Unlocking potential profits with limited risk
Funded trading accounts have gained significant popularity in recent years, offering aspiring traders a unique opportunity to access the financial markets without risking their own capital. These accounts, often provided by proprietary trading firms, come with various features and benefits that make them an attractive option for both beginners and experienced traders. In this brief description, we will explore the concept of funded trading accounts, their advantages and how they work.
What Are Funded Trading Accounts?
Funded trading accounts, also known as proprietary trading accounts, are arrangements between traders and trading firms where the firm provides capital to the trader to trade with, typically in exchange for a share of the profits generated. These accounts allow traders to participate in various financial markets, including stocks, forex, commodities, and cryptocurrencies, without the need to deposit their own money.
How Funded Trading Accounts Work
- Evaluation Phase
Traders interested in funded trading accounts typically go through an evaluation process where they showcase their trading skills, strategies, and risk management. This can be compromised of one or two stages and firms have specific criteria that traders must meet to qualify for a funded account. - Trading Capital
Once selected, traders are provided with a predetermined amount of trading capital by the proprietary trading firm. This capital can range from a few thousand to several hundred thousand dollars, depending on the trader's experience and the firm's policies. - Profit Sharing
In most cases, traders are allowed to keep a portion of the profits (80-90%) they generate while trading on the funded account. The remainder of the profits (10-20%) goes to the trading firm. The trading firm retains this as compensation for providing the capital, infrastructure and support necessary for trading operations.
Advantages of Funded Trading Accounts
- Risk Mitigation
Funded trading accounts allow traders to trade with someone else's capital, reducing their personal financial risk. This can be particularly appealing to new traders who may not have the resources to withstand significant losses. It is important to note that the trader is not required to cover any losses they may make whilst trading. - Access to Capital
Traders gain access to substantial trading capital (up to $400,000) they might not have otherwise had access to. This enables them to explore larger trading positions and potentially increase their profits. - Professional Support
Many proprietary trading firms offer access to advanced trading tools and technology. This can help traders improve their skills and make more informed trading decisions. - Performance-Based Earnings
Traders are rewarded based on their trading performance. The more profitable their trades, the more money they can earn. This incentivizes traders to develop and execute effective trading strategies.
Challenges and Considerations
While funded trading accounts offer several advantages, traders should be aware of the following considerations:
- Profit Sharing
Traders must share a portion of their profits with the trading firm, which can reduce their overall earnings. - Trading Rules
Proprietary trading firms often have specific trading rules and risk management guidelines that traders must adhere to, limiting their trading flexibility. - Evaluation Period
Traders often undergo an evaluation period where they need to meet certain performance targets to secure a fully funded trading account, this limits their ability to immediately access the markets to begin making money.
Conclusion
Funded trading accounts offer an excellent opportunity for traders to access substantial capital and trade the financial markets without risking personal funds. Through a thorough evaluation process and adherence to risk management guidelines, traders can harness the potential for profit and share the rewards with the trading firm. This model incentivizes responsible trading and aligns the interests of both traders and trading firms, fostering a mutually beneficial partnership in the world of finance.
Example of a $200,000 funded account which costs approx. $600 from a prop firm:
| Based on $200,000 Funded account | Step 1: Challenge | Step 2: Verification | Step 3: Fully Funded Trader |
|---|---|---|---|
| Trading Period | Unlimited | Unlimited | Unlimited |
| Minimum trading days | 4 days | 4 days | X |
| Maximum Daily Loss | $10,000 | $10,000 | $10,000 |
| Max Overall Loss | $20,000 | $20,000 | $20,000 |
| Profit Target | $20,000 | $10,000 | X |
| Refundable Fee | Fee Refunded |
FAQ
If I lose the money in the funded account do I need to pay it back?
No, one of the main benefits of a funded trading account is that no matter how much money you lose, you are not responsible for the loss. Should your losses result in your losing your funded trading account, you will lose the amount you paid to purchase the account.
If I pass the evaluation phase of the funded account, do I get my fees back that I paid to purchase the funded account?
The majority of proprietrary trading firms will refund the account fee with your first pay-out.
What is the lowest and highest amount I can buy with a funded account?
Funded trading account balances vary from $5k all the way up to $400,000
Interested in receiving a Funded account?
Forex and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Any information provided by FTG Capital should not be constituted as investment advice and you act on the information entirely at your own risk.
