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If you want to trade in financial markets, you need money. The lack of money creates a significant barrier for many traders. To allow traders to trade without using their own money, many proprietary trading firms offer funded accounts.
A funded account provides a trader with the money of the prop trading firm. If a trader has a funded account, he can trade even if he has no money that he can use for this. This is one of the main reasons why prop trading gained so much popularity.
What Is a Funded Account?
A funded account is a trading account. The main difference between a traditional trading account and a funded account is that the funded account is provided by a proprietary trading company.
The firm assesses the skills of a selected trader and gives his funds based on his skill level. The trader has to follow the rules of the company, and he gives a part of his profit to the company. In return, he doesn’t have to risk his own money.
Who Is It Suitable For and Why Is It Needed?
Funded accounts are suitable for all types of traders. Some traders have enough knowledge and experience but cannot trade at a large scale because there is not enough money. Others want to trade but without risking their own funds. This approach allows traders to focus on their strategies and the process instead of worrying about funding. Also, a funded account is suitable for those traders who need to be more disciplined, the company requires to follow stict rules, and it helps them.
How Does a Funded Account Work?
To get a funded account, you would need to pass several stages. First, you pass an evaluation phase. During that stage, the company assesses your trading skills, checks how you manage risks, and whether your trading is consistent. After that, you get a real account with real money, and you can trade. Whatever you earn, you give a part to the company.
Risk management plays a special role in trading with a funded account. Such companies impose very strict drawdown limits and daily loss restrictions. It helps the company to make sure that you don’t lose more than earn.
Another important detail is that you share your profits with the company. You earn, but you receive only a specific percentage of your earnings. The other part goes to the company. Also, the firm sets some rules, such as specific assets that you can tarde, strategies that are allowed or forbidden, and some more.
Who Provides Funded Accounts?
Proprietary trading firms are the main providers of funded accounts. These firms invest in traders and in return, they get a share of their profits. Some well-known firms in the industry include FTMO, Topstep, The Funded Trader, MyForexFunds, and Supertrade. Each firm has unique requirements, rules, and payout structures.
Process of Obtaining a Funded Account
To get a funded account, traders have to comply with a lot of requirements. They have to show that they can get a profit consistently, and not just from time to time. Traders have to follow very strict rules to manage risks. They are obliged to use only trading strategies that are approved by the company. This is why only skilled and disciplined traders can access the funded accounts.
