Funded account as the best way to increase income
There are quite a few traders in the market who do trading as a hobby. It is just an interesting occupation, which cannot give the necessary level of income. A trader is good at trading and has results, but it makes no sense to talk about them in monetary terms, as his deposit is hundreds of dollars. This state of affairs can be changed with the help of a funded account. Let us tell you about such trading, which is becoming more and more profitable every year.
What is a funded account and how to earn on it
The main problem of a retail trader is that he cannot dramatically increase his deposit. If we look at the data from various brokerage companies, we will see very disappointing figures – the average trader’s deposit in most cases does not exceed the mark of $500. A talented trader, whose trading is highly stable, can earn up to 20% per month. This is a figure that is quite realistic and is based on convincing statistics. We look at the percentages and see a great result. However, when we translate this income into money, everything changes dramatically. That $100 monthly profit does little or nothing to improve daily life. It is no secret that a trader can spend up to 4-6 hours per trading day at the charts. It turns out that there is a situation when there is a lot of effort, but the result is not impressive at all.
When a trader realizes that he will not be able to change the situation by increasing the profitability of the trading system, he initially looks for opportunities to increase the deposit. Here many people make a mistake – they attract capital under full responsibility. For example, a loan from the bank. No matter what happens and no matter how trading goes, it is necessary to pay. This is quite different from classic business and third-party investments when the investor is fully aware of the risks and the entrepreneur is not financially responsible. However, at some point in time, a similar principle penetrated the sphere of trading. You have heard about PAMMs. However, they offered such conditions that practically did not improve the trader’s position. He had to agree to give away a very large part of the profit and in the end, the game was not worth the candle.
What happens in the market when there is a demand for something? Supply appears! For retail traders, this supply has become funded trading accounts. It works according to such an algorithm, which you will find as simple as possible. Most likely, you will wonder why no one has ever thought of doing this before and why this sphere has not become the mainstream. However, let’s talk about everything in order. Imagine a situation when an investor with capital is perfectly familiar with trading on financial markets. We do not touch upon the reasons why he does not trade himself, there is simply the fact of understanding trading and the profitability it can give. An investor, or a whole group of investors, registers a proprietary trading company. Then, the capital starts to be distributed among a certain number of funded accounts. Here, we will stop and tell you in detail.
What is a funded account in trading? It is an account in a Forex prop firm or any other prop firm where the capital of the company is held. How much money can be in such an account? At the moment prop firms give traders accounts with amounts up to $500,000. You probably have already imagined how much you can earn with such amounts and how great it would be to get such an account. Everything is possible and everything is in your hands. However, now we will tell you how do prop trading firms make money. It is an important aspect that will demonstrate the main idea of prop trading – a benefit for both parties. Let’s assume that you already have a funded trading account, you have received money from The 5 prop firms. As you trade and profit, you come to the moment when the funded account payout occurs. Let’s imagine that you have fixed the result of +$3000. You can’t count on this sum in full, because prop trading companies UK also have their interest. You get the part that is stipulated in the terms of your cooperation. However, we hasten to assure you that it does not correlate with the terms of PAMMs at all. The top 10 prop trading firms will take only 10-20% of such profit. That’s what is prop trading.
It turns out that every trader can get the funded account. Technically, yes. However, there are important conditions. You cannot just buy funded account. Earlier we told you what is a prop trading firm. It is an investor. An investor wants to understand who will manage his money. In the case of trading, the easiest way is to assess skills in a real market environment. Such a test is done with the help of a prop firm challenge. Let us tell you how it works.
Challenge to get a funded account
How can you determine that a trader has the necessary skills and will be able to competently manage the capital of a prop company? You need to set parameters and see how he/she copes with the tasks on a demo account. The list of such tasks includes the very standard requirements and indicators that determine a trader’s success. Let’s list them:
- Positive trading result. A trader receives funds when he effectively generates profits. The company will set an earnings target, for example, best futures prop trading firms often have a 7% profit margin. You have a $5000 account, so earn $350 to fulfill such a task.
- The systematic nature of making trades. You need to trade in such a way that profits appear gradually, not in one or two trades.
- Attention to risk. Funded trading is based on this parameter. The company will set a task not to let your funded account sag by 5-10%. Sometimes it happens that there is not only such a limitation for your trading period, but also a limitation for separate trading days.
In proprietary trading, a challenge is an entrance ticket. And you pay for it to show your serious intentions. However, we hasten to rejoice – for small accounts of $5000-10000 you will have enough $50-70 to pay for it. If it seems like a lot to you, just recalculate the profit you can make on such an account. You will recoup the cost of the challenge in literally a week.
Is it possible not to perform company tasks for a funding account? There is such a possibility in Forex funding. It is called instant funding. Pay for a challenge that has this item in the description and get the capital immediately. Please note that in a regular challenge, the value of the capital is almost directly determined by the balance of the funded account. In the case of instant funding, you will receive a much smaller amount, but the conditions can be much stricter. At the same time, you can fail a regular challenge and simply lose the money you spent on its purchase. Here there is no such risk, you can immediately start using the provided capital.
Trading on a funded account: basic conditions
Let’s assume that you have bought a challenge of interest to you and managed to fulfill the tasks set by the company. Now you can count on the funded account described in the challenge. How to start using it? Full-fledged trading starts after you and the company sign a contract. It is the most important point and here we come back to the question of responsibility. Your risk when using funded trading accounts UK comes down to the possibility of losing the account. The money in the account is not your responsibility. You can lose your account if you breach the drawdown conditions, similar to the terms and conditions of the challenge. It is also recommended to familiarise yourself with the withdrawal conditions, the full regulations are always available on the company’s website. This applies to all accounts, including funded crypto trading account. Usually, withdrawal is regulated by 2-4 transactions per month.
What you are not allowed to do on your funded account
Each company has its trading policy. This applies not only to the simple and clear rules for completing the challenge but also to the seemingly implicit aspects. Your trade and its result can be cancelled or your funded account can be closed for violating the rules. What are these rules and where can I read them?
Most often you can find a description of the items prohibited in trading in a special section on the company’s website. Not only trading techniques that cannot be used, but also other parameters are listed there. For example, funded Forex often requires such parameters as risk limitation for each trade. Funded accounts trading already implies a limitation of drawdown, but here we are talking about stop loss. Or such a common clause as a complete ban on trading robots. You found on the Internet or wrote the best prop firm EA and then decided to use it on your funded account. However, then it turns out that it is forbidden and you have broken the rules. To avoid such troubles, we strongly recommend studying not only the list of challenges and conditions in forex proprietary trading firms but also the specific conditions and prohibited techniques in each of them.
How to choose a challenge for your funded account
As you have already understood, there are a lot of parameters that determine the parameters of funded trading accounts. However, the most important one, according to traders’ feedback, is the cost. So usually beginners just decide how much they can afford to spend on the challenge. And then you can use our rating to find a good solution. Make a list as you like, put up different filters, and then go through all the terms and conditions in detail. It is the easiest way for the best solution.
Tips for beginners on trading on a funded account
There are many similarities between prop trading and regular trading. However, some points should be kept in mind and under no circumstances not to deviate from the rules. Beginners often make mistakes in risk calculations. Here you just need to remember that you should always double-check the calculation of the volume of the deal, as well as the size of stop loss. Only in this way, you can avoid losing your funded account due to inattention.
Do not forget about the careful study of all additional trading restrictions. The company can be perfect for you in terms of the cost of the challenge and the amount you will receive, but it prohibits scalping. And you, let’s say, trade using this technique. No matter how convenient and favorable the conditions are, this option is unsuitable for you. Look for trading funded accounts, somewhere it is not forbidden.