proprietary firms (or “prop firms”) that work with eligible traders and take a share in the profits traded with their capital. In the best circumstances, it’s a definite win-win!
If you’d like to learn more about prop firms, check out our review of the top prop firms right here.