What is a Funded Trading Account, How Does it Work, and How to Get One?

The financial world has transformed significantly, allowing traders of all skill levels to access larger amounts of capital than ever before. Funded trading accounts are a unique offering that allows traders to leverage a firm's capital rather than their own, providing an opportunity to trade at a much larger scale. This article explores what a funded trading account is, how it works, and why traders seek it out. For those aspiring to expand their trading careers, we’ll also outline how to secure a funded account.

What is a Funded Account?

A funded trading account is a type of account where a proprietary trading firm (prop firm) provides a skilled trader with capital to trade on their behalf. The firm supplies the capital, and the trader’s role is to manage that capital effectively, often following specific risk management protocols. Profits generated are shared between the trader and the firm based on a predefined split, allowing the trader to earn without risking personal funds.

What is a Funded Trader?

A funded trader is an individual who has access to a funded account after successfully passing an evaluation or challenge to demonstrate their trading abilities. These traders work with the firm's capital, executing trades and managing risks according to the firm’s guidelines. The funded trader keeps a portion of the profits while adhering to set risk limits.

How Does a Funded Account Work?

The journey to managing a funded account typically starts with an evaluation. This involves a challenge or performance assessment where traders prove their skills, risk management, and consistency. Once they meet these requirements, they gain access to a funded account. Here’s a breakdown of the process:

1. Evaluation Stage: Traders go through a series of trading challenges to showcase their expertise. This stage often has specific requirements, such as not exceeding a daily drawdown limit or maintaining a certain profit target.
2. Funded Account Access: After passing the evaluation, traders receive a funded account with a capital amount based on their performance level.
3. Profit Sharing: Profits from successful trades are split between the trader and the firm. Some firms offer 70% or even 80% of profits to traders, though profit-sharing ratios vary.
4. Ongoing Performance Reviews: Traders must continually meet performance standards to retain access to the account. Firms may also impose stop-loss levels or daily loss limits to control risk.

Funded vs. Regular Account

Funded accounts differ significantly from regular trading accounts, primarily in the source of capital and the level of accountability:

• Capital Source: In funded accounts, the prop firm provides the capital, meaning the trader avoids personal financial risk. With a regular account, traders use their own funds.
• Accountability: Funded traders must adhere to strict risk management rules imposed by the firm. In a personal account, the trader sets their own limits.
• Profit Structure: Funded accounts operate on a profit-sharing model, while regular accounts allow traders to keep all profits after fees and taxes.

Who is a Funded Account For?

Funded accounts are ideal for skilled traders who have the knowledge and expertise to trade but lack sufficient capital. These accounts provide a unique opportunity for individuals who:

• Have a proven track record or trading skillset
• Can follow strict risk management rules
• Seek to trade larger capital without risking personal funds
• Want access to mentorship, tools, and support provided by prop firms

Risks of Funded Accounts

While funded accounts offer unique benefits, they also come with certain risks and considerations:

1. Performance Pressure: Funded traders are expected to meet profit targets and adhere to loss limits, which can create additional pressure.
2. Profit Splits: Traders must share a percentage of their profits with the firm, which may reduce overall earnings.
3. Evaluation Costs: Most firms charge fees for the evaluation stage, which can be costly, especially for those who don’t pass the challenge initially.

Pros

1. Access to Larger Capital: Enables traders to execute trades at a larger scale without risking personal funds.
2. No Personal Financial Risk: Since the firm provides the capital, the trader’s personal finances remain protected.
3. Structured Environment: Funded trading accounts provide a structured environment, with access to support and resources, including mentorship.
4. Profit Potential: Traders can earn a substantial income based on performance, with some firms offering up to 90% profit share.

How Do You Choose a Funded Account?

Choosing a funded account requires careful consideration of the firm’s terms and support structures. Here are some factors to consider:

1. Evaluation Structure: Look at the requirements for the evaluation phase. Does the firm have reasonable profit targets and drawdown limits?
2. Profit Share: Find out how profits are divided. Some firms offer higher profit splits but may have stricter rules.
3. Fees: Many firms charge for evaluations or monthly maintenance. Be sure to factor these costs into your decision.
4. Support and Resources: A good funded account provider offers access to mentorship, risk management tools, and continuous training.
5. Reputation and Transparency: Opt for a firm with transparent terms and a strong reputation in the industry.

Introducing FPT Select

At At Funded Pro Trader (FPT), we aim to support traders by providing capital and a comprehensive environment for growth. FPT Select offers traders access to significant capital with a profit-sharing model tailored to reward skilled performance. Our evaluation phase is designed to be accessible, with clear risk management guidelines and mentorship support throughout the journey.

Why FPT Select?

1. Competitive Profit Splits: FPT Select offers up to 90% profit sharing, ensuring traders keep the majority of their earnings.
2. Structured Risk Management: Our risk management protocols are designed to protect both traders and the firm, allowing for responsible trading.
3. Accessible Evaluation Process: The evaluation process at FPT Select is structured to be fair and achievable, with clear targets and expectations.

How is FPT Select Different from Other Prop Firms?

FPT Select stands out in the prop trading landscape by providing a balanced approach to profit-sharing, a trader-focused evaluation, and a commitment to trader development. Our firm offers competitive profit splits and a simplified path to account funding, ensuring traders can focus on honing their skills without unnecessary hurdles.

Conclusion

A funded trading account offers a compelling option for traders seeking access to larger capital and the support of a structured trading environment. Although there are risks, such as profit splits and evaluation fees, the potential to trade without personal financial risk makes funded accounts an attractive choice for skilled traders. By understanding the pros and cons and selecting a reputable firm like FPT Select, traders can leverage funded accounts to advance their trading careers.

Frequently Asked Questions

How do funded trading accounts make money?

Funded trading accounts earn through a profit-sharing model. The firm provides capital to traders, who then execute trades and split the profits with the firm.

What happens if you lose all the money in a funded account?

If a funded trader exceeds the allowed drawdown or loss limit, the firm may revoke access to the account. However, losses are covered by the firm’s capital, not the trader’s personal funds.

Can you withdraw money from a funded trading account?

Yes, funded traders can withdraw profits according to the firm’s payout schedule and guidelines, often after meeting a minimum profit threshold.