Funded Trading Accounts (Prop Trading)

If you have the skills and the knowledge to generate steady profits from trading, you can be frustrated if a lack of initial funds limits your potential returns. The best brokers offering funded trading accounts solve this problem by allowing experienced traders to easily use capital from an investment company to trade forex, equities and other assets, dramatically increasing their financial leverage and potential profits. While traders and brokers with funded trading programmes generally share profits, the trader benefits from protection against risk, as it is not his own funds that are at stake.

This guide gives an overview of the key information you need to know to get a funded trading account, including a comparison of the best brokers with funded trading programmes. We also share our tips for becoming a funded trader, as well as the audit pitfalls to watch out for. Read on to find out how to get funded to trade currency pairs, stocks and cryptocurrencies.

Comparison of Prop Trading accounts

How does funded trading work?

The internet has become ubiquitous, bringing trading tools outside of traditional brokers and markets into the homes of everyday traders worldwide. As a result, many unaffiliated traders have developed the skills to consistently make money in the stock and forex markets.

Some investment firms, brokers, and prop trading firms have recognised the profit potential of these traders and offer to fund them and take their losses in exchange for a fair share of the profits they make. The trader may have to pay a subscription or other fee, but the firm provides the capital, sometimes in the hundreds or thousands of pounds (or dollars, or euros...). This arrangement is the definition of a funded trading account.

Of course, since the investor is putting their capital at risk in this arrangement, a trader will have to meet certain eligibility criteria to prove they have what it takes to be funded. The exact steps in this process vary by programme, but typically the trader will be required to achieve a profitability target over a test period.

Once a trader has proven himself, he or she is given an initial amount of capital by the company, which sets certain conditions to control how trades are made and to reduce risk. For example, trading firm FTMO requires traders to trade for 10 out of 60 days in the 2nd stage of its verification process, setting a profit target of $500 on a $10,000 account and allowing a max. daily loss of $500 and a max. overall loss of $1,000.

How should I choose a funded trading account?

If you think you have what it takes to qualify for a funded trading account, then you’ll want to dive in and find the best broker for your needs. Here are some of the most important factors to consider when choosing from the many brokers offering funded trading accounts:

Admission and verification criteria

Brokers offering funded trading accounts are putting their money on the line when they fund you, so they want to make sure they are working with someone who has the skills to turn a profit. To prove to them that you have what it takes, you need to meet the broker’s membership or eligibility criteria.

Qualifying for a funded trading account usually involves an evaluation process, which some brokers call a "challenge". Traders participating in a challenge will have to achieve a profit target with their trading account over a set period of time, without allowing a drawdown or daily losses below a certain limit. These criteria vary between brokers, but you can expect a target of around 10% of the account value.

Some companies, like Topstep, will ask you to complete the challenge on a simulated demo account, with no real money, while others will allow you to trade with a funded account right from the start.

One company that has a somewhat different evaluation process is Audacity Capital. They ask traders to fill out a form with their contact information and then take part in an interview to describe their trading experience. Audacity’s risk management team evaluates the interview within 1 day and notifies candidates of the results. Successful candidates will be able to start trading on their funded account after they've signed a contract.

When traders sign up for the challenge, they're typically required to pay the broker an evaluation fee, which can vary depending on the size of the account the trader wants to manage.

To give you an idea of ​​what to expect, FTMO’s fees start at €156 for the 10K account, rising to €1,085 for its largest 200K account. Another funded account broker, UK-based City Traders Imperium, charges between £110 and £650, and Cyprus-based Fidelcrest’s fees range from $350 to $1,500.

Fees

Other fees vary between providers of funded trading accounts, so you should compare them them carefully.

Brokers typically earn money in two ways: through their share of the profits made by a funded trading account, and through additional fees.

Pricing structures can vary considerably from one broker to another. For example, Topstep allows traders to take 100% of the first $5,000 of profits they make, and 90% of all subsequent gains. This is probably one of the most generous offers you could hope for, but you also have to factor in the $165 monthly subscription fee that Topstep charges.

Other brokers, such as Earn2Trade and FTMO, offer an 80/20 split in favour of the trader, while others, such as Audacity and City Traders Imperium, split profits equally. You can find funded trading accounts that are free of subscription fees and other common fees, but they take a larger share of the winnings.

Bear in mind that, as with Topstep, brokers that offer a more generous share of the profits often charge a monthly subscription fee. OneUp Trader charges users $105 a month for its 50/50 profit share account, but $650 a month for the account where traders receive 80% of the profits.

While Topstep, FTMO and a few other funded trading accounts offer a free trial, for many others you'll need to pay money upfront to enter the challenge before you can try out their system. So bear this in mind if you want to try out a company before you spend any money.

Don't forget that there may also be hidden or unexpected charges. These can include commissions, regulatory and transaction fees, penalties if you don't meet the company's criteria, chargeback fees if you don't pay your subscription or conversion fees if you pay your subscription in a foreign currency. Some companies also offer educational resources and even one-to-one coaching to traders, which can be costly if fees are applied.

You can also face a hefty breach charge of thousands of euros (or pounds, or dollars) if you don't abide by the terms of the contract, so it's wise to know all the terms and conditions before you sign up.

Funding amounts

With the right trader, more capital means more trading power and more profits. Different funded trading accounts offer users different starting capital amounts and offer different funding level ranges.

Some brokers, such as Audacity, start traders on funded accounts with a lower cash amount and let them progress by hitting targets. With them, the funded trading account programme has 6 levels, ranging from $15K to $475K at the 6th level. Traders can double the size of their previous account each time they reach a 10% profit target.

Other brokers, like FTMO and OneStep, offer traders the chance to choose the amount of funding they want when they sign up. With the former, you will choose how much funding you would like to receive when you start your challenge, with 5 levels ranging from $10,000 to $200,000. They also offer to increase accounts for consistently profitable traders by 25% every 4 months.

City Trader Imperium has a slightly different system whereby new traders are offered an account with a starting capital of between $2,500 and $17,500 during the evaluation period. Once you have proven yourself and acquired a full account, you can move up the ladder by hitting 10% targets, with the possibility of managing an account worth up to $4,000,000.

Benefits and specialties

Different companies give investors who their funded trading accounts access to different assets. If you're primarily a commodity trader, you'll be looking for the best funded trading account for commodities; similarly, there will be specific companies that are better for trading stocks, cryptos, forex pairs, etc.

Some trading companies also offer differentiated accounts and examples for different types of traders. UK-based Alphachain Traders offer a general "global trader" account, as well as specialised accounts for cryptos, forex and algorithmic trading.

Some firms offer a choice between a standard account and a more "aggressive" account, which has higher targets and allows greater drawdowns. City Traders Imperium offers a similar "Day Trading Funded Trader" account for high-risk traders, which allows a larger drawdown but requires all trades to be closed by the end of the week.

Leverage and maximum loss

The availability of leverage has a huge impact on a trader's strategy, as a leveraged position can generate significant profits from relatively small price movements. This is a key factor for traders who are choosing their funded trading account.

The amount of leverage available will depend on the type of asset being traded. Options, for example, tend to be traded with lower leverage, so you can expect a funded trading account that deals in this type of instrument to provide you with leverage that's commensurate with options.

To give an idea of how some funded trading firms deal with leverage, FTMO's normal account offers leverage ranging from 1:5 for cryptos, to 1:50 for commodities and indices, and 1:100 for currencies. Fidelcrest announces that it offers 1:100 leverage for all accounts.

Leverage gives traders the ability to make large gains from relatively small price movements, but it can also plunge them into heavy losses. Trading firms generally address this possibility by setting limits on the maximum daily and total acceptable losses on a funded trading account.

These limits vary between brokers, but a common limit is 12% maximum loss and 6% daily loss. Check the broker's terms and conditions to find out how they calculate losses. Also note that some companies, such as City Traders Imperium, require traders to close each trade with a stop loss order.

Markets and platforms

The various brokers who offer funded trading accounts will have access to different markets, which will be an important factor for most of you. Market leader Topstep specialises in trading futures from the Chicago Mercantile Exchange, while FTMO traders deal in forex and cryptos, and City Traders Imperium provides access to the currency, gold and index markets.

Similarly, different companies support different trading platforms, with some providing their own proprietary services while others use third-party software such as the MT4 and MT5 platforms. Traders should ensure that they are comfortable with the platform available on a funded trading account before signing up.

Benefits and drawback of funded trading accounts

The advantage of a funded trading account is obvious: proven traders will have access to a large amount of capital without having to risk their own money.

Good investment firms will also provide support to their traders to help them hone their skills and make more money. The best funded trading brokers treat their traders like partners, not clients - it's in their interest for a trader to generate significant profits, as they will receive a share of those profits. So it's a good sign if a company has a strict assessment phase, because it means that traders' abilities are taken seriously.

Bear in mind that some companies may have a different business model. For example, they will offer training to prepare for a funded trading account. In this case, the company can make money from charging for this training, and the maximum loss criteria means that they face very little downside if a trader misbehaves once the training is complete.

You should bear all of this in mind when looking for funded trading accounts. Try Day Trading, for example, sells student packages starting at $500 and going up to $15,400. This program may work for some, but there are much cheaper options out there.

Ultimately, a funded trading account is really an option suited to a trader who has already accumulated experience and developed skills, so be wary of programmes that cater to beginners.

Conclusion

For many traders, having the chance to manage an account worth up to $1 million is a dream. With enough hard work and discipline, a funded trading account can make that dream a reality, even for day traders who have never spent a day at an established trading desk. Funded trading accounts are worthwhile if you have the skills and knowledge to make steady profits in your preferred market, however, you need to be careful before signing up, as some companies charge high fees and can trap you into expensive training courses. The key to making good profits is to look for a funded trading account that has a tough assessment process, but doesn't charge high fees to participate and offers a fair deal for traders who prove themselves worthy.

Alternatives: copy trading and social trading

	Types of accounts	Minimum deposit	Management fees	Manager remuneration	Open an account
	Copy Trading	5 $/£/€	Spread	Fixed monthly commission	Open an account
	Copy Trading	2000 $/£/€	Spread	5$ per lot	Open an account
	Copy Trading	1 $/£/€	Spread	Variable depending on trader	Open an account
	Copy Trading	50 $/£/€	Spread	Up to 35%	Open an account
	Copy Trading	300 $/£/€	Spread + 0.8 to 1.5 pips (0 pips for AAAFX)	0.5 pips for each trade or 20% of profits	Open an account
CFD trading involves a significant risk of loss, so it is not suitable for all investors. 74% to 89% of retail investor accounts lose money trading CFDs.

FAQ on funded trading accounts