Understanding The Key Rules Of Funded Trading Accounts

Risk management

Effective risk management is the backbone of success for traders within proprietary trading firms (prop firms). These firms impose specific risk management requirements to protect their capital and maintain the integrity of their trading programs.

On challenge accounts, The Funded Trader typically offers stringent risk guidelines, with a maximum drawdown of 10% and a limit of 5% on potential losses in a trading day. In contrast, leading prop firms such as FTMO and Fidelcrest have comparable risk management provisions, setting their daily loss limits at up to 5% and maximum drawdown at 10%. Most prop firms have similar risk management rules on both funded and challenge accounts, making it easy for traders to transition seamlessly from the challenge phase to live trading.

These restrictions are in place to prevent catastrophic losses and ensure that traders operate within manageable risk parameters. Of course, violating these limits can result in the suspension or termination of a funded trading account.

Profit targets

The profit targets set by prop firms vary based on the account type and those with two-step challenges typically have different profit targets for each stage. Proprietary trading firms set profit targets for traders taking their challenges to ensure that traders demonstrate consistent profitability and risk management. This approach helps evaluate a trader's ability to generate returns while effectively managing risk, which is vital for both the trader and the firm to sustain a successful trading relationship.

With The Funded Trader, the first stage of the challenge account has an 8% profit target while the second stage has a 5% target. On the other hand, FTMO and Fidelcrest are more daunting, with a whopping 10% target on stage one and 5% target on stage two.

For firms with multiple account offerings, the trading objectives could vary based on your account type. For instance, with a firm like Fidelcrest, you may be able to access aggressive trading accounts which come with more lenient drawdown requirements and higher profit targets of up to 15%. Ultimately, you want to compare these offerings and choose the best funded trading accounts for your trading style.

Trading rules and restrictions

Proprietary trading firms offer a spectrum of trading rules and restrictions tailored to their specific programs. For instance, The Funded Trader program allows traders to employ a wide range of trading strategies, including EAs, scalping, and news trading. With leverage of up to 1:200, it provides traders with ample flexibility. Moreover, the refundable registration fee, which is a one-off payment, eases the entry process.

On the other hand, Fidelcrest offers distinct features such as permitting news trading and allowing traders to hold positions overnight and over weekends. While Expert Advisors (EAs) can be used, they require authorization.

FTMO allows overnight and weekend trading on challenge accounts but not on funded accounts. However, the FTMO swing account allows overnight and weekend trading and may be a great option for swing and position traders. The firm also restricts trading 2 minutes before and after high-impact news events, making it unsuitable for those who like to capitalize on volatility caused by news releases.

These rules and restrictions highlight the diversity in proprietary trading firms, catering to different trading styles and preferences. Traders can select the program that aligns best with their strategies and objectives.

Profit splits and fees

If you’re wondering how much you’re likely to get from a Funded trader program, here’s a brief overview.

Profit split in funded trading accounts

When it comes to the profit split in prop firm trading, different companies offer varying terms.

The Funded Trader stands out with an attractive starting point, offering an 80% profit split, which can increase to an impressive 90% with scaling, making it a compelling choice for traders aiming to maximize their earnings over time. On the other hand, Fidelcrest provides traders with an 80% profit split, which can potentially reach 90% in Aggressive Mode. Topstep's unique approach allows traders to keep the first $10,000 in profits entirely, a feature that sets it apart from the rest. Beyond that initial threshold, they offer a 90% profit split, making it an appealing option for ambitious traders.

FTMO maintains a solid 80% profit split, and what's particularly advantageous is that there's no minimum profit requirement before withdrawal, as long as the trader can cover the withdrawal fee. Ultimately, the choice among these prop firms largely depends on a trader's preferences and risk tolerance, with each offering distinct advantages.

Funded trading account fees

Most proprietary trading firms like The Funded Trader, Fidelcrest and FTMO offer a one-time fee with no recurring charges, and the uniqueness lies in their fee being refundable with the trader's first payout. This feature aligns their interests with traders, as it essentially ties the fee to a trader's success.

Note: If you don’t use a challenge account and opt for a direct funding option, you may have to pay a monthly or weekly fee to maintain your account access.

Account funding and withdrawal rules

Generally, you can access a funded trading account by passing a challenge (a one-step or two-step simulated trading account) or opting for direct funding. With a challenge account, you only access the prop firm’s funds once you’ve passed the challenge phase. This stringent process explains why funded accounts tend to give traders higher profit split than direct funding - which doesn’t involve challenges.

Funding and withdrawal processes in prop trading firms play a pivotal role in the trader's journey. These firms typically offer various payment methods for account funding, including bank transfers, credit cards, and e-wallets, offering flexibility to traders. However, it's crucial to note that withdrawal methods might be more limited and are often tailored to prioritize security and transparency.

On the flip side, withdrawal procedures tend to be more stringent to prevent fraud and protect both the trader and the firm. Common withdrawal methods include cryptocurrencies, bank transfers and e-wallets, but these processes often require thorough verification, which can lead to longer processing times. You are usually allowed to withdraw your earnings on specific dates if your account balance meets the firm’s minimum withdrawal threshold.

Note: If you fail to reach your profit target within the set time frame, some firms allow you to restart your challenge at no extra cost. There may be conditions attached to such offerings as most firms require you to be in profit when your time elapses.