How Funded Accounts Work
A comprehensive guide to understanding evaluation processes, risk rules, profit-sharing models, and everything you need to know about trading with funded capital.
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Overview
Funded trading accounts allow traders to access capital provided by a proprietary trading firm. Instead of risking your own money in the markets, you trade with the firm's capital after proving your skills through an evaluation process. This guide breaks down every component of how these programs work.
The funded trading model has become one of the most popular paths for aspiring traders. It bridges the gap between having skill and having capital, which has historically been the biggest barrier for retail traders.
The Evaluation Process
Most prop firms use one of the following evaluation structures:
1-Step Evaluation
A single phase where you must hit a profit target (typically 8-10%) while staying within risk limits. Faster path to funding, but targets may be slightly more demanding.
Typical Profit Target
8-10%
Time Limit
30-45 days
2-Step Evaluation
Two phases: Phase 1 typically requires 8-10% profit, Phase 2 requires 5%. This model prioritizes consistency and is the most common structure in the industry.
Phase 1 Target
8-10%
Phase 2 Target
5%
Instant Funding
Skip the evaluation entirely and receive a funded account immediately. Higher upfront cost and often a lower initial profit split, but no risk of failing a challenge.
Evaluation
None
Typical Profit Split
50-70%
Risk Rules Explained
Risk rules are the guardrails that prop firms put in place to protect their capital. Understanding these rules is essential, as violating any of them typically results in immediate account termination.
| Rule | Typical Limit | Description |
|---|---|---|
| Daily Loss Limit | 4-5% | Maximum you can lose in a single trading day, calculated from the day's starting balance. |
| Max Drawdown | 8-12% | Maximum total loss allowed on the account, measured from the highest balance (trailing) or initial balance (static). |
| Minimum Trading Days | 5-10 days | You must trade on a minimum number of distinct days before completing the evaluation. |
| Lot Size Limits | Varies | Maximum position size allowed at any given time, often tied to account size. |
Profit Splits & Payouts
Profit splits determine how trading profits are divided between you and the firm. Most firms offer splits ranging from 70/30 to 90/10 in favor of the trader. Some key considerations:
- Higher profit splits often come with stricter rules or higher evaluation fees
- Payout frequency varies: weekly, bi-weekly, or monthly
- First payout may require a waiting period (7-30 days after funding)
- Some firms offer scaling bonuses that increase your split over time
- Minimum withdrawal amounts may apply (typically $50-$100)
Scaling Plans
Many prop firms offer scaling plans that increase your account size and profit split as you demonstrate consistent profitability. A typical scaling path might look like this:
Initial
Pass evaluation
$50,000
80/20 split
Level 2
3 months profitable
$75,000
85/15 split
Level 3
6 months profitable
$100,000
90/10 split
What to Look For When Choosing a Firm
Not all prop firms are created equal. Here are the most important factors to evaluate:
Reputation
Check Trustpilot, Reddit, and trading communities
Payout Proof
Look for verified payout screenshots and testimonials
Rule Clarity
Rules should be transparent and easy to understand
Platform Quality
Reliable execution and minimal slippage
Support
Responsive customer service via multiple channels
Fee Structure
Reasonable evaluation fees relative to account size
Disclaimer
This content is for educational purposes only and does not constitute financial advice. Trading involves substantial risk of loss. Always do your own research and consider consulting a qualified financial advisor.