How to Get a Funded Trading Account

The investment market has long been the territory of the wealthy and the well-connected. Proprietary trading, in which financial institutions use their own capital for large investments, has been in place for decades. However, this option has rarely been opened to everyday investors, regardless of how talented they may be.

In recent years, though, funded trading accounts have allowed successful private investors access to institutional capital for investing. These accounts enable investors to make major gains with little risk to their personal finances.

This post covers how to get a funded trading account. Learn how this option can boost your investment portfolio and sharpen your strategy. 

What is a Funded Trading Account?

A funded trading account is an investment vehicle supported by institutional capital. Major brokerages give funded trading accounts to individual investors for trading in the marketplace. Investors trade with company funds instead of their own reserves.

Not every investor is eligible for a funded trading account. An investor must be vetted and tested to verify their abilities. If approved, they get sufficient funds to enter and exit positions in the investment marketplace. The company issuing the account takes on the risk instead of the trader.

How much capital an investor gets in a funded trading account depends on their general investment strategy, risk tolerance and other requirements the funding provider may instill. The trader executes transactions for the company and monitors the account closely. If an investment pays off, the trader generally shares the profits with the funding provider.

Different Types of Funded Trading Accounts

Funded trading accounts are suitable for almost all investment vehicles. Some of the most common include the following. 

Funded Forex Trading Account

Investors use investment capital to buy positions in international currency on foreign exchanges. Thanks to its high liquidity and accelerated leverage, forex trading is especially well-suited for funded trading accounts.

Funded Futures Trading Account

Futures investors buy and sell contracts that require them to execute their transaction by a certain future date. Since the price is preset, the buyer gets the commodity at the price quoted in the contract even if the commodity gains in value between now and the contract date.

Funded Stock Trading Accounts

Just as most investors already do on their own, you can use funded trading accounts to buy and sell shares of stock.

Funded Options Trading Accounts

With a funded account, you can buy options, through which an investor reserves the right to buy or sell a commodity at a given date and price. If the stock price eventually gets to where the trader can maximize their positions, they can execute a trade to take advantage.

How to Get a Funded Trading Account: 3 Easy Steps

Sometimes, it can be difficult for all investors to meet the qualifications needed to acquire a funded trading account. Nonetheless, the process for getting one is simple.

1. Choose a Trading Firm and Account Type

Look for reputable institutions that offer funded accounts. It’s extremely important to choose a provider that meets your standards and covers all your trading exchanges. For these kinds of arrangements, investors and providers must be on the same page.

2. Sign Up for a Funded Training Program

To be sufficiently prepared, enroll in a training program for funded traders. You’ll be evaluated for skills in risk management, consistent performance and ability to follow directives. Make sure you’re comfortable with the regulations and limits the provider may impose.

3. Accept the Trading Account

If you’ve met the institution’s requirements and challenges, you’ll receive a funded trading account in your name and can start trading immediately. Now that the partnership is official, stick to the rules and regulations the providing firm has laid down for your account. 

Pros and Cons of a Funded Trading Account

As with any investment vehicle, funded trading accounts come with certain benefits and potential pitfalls that investors should be aware of.

Benefits of a Funded Account

Some of the major advantages of a funded account include the following.

• Access to company capital: Funded traders get institutional cash to execute transactions with zero risk.
• Trade from anywhere in the world: Using the company’s money means the rules for market managers don’t apply — you can execute trades from anywhere.
• No clients: As long as you keep turning profits, communications will only be between you and your provider.
• Less stressful trading environment: A funded account lets you avoid the killing floor of a busy stock exchange and conduct business from home.

These advantages and conveniences make for a positive, productive trading relationship.

Risks of a Funded Account

A funded trading account comes with its share of potential risks and setbacks, including the following.

• Testing requirement: You must pass an evaluation to become a funded trader, and every program has unique requirements, whether profit- or time-driven.
• Strict regulations: To protect its investments, the funding company may impose drawdown limits and restrictions on the risks you can take.
• Withdrawal limits: Most prop firms only allow traders to withdraw funds once or twice a month, unlike personal accounts that you can withdraw from at any time.
• Capped account balances: Depending on your experience, the funding provider may put a ceiling on how much capital you can have.
• Exposure to potential scams: The lack of oversight on funded prop accounts opens them to scammers, so setting cybersecurity policies should be a priority.

Tips on How to Become a Successful Funded Trader

If you’ve passed the test and are a certified funded trade partner, take a few steps to become successful.

Educate Yourself

Learn everything about trading basics, technical and fundamental analysis, risk mitigation and trading psychology. In addition to your partners at the funding company, online services and community resources can provide some insight. Always put yourself in a learning mindset, even if you have lots of experience.

Practice With a Demo Account

Your funding provider should have the ability to set up a demo account through which you can practice executing trades and sharpening your strategy. There’s no real money involved here, but treat your demo account with the same seriousness you would your real account.

Learn and Follow the Rules

Dive deep into the regulations and standards your funding company has set up. They may include loss limits, specific profit targets, risk management policies, communication requirements, restrictions and other rules.

Keep a Trading Journal

The best way to learn is to track your trading progress in written form. Record every transaction you make to analyze its outcome, along with thoughts and ideas for future moves.

Stay Disciplined

Stick to your trading and risk management plans. Set reasonable goals that will keep you motivated to go further and avoid emotional investing. Also, give yourself a break every so often — this can be stressful stuff, so take care of your mental and physical health. 

Best Funded Trading Accounts

Here are some of the top providers of funded trading.

Learn More About How to Get a Funded Trading Account

In the right hands, a funded trading account can establish you as a skilled financial professional if you’re willing to put in the necessary time and practice. With hard work and your financial partners shouldering the risk, a funded trading account can generate real income and deepen your financing experience.

Frequently Asked Questions