Funded Account
The term 'funded account' has two distinct uses. In general financial contexts it refers to any brokerage or investment account that has been capitalised — a standard retail account with a deposit. In prop trading it means something specific: a simulated account provisioned by a prop firm after the trader passes a structured evaluation. The capital belongs to the firm. The trader earns a share of the profit. These are different products. This page covers the prop trading definition.
A funded account is a simulated trading account provisioned by a proprietary trading firm after a trader passes a structured evaluation, granting access to the firm's capital in exchange for a percentage of the net simulated profit.
The capital is the firm's, not the trader's; the balance the trader sees and trades is simulated. The trader's contractual claim on the firm is the agreed share of the net simulated profit, paid in cash at the firm's payout schedule. Funded accounts inherit the same drawdown and daily loss rules from the evaluation in most cases, so a breach after funding ends the account the same way it would end an evaluation.
This page covers the mechanic; it is not trading advice.
Prop firm rules vary between firms and change frequently. Always verify specific rules directly with your firm before making any decision.
What 'funded' actually means in practice
A prop firm gives you a simulated account funded with their capital — pass the evaluation first, trade within the rules, and keep a percentage of what you earn.
You never put your own money into the funded account; only the evaluation or subscription fee is at risk. The firm gives you a simulated balance to trade. When you make a profit, the firm pays you a share of it in cash at the agreed schedule. If you breach the rules, you forfeit the right to keep trading the account.
Try the concept
Account size
Drawdown type
Scenario
Starting balance: $50,000 · profit target $55,000 · static drawdown floor $45,000
Evaluation passed — profit target reached, drawdown floor never breached.
Parameters are illustrative. Profit targets, drawdown limits, and daily loss levels vary between firms. The trailing scenarios depict the end-of-day variant; intraday trailing follows the same rising- floor rule but updates in real time, including unrealised P&L on open positions.
How a funded account works
A prop trading evaluation is a structured trading challenge with defined rules. The trader trades a simulated account over a fixed period and must reach a profit target without breaching either the daily loss limit or the maximum drawdown limit. Only the evaluation or subscription fee carries financial risk during the challenge.
The rules screen for consistency, not for one-day winners. Reaching the profit target through a single oversized position fails most firms' consistency checks even when the target is hit. Steady gains across the period are what the firm is looking for. Breaching either loss limit typically ends the evaluation immediately, though the specific consequence (termination, pause, or reset) varies by firm.
Most evaluations also require a minimum number of trading days (typically 5 to 10) before the trader can request the funded account. The minimum is a structural test: it prevents passing on a single lucky day and demands the strategy survive across multiple sessions. Some firms additionally restrict trading around scheduled high-impact news events, prohibit weekend holding, or limit hedging across the firm's account family.
Once the trader passes, the firm provisions a funded account: a new simulated account with the chosen capital allocation. The capital belongs to the firm. Profit on the account earns the trader a percentage of the net simulated total, paid in cash on the firm's payout schedule. Funded accounts inherit the same drawdown and daily loss rules from the evaluation in most cases. A breach after funding ends the account the same way it would end an evaluation.
Evaluation types
Evaluations come in three structures: 1-phase, 2-phase, and instant funding. The structure affects how quickly a trader can reach a funded account and what fee and rule trade-offs apply at each stage. Profit targets and time limits vary by firm; the table below shows commonly observed ranges. Drawdown and daily loss limits are firm-defined parameters. Always confirm the specific values before starting an evaluation.
Drawdown types
The maximum drawdown is the total loss limit on the account. Three variants of drawdown are in common use: static, trailing intraday, and trailing end-of-day. They differ in how the loss floor is calculated.
Static drawdown sits at a fixed distance below the starting balance. On a $100,000 account with a 10% static drawdown, the floor is $90,000 for the life of the account. Profit gains expand the buffer between current equity and the floor. At most firms a payout cycle resets the balance but leaves the static floor at $90,000, though some firms reset the floor at each payout cycle; confirm the specific firm's policy. This is the more trader-friendly variant — a $5,000 gain widens the survivable loss budget to $15,000.
Trailing intraday drawdown updates the floor in real time as equity rises during the session, including unrealised P&L from open positions. A trade that runs $1,000 into profit raises the floor by $1,000 the moment that floating profit is recorded. Pulling back to the entry erases the floating profit but the higher floor stays. This is the most punishing variant: a trader who rides a winning trade up and gives the profit back ends the session with a meaningfully tighter loss budget than they started with.
Trailing end-of-day (EOD) drawdown updates the floor only at the daily close, based on the highest closing balance recorded at the end of any previous day. Intraday peaks that pull back before close do not move the floor. EOD trailing is the more forgiving of the two trailing variants for active intraday strategies.
On most trailing accounts, the floor stops rising once accumulated profit covers the original drawdown allowance — the drawdown floor lock. After the lock the floor stays static at the starting balance, and the account converts to a static-style rule for the remainder of its life. Note that withdrawals reduce the buffer even after the floor has locked: a $4,000 payout taken on a $104,000 funded account brings the balance to $100,000, equal to the locked floor, and any subsequent loss breaches.
Hard breach versus soft breach
Breach consequences are firm-defined. The two patterns are hard breach and soft breach.
A hard breach terminates the account immediately. The trader cannot continue trading on it; resuming requires purchasing a new evaluation. Hard breach is the default consequence at most firms for maximum drawdown violations, and for daily loss breaches at firms that treat the daily limit as a hard rule.
A soft breach pauses trading without terminating the account. The session ends; the trader resumes the next session subject to the firm's specific reset rules. Some firms apply soft breach to daily loss violations, treating the daily limit as a circuit breaker rather than a kill switch. The account survives, the breached day's results are typically locked in, and the account continues forward.
Outcomes diverge sharply between the two patterns. A daily-loss breach at a hard-breach firm ends the account, while the same loss at a soft-breach firm ends the day. Always confirm the specific rule before starting an evaluation. Assuming the gentler interpretation will end an account at firms that take the stricter line.
Payout mechanics
Trader earnings on the funded account are a share of the net simulated profit. That share, the profit split, ranges between 50% and 100% in the trader's favour depending on the firm and account tier; 80/20 (80% to the trader, 20% to the firm) is the most common pattern across major firms. Splits at the upper end (90% or higher) are commonly offered at higher account tiers or as a scaling reward; lower-tier accounts often start nearer 70%, and some entry programs go as low as 50/50.
Payouts run on a cycle. Common patterns are monthly, bi-weekly, and on-demand after a minimum number of trading days. The minimum trading day requirement (typically 5–10 days) ensures the firm sees consistent activity before releasing cash. Payout requests typically require all positions to be flat at the cutoff; some firms include floating P&L at the cutoff, others require positions closed.
Worked example — monthly payout
Payout = Net simulated profit × Profit split- Net simulated profit
- $4,000
- Profit split
- 80%
Trader payout
$3,200
On a $100,000 funded account that closes the month with $4,000 net simulated profit at an 80% split, the trader receives $3,200 in cash and the firm retains $800. The funded account resets to its $100,000 starting balance for the next cycle. If instead the month closes at –$1,500, no payout occurs and the account continues at $98,500. On a trailing drawdown the floor-lock buffer is now closer to current equity than at the start of the cycle.
Net simulated profit is calculated after all per-trade costs the firm models on the simulated account: spread, commission, and overnight swap charges on positions held past the firm's daily rollover time. A trader who sees a $5,000 gross gain on the day's trades but accrued $400 in modelled commissions and swaps closes the day with $4,600 of net simulated profit — the figure the profit split applies to and the figure the daily-loss and drawdown limits are measured against.
Scaling plans
Most firms offer a scaling plan: a defined path to grow the funded account size as the trader hits performance milestones. Scaling rewards consistency. A common structure requires three consecutive profitable months (each closing with a minimum net gain) to qualify for the next account size step.
Step sizes vary. Percentage steps run from 25% to 50% per milestone — a $100,000 account on a 25% step scales to $125,000, then $156,250, then $195,312.50; a 50% step would reach $337,500 over the same three milestones. Some firms offer fixed-dollar steps ($25,000 per milestone). Caps are firm-defined; many firms cap total simulated capital across linked accounts at $200,000–$2,000,000 or more.
Worked example — 3 milestones at 25%
Next size = Current × (1 + step rate)- Starting account
- $100,000
- Step rate
- 25%
- Milestones reached
- 3
Account after 3 milestones
$195,312.50
Drawdown limits and daily loss limits are firm-defined. Forex-prop firms commonly express them as a percentage of starting balance — a 5% daily loss limit on a $200,000 account is a $10,000 daily budget, on a $100,000 tier it is $5,000. Futures-prop firms commonly use fixed-dollar limits per account tier instead, with the limit set at the tier boundary rather than scaling with size — for example, a $3,000 maximum loss on a $100,000 account and $4,500 on a $150,000 account. The profit split sometimes improves with scaling, with some firms moving from 80% at the entry tier to 90% at higher tiers; that progression is firm-specific.
How prop trading worksThe business model behind funded accounts: the evaluation, profit splits, and why only the evaluation or subscription fee is at risk.Related terms
Common questions
What is a funded trading account?
A funded trading account is a simulated trading account provisioned by a proprietary trading firm to a trader who has passed the firm's evaluation challenge. The capital belongs to the firm; the trader earns a percentage of the net simulated profit. The trader does not deposit personal capital into the funded account.
Is a funded account a real trading account?
No. The funded account is a simulated balance the firm uses to compute the trader's payout entitlement. The trader cannot withdraw the simulated balance itself, only the cash payout calculated as the agreed profit-split percentage of net simulated profit at each payout cycle.
How is a funded account different from a retail brokerage account?
A retail brokerage account holds the trader's own capital; gains and losses are the trader's. A funded account holds simulated capital provided by a prop firm; the trader earns a share of the simulated profit but never owns the underlying balance. Retail brokerage accounts have no profit target, no drawdown rules, and no daily loss limit imposed by an external party; funded accounts have all three.
Do you risk your own money on a funded trading account?
No personal trading capital is at risk on the funded account itself. The trader's only financial exposure is the evaluation or subscription fee paid to access the challenge. Once funded, losses are absorbed by the firm. The trader can forfeit the right to trade the account through a drawdown breach, but does not owe any money to the firm.
What is the difference between a 1-phase and 2-phase evaluation?
A 1-phase evaluation requires the trader to hit a single profit target before being funded, commonly 8–10% within a defined trading period. A 2-phase evaluation splits the requirement across two stages with separate profit targets, commonly 8% in Phase 1 and 5% in Phase 2. 1-phase is typically faster to complete; 2-phase typically grants larger funded capital and is offered by firms emphasising verification depth over speed.
What happens if you breach the drawdown limit on a funded account?
A maximum drawdown breach is typically a hard breach: the funded account is terminated immediately. The trader cannot recover that account; resuming requires purchasing a new evaluation. Specific consequences vary by firm. Some firms offer a one-time reset on a funded account at additional cost; most do not.
What is the difference between a hard breach and a soft breach on a funded account?
A hard breach terminates the account immediately when the limit is hit. A soft breach pauses trading until the next session without terminating the account; the trader resumes the next day with the breach recorded but the account intact. Most firms apply hard-breach treatment to maximum drawdown. Daily loss limit treatment varies by firm; confirm the specific rule before starting an evaluation.
How are profits paid out on a funded account?
The trader earns a percentage of net simulated profit, called the profit split. Splits range between 50% and 100% in the trader's favour depending on the firm and account tier; 80/20 is the most common pattern across major firms. Payouts run on a defined cycle. Common patterns are monthly, bi-weekly, or on-demand after a minimum number of trading days. Most firms require positions to be flat at the payout cutoff; some include floating P&L at the cutoff, others require positions closed first.
What is trailing drawdown on a funded account?
Trailing drawdown is a loss floor that rises with the account's equity highs. As the account makes new highs, the floor rises by the same amount, locking in gains as a permanent floor below which the account cannot fall. The floor never decreases when equity pulls back. Two timing variants exist: intraday trailing (updates in real time, including unrealised P&L on open positions) and end-of-day trailing (updates only at daily close, based on closing balance). Most firms lock the floor at the starting balance once accumulated profit covers the original drawdown allowance.
Can a funded account be scaled up?
Yes, most firms offer a scaling plan that grows the funded account size as the trader hits performance milestones. Percentage steps run from 25% to 50% per milestone, commonly triggered after three consecutive profitable months meeting a minimum gain threshold. Caps are firm-defined; many firms cap total simulated capital across linked accounts at $200,000–$2,000,000 or more. The profit split sometimes improves with scaling.
What is a consistency rule on a funded account?
A consistency rule caps the share of total profit that any single trading day may contribute. A common form is 'no single day's profit may exceed X% of total profit', typically 30–50%. The rule prevents passing an evaluation or qualifying for a payout via a single oversized position. Consistency rules apply to evaluations at most firms and to funded accounts at some; the rule and its threshold vary by firm.
How long does a prop trading evaluation take?
Time limits vary. 1-phase evaluations are commonly 30 days minimum, often with no maximum; the trader can take as long as needed to hit the profit target subject to maintaining minimum trading days. 2-phase evaluations often allow 30 days per phase. Instant funding has no evaluation phase. Some firms run 'evergreen' evaluations with no time limit; others impose strict caps. Confirm the specific time rules before starting.