What is a funded Forex account?
A funded Forex account is nothing more than an account that is fully funded with the capital of a third party. Prop trading firms offer funded Forex accounts to talented or professional Forex traders to grow their capital.
The funded trading is beneficial for both parties. A trader has immediate access to trading capital so they can begin trading significant amounts of capital from day one. The trader is also not emotionally involved with the capital, so they can focus on purely rational decisions. On the other hand, the prop trading firm sees its capital increasing because of the excellent work of its traders.
Typically, the profit is equally split between the FX trader and the FX prop firm. This gives both parties the benefits of substantial profits while each one is bringing value to the table, be it trading capabilities or risking capital.
Advantages of a funded Forex account
The pros of a Forex funded account are the following:
Direct access to substantial capital from day one
Imagine starting as an independent FX trader with your own capital of £100,000. Being a low-risk trader, you aim to reach a solid profit level of 10% each period. That means that your capital grows by £10,000 every period, doubling your capital in almost nine periods. You cannot withdraw any of your profits, and will have to leave profits in your account to achieve growth.
Some funded Forex accounts work with accelerated growth, doubling your capital every time you hit a milestone. Imagine that you start with a funded Forex account of £17,500, and your capital quadruples when you hit the milestone of 10% profit. This means you can already work with a capital of £70,000 in the second period, and one period later you can work with a capital of £140,000. You have just shortcut seven periods and gained exponentially more opportunities.
After the third period, your capital is doubled to £280,000, in period four to £560,000, until you eventually reach a capital of £1,000,000 in period six.
Maybe the greatest advantage to a funded account is that you can withdraw your profit share every single year. With a Forex funded account you typically keep 50% of the profits, which can give you a substantial income in a relatively short period of time.
When you are continuing to show a consistent profit level of 10%, you receive £50,000 of profit every period beginning at the sixth period. You used to reach profits of £10,000+ with your own capital that you were unable to withdraw if you wanted to grow your account.
No need to risk your own money
Another great advantage of a funded Forex account is that you are not risking your own money. When you have built up a capital of £100,000, you can invest it in a down-payment on your house, you can buy yourself a nice car, or invest it in any way you choose. When you have the skills, it is better to trade with a prop firm’s capital in order to leave your own capital untouched.
Besides, trading other people’s money gives you the benefit of leaving all emotions out of the game. You can purely make rational decisions based on facts. You coach yourself through market reports, trading signals, or any other parameters to make profitable trades.
As you know, Forex movement can be quite volatile and hardly remains consistent. But seeing the forest through the trees can be quite a challenge when you are trading your own money. You can make the best decisions as a trader when you are not trading your own money.
Competitive element of the community
Most prop trading firms that provide you with a Forex funded account host a developed trading community. Most traders are competitive and want to be number one on the leader board. You also have access to trading sessions, workshops, courses, and one-on-one sessions with experienced FX traders. A prop trading firm re-invests their profits in resources to make you a better trader and improve your skills.
Disadvantages of a funded Forex account
In addition to the advantages, there are also cons to utilizing a funded Forex account. Read about them below:
Working on an assigned trading platform
Most Forex funded accounts are offered on a specific trading platform of a certain FX broker. If you were used to working on another platform, you must get acquainted with the specified platform. You will need to invest time to learn about the features, options, and opportunities of the trading platform.
Luckily, most Forex funded accounts are offered on some of the largest trading platforms. This means you will have access to one of the best platforms around, so your learning efforts are never wasted. You will probably have access to more opportunities on the platform, giving you more options as an FX trader.
Need to show constant results
A prop firm provides you with their capital and, of course, wants something in return – profits. You will have to show constant profits to keep your funded Forex account. This means that you will always keep your targets in mind, trying your best to reach them within the allotted time. If you do not reach your target, you could lose your Forex trading account.
However, this does not mean that you must show profits every day. You have an allotted period to do so, sometimes a year, to show the prop firm that you can reach their profit target. You can hold your trades when you are absent for a vacation, and you are even allowed to have losses within the firm’s parameters.
If you have the skills, it will be no problem at all to reach the profit targets. They are not unrealistically ambitious. When trading your own capital, you not have someone watching your KPI’s, but you also do not have the convenience of an externally set goal.
Splitting the profits
Splitting the profits may be the most challenging aspect for some traders. As a individual trader you have immediate access to your capital and your profits, and you decide to leave it in your account or withdraw it. As a trader with a Forex funded account, you must withdraw the profits in order to continue to trade.
To understand these dynamics, you must think very rationally about the situation. Would you prefer 100% of a small pie, or a fair 50% profit share of a gigantic pie? You must make a realistic and rational comparison about what is left under the line. Of course, you consider the option that gives you more profit under the line, while also considering all the other pros and cons.
Imagine you have your capital of £100,000 and decide to trade as an independent Forex trader. As a low-risk trader, you will be able to earn a solid £10,000 every period. When you decide to withdraw your profit, you get a nice £10,000 bonus on top of your primary income.
When you trade for a prop trading firm, you can gain access to a guaranteed capital of £1,000,000. With the same FX trading strategy, you will be able to reach a solid 10% profit level each period, earning you a total profit of £100,000 per period.
You receive 50% of that profit, leaving you with £50,000. That is a substantially higher income and allows you the option of using trading as your primary income source. Imagine the profits when you are a successful aggressive trader with a profit rate of 25%!
How to begin with a funded Forex account
There are several prop trading firms that can provide you with a fully funded account. The criteria and conditions for a funded Forex account differ from firm to firm.
Most proprietary firms request completion of an initial exam before they grant a funded trading account. This way they can ensure a trader has the knowledge required to successfully begin Forex trading.
When you pass the exam, you will typically begin trading with a demo account. This is a realistic representation of the real market where you will be able to show your skills. When you hit the virtual target, you pass this phase as well and you are often welcomed as a new trader.
Other proprietary trading firms allow you to work with real money in the real market immediately on a live account instead of an evaluation account. This gives you the advantage of not having to waste your time with exams and demos. These firms know that exams and demos are not necessarily representative of a trader’s abilities, and some traders need to feel the adrenaline of the real market to perform their best on the trading floor.
With these prop companies, you are often given a relatively small sum of capital to start with and exhibit your trading skills. Each time you hit a milestone, your capital is doubled to quadrupled.
With these firms, your future as a trader in your own hands. When you prove you are an excellent trader, the prop firm will provide you with more money. Simple as that!
The advantages of a funded Forex account
As a professional Forex trader, you receive the benefits of a funded Forex account:
- No need to risk your own capital trading Forex
- Immediate access to substantial capital
- No need to wait for your own capital growth
- Serious profits from the very beginning
- Access to experienced traders within the trading community
Are you interested in a funded Forex account? Forex Traders UK is a UK-based proprietary trading firm that will provide you with a fully funded Forex account. At Forex Traders UK, you can start trading real money in the real market without any initial trading exam or working on a virtual demo account.
At Forex Traders UK, you will begin with a starting capital of £10,000 to £70,000. Your capital will be quadrupled when you hit your first milestone – reaching a 10 to 25% profit margin, depending on your trading style (aggressive versus low-risk). Your capital is doubled every successive time you hit a milestone.
Forex Traders UK provides you with a Forex funded account and a guaranteed capital of £1 million. You just must show constant profit levels and a consistent trading style. We welcome both aggressive traders and low risk traders.
