What is Funded Account Traders?

A funded account in trading is an account offered by proprietary firms that allows traders to trade with the firm's capital instead of using their own. In the funded account relationship, the firm allows traders to trade with a considerable amount of buying power; thus, they can participate in markets using considerably more capital than if they had used their own. They split profits earned with the firm.

Here's how it typically works:

Evaluation Process: Most companies, in my experience, will have some evaluation or challenge that the trader must pass to prove that they can trade well and are disciplined enough. This is hitting specific profit targets without overdrawn a set drawdown limit.

Capital Allocation: Once this evaluation then the trader gets a funded account with a specific capital allocation, which can be from $ 10,000 to $ 500,000 or more depending on the company and the performance of the trader involved.

Profit Sharing: The profit earned from the trades is retained by the traders in a range of 50-90% and the rest is handed over to the firm. This way, both parties benefit from the trades carried out.

Risk Management Rules: For funded accounts, traders have stringent risk management rules, such as a day's loss limit and maximum drawdowns to ensure the protection of the firm's capital.

Benefits:

No loss to trader's capital
Available funds are more liquid, which would enable the traders to make leverage on their trades.
Chance of generating money from trading expertise not involving significant personal investment.

Disadvantages:

Strict policies and performance indicators to which the trader has to adhere.

Generally, the evaluation process or the contest involves a charge, which may not be refundable if the trader loses.

Funded accounts attract skilled traders with small initial capital but who are confident in their trading strategy and discipline.