Are Funded Accounts Worth It? (Expert Recommendations Included)

Funded accounts are worth it as they allow skilled traders to trade the financial markets without risking their own money. By using a funded account, traders can reduce their exposure to financial risk, access greater trading capital, and potentially earn higher returns. Stick with us as we elaborate on the benefits and drawbacks of using a funded account via a prop firm and much more. 

What is Prop Trading?

Prop trading or proprietary trading happens when a trader trades the financial markets (currencies, bonds, derivatives, stocks, and bonds) or other instruments using a prop trading firm's money, not their own. Prop trading always involves a return-sharing model where the funded trader receives a pre-agreed percentage of returns made (usually 70% to 90%) and the firm providing the trading capital gets the remaining (10% to 30%).

Funded Account vs. Personal Live Account

To understand if a funded program account is worth it, we’ll compare the pros and cons of a personal account (using your own money) and being a funded trader with a prop firm.

What are the Benefits of a Funded Account?

Quick Trading Capital Boost 

Every experienced trader knows that the primary hindrance to quality progress in a trading journey is purchasing power. A funded account gives traders a large account size that enables higher returns. 

For example, with IC Funded, the funded trader can access up to $500,000 in trading funds. A high trading capital boost also allows traders to have greater lot sizes without risking too much.

Reduced Risk to Personal Funds 

Being a funded trader means that you won’t need to risk personal capital in executing trades. Traders only need to buy an account and pass the evaluation challenge, then they get access to the prop firm’s funds.

Potential for High Returns

Due to the large trading capital offered by a funded account, traders can potentially achieve higher returns. This isn’t the case with a personal live account, as the trader is limited to their trading capital. Funded accounts also allow the trader to increase/scale their account size to further boost their performance.

Development of Trading Discipline and Skills (Coaching and Practice)

Most prop firms offer a coaching service to their traders, which comes in a variety of ways, such as video tutorials, one-on-one coaching with industry experts, trading educational articles, etc. Traders also have the opportunity to develop strong trading discipline and skills due to having to follow the firm’s rules. Funded programs also offer a demo account where traders can practice and improve their trading strategies.

What are the Cons of a Funded Account?

Psychological Pressure on Funded Trader

Participating in a funded program means that the trader must stick to the trading rules and regulations of the firm providing the account. This results in the fear of loss where the trader is afraid of losing the firm’s money or getting kicked out of the program, which leads to hesitation/missed opportunities or, conversely, taking unnecessary risks.

Performance Targets

Traders having to hit a performance target set by the funded program can be a major problem for inexperienced individuals. The desire to hit the performance target quickly can make newbie traders deviate from their trading strategy and gamble with riskier strategies, which they wouldn’t typically use. This significantly increases their failure rate and can blow up the account.

Traders can also demonstrate bad trading behaviors like overtrading to hit a performance target or closing positive positions prematurely to lock in returns.  

Daily Drawdown Requirements

The daily drawdown requirements associated with funded programs can create a constant fear of loss about losing the account. This can lead to hesitation and missed opportunities, or worse, taking bad trades to cover losses quickly.

Evaluation Success is Not Guaranteed 

To participate in an evaluation challenge, traders must buy a particular account size. If the evaluation isn’t successful, then the trader must repurchase the account. They can pay a one-time fee or recurring subscription depending on the prop firm offering the program. That said, with IC Funded, traders are given unlimited time to retry for an account if they fail on the first try.

Return Sharing

Return sharing means that traders do not get 100% of the returns made with the provided trading capital. However, most prop firms provide scaling plans that allow users to both increase their trading capital and return-sharing percentage. The scaling plan usually depends on hitting performance targets consistently.

What are the Benefits of a Personal Live Account?

No Imposed Trading Account Daily Downdraw 

When you trade with your own money, there’s no obligation to maintain an imposed daily drawdown. This allows you to trade more freely and use trading strategies like dollar-cost-averaging, which may not be suitable for a funded program.

Reduced Pressure 

Every form of trading has some type of pressure associated with it. However, when you’re on a personal live account, you make the rules on acceptable trading strategies and targets. You won’t have to hit a particular target or stay above a drawdown to maintain your account. This reduces the pressure associated with funded programs.

Trading Evaluation is not Needed 

The evaluation or challenge phase is used to test a trader’s skills before giving them capital to trade with. On a personal live account, there’s no need to pass a trading evaluation to begin trading. The personal account allows you to start right away.

What are the Cons of a Personal Live Account?

Your Own Money is at Risk

The primary disadvantage of using your own capital to trade is that you can lose it. On a funded program, this isn’t a possibility as you aren't using personal funds to trade. Losing personal funds due to a bad trade can halt your trading activities or affect the type of strategies you can use.

Reduced Trading Potential

Most traders have a hard cap on the type of outcomes they can achieve due to low trading capital. This means that even on successful trades, the returns received are minimal. With a funded trading program, traders have access to scaling plans and higher capital for increased results.

Limited Trading Capital 

Limited trading funds mean that traders on a personal live account are restricted in the type of trades they can take (position size, trade risk, etc.). Traders with low trading funds are also unable to open positions with certain assets like Gold Futures/XAUUSD on particular brokers.

Are Funded Accounts Right for You?

IC Funded Evaluation Account Types

Funded programs are best for self-directed and self-motivated traders as you must hit set performance targets and abide by the rules and regulations of the proprietary firm. You must also consider your trading experience and risk tolerance. The demands of a funded program can overwhelm an inexperienced trader, as it requires strong discipline and the ability to handle pressure.

Conclusion

Getting a funded program account is worth it! Funded programs give traders access to higher capital and potentially larger results. Traders also do not have to risk personal funds to execute trades and develop strong trading discipline through the educational offerings of a prop firm. That said, prop trading is best for experienced traders who have definable strategies and can maintain consistent performance under high pressure.

Before applying for any funded program, ensure you do your own research and evaluate your trading goals.

FAQ

Join the Funded Traders Program at IC Funded 

The IC Funded Traders Program is an excellent option. The evaluation program requires a one-time fee and offers accounts with up to $500,000 in funding. Plus, the funded trader program offers popular trading platforms such as cTrader, MetaTrader 4, and MetaTrader 5, which are easy to use and customizable.