Forex trading is now a realistic career choice for anyone who can demonstrate the necessary skills and commitment, thanks to the accessibility offered by prop funding firms. These firms give the trader access to capital, so that the trader has the opportunity to develop their career by making consistent profits over time without risking their own funds.
Here’s a look at how these funded accounts work, and how to get started.
What is a funded forex account?
A funded account refers to an account where the capital is provided by a broker or proprietary (prop) trading firm. At one time, the vast majority of forex trading was carried out within investment banks or other financial institutions. The rapid rise of digital technology has lowered the barriers to entry, opening up access to anyone with an internet connection.
However, self-funded forex trading accounts are difficult to maintain unless you already have significant private capital, plenty of trading experience and a high risk tolerance. Prop firms offer the trader the opportunity to trade with the firm’s capital rather than risk personal wealth. In return, the prop firm will keep a percentage of any profits made.
The best traders who can prove their worth to the prop firm will be rewarded with a scaling trading plan that increases their account size and profit share. This can lead to a very lucrative income stream, and even become a full time career. However, it will be necessary to demonstrate a consistent performance and hit the firm’s profit targets.
Selecting a prop firm
To access a funded prop firm account, it’s usually necessary to pass a structured evaluation process. Many prop firms will offer a free two-step evaluation process, whereby you need to pass two tests during a 14 day free trial. During the evaluation, you’ll need to demonstrate that you can manage risk responsibly, stay within drawdown limits and hit set profit targets.
You’ll be trading in simulated market conditions without the pressure of risking real money. If you are successful, you will have free access to a funded account, with the opportunity for a scaling trading plan that rewards good performance. However, more experienced traders may prefer to purchase instant funding accounts that allow them to trade live from day one.
Some firms such as FTUK also offer a one-step evaluation program, whereby you will only need to pass one test instead of two. You’ll need to pay a fee to access the one-step program, but it will be refunded to you if you are successful.
This path may suit more experienced and confident traders who want the opportunity to familiarise themselves with the prop firm’s trading interface and operating rules before entering live market conditions.
Less experienced traders are advised to learn as much as they can about the basics of forex trading before applying to a prop firm.
Understanding scaling trading plans
Once you have passed the evaluation stage or purchased instant funding, you’ll be given a funded traded account. Typically, this will start at around $10k, but if you hit set profit targets and prove that you can trade within the rules of the prop firm, you’ll be rewarded for your good performance.
All prop firms have a slightly different structure, so it’s important to research them carefully and choose one that suits your trading style, time constraints, and profit goals.
The best way to make progress in your forex trading career is to use a prop firm that offers scaling trading plans. These are designed to reward committed traders who perform well with increasing account sizes and larger profit shares as set milestones are reached.
Skilled traders who have demonstrated a consistent track record in managing risk and hitting profit targets have the potential to trade with seven figure accounts, with a profit share of 80:20 in their favour. The prop firm will cover any losses that are made, and the trader will be able to access their payouts at weekly or monthly intervals.
This means that in return for their time and effort, the trader will be very well rewarded with no personal financial risk. With a strong trading strategy and a clear risk management plan, it’s possible to earn lucrative profits from a forex prop trading firm.