The funded account challenge is a trading contest in which the winners are rewarded with real money to trade online. Traders are challenged to prove their ability to earn consistent profits. Those who pass the test get funded with up to $200K in their account. There are three stages to the competition: the demo stage, the verification stage, and the funding stage. The successful traders who make it through to the final stage receive the funding under management.
The idea behind the challenge is to test both the applicant’s profitability and consistency over a limited period. There are predefined trading objectives such as profit targets and maximum losses. The program is layered with different account sizes making it suitable for traders of all abilities. One of the most alluring features of the funded account is that traders can manage their trades with minimum risk and maximum profit: 70:30% in the trader’s favor. The traders are responsible for following market rules and trading practices.
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The first step for traders wanting to pass the challenge is to sign up and pay an entry fee. The fee is fully refundable once the next stage is reached – with a $1000 bonus on top. Traders choose their account type, with accounts starting from $10,000 up to $200,000. The lowest sign-up fee is just $99. Each stage comes with its own trading parameters and prerequisites.
Traders need to bear in mind the “consistency rule” when applying their strategy of choice in the first two stages. The rule stipulates that the profits earned on your best trading day shouldn’t surpass 30% of the overall target profit. Traders can monitor and analyze their results using a transparent tracking system.
There is a plethora of funded accounts on offer, in the growing industry of what is known as proprietary trading firms or “prop trading.” Mostly you will have a preallocated timeframe in which to demonstrate your trading skills, generally within 30 calendar days. The limited time will offer the added challenge of testing your trading mettle over a variety of trading conditions. If you are choosing your time frame then you will be in the enviable position of being able to tweak your style to best suit the trading session, be it as different as New York or London. Be open to letting the market guide your choice. A strategy that performs well over one trading event may surprise you in another.
The golden rule for passing a funded account challenge is to find a strategy that you can excel at – not one which promises the highest rewards. Traders who are best suited to keeping positions open longer may not best perform with a scalping strategy, for example. Use retrospective analysis of your past performances to judge what strategy would be best using the statistics and data you have honed in previous trading sessions. Also, bear in mind that the funded account leverage may be different from what you would normally trade with, and you should alter your style accordingly. The leverage will affect the margin and commission for example. Avoid the pressure of self-imposed deadlines – adding stress can remove rationale.
Lately more and more prop firms allow the use of trading bots to pass their challenge. It may be worth it to consider Expert advisors as part of your strategy and we strongly advise you to read first our guide on How to Use a Trading Bot to Pass a Prop Firm Challenge and program your trading bot accordingly.
Most traders enter the challenge not only for the opportunity of trading with a funded account – but a largely risk-free one. The broker assumes the risk, the trader takes home the vast majority of the reward. Of course, to pass through these golden gates of opportunity traders will need to balance the risks and rewards within their strategy. The FAC tests not only your ability to make one windfall profit but consistently earn over time. Therefore a keen eye for market opportunities alongside a proportional risk-reward ratio is vital.
Not every trader will pass the funded account challenge. If they did, it wouldn’t be a challenge! However, with the right risk mitigation and strategy in place then a trader with an astute eye and a disciplined mind will be able to pass to the next stage. The chance of being a funded trader with up to nearly a quarter of a million dollars – risk-free – in your account is not lightly passed up and with good reason. Due diligence, preparation both for the market and the mind, and you will stand in good stead in joining the lucky winners.
So I have been reading through your comments people are asking how to pass the challenge and get funded. So today, we've asked Rosen our channel trading expert to record a quick 2-minute video for you. Here is the full discussion in the video below:
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