Funded Trader 101: The Beginner’s Handbook

If you’re interested in trading, becoming a funded trader should be your ultimate goal. A prop firm will give you capital to trade on various trade markets, such as cryptocurrency or foreign exchange (forex) currencies. With a funded account, you have a high degree of autonomy and can earn handsomely based on a profit-sharing model.

So, what is a funded account? And as a funded trader, what are you responsibilities? In this guide, we’ll dive into the basics of funded trading and cover everything you need to know to become a funded trader.

What Are the Different Trade Markets?

Trade markets are different channels through which investors can trade to earn a profit. There are four major trading markets:

  1. Forex: Forex is a decentralized global market where all the world’s currencies are traded.
  2. Cryptocurrency: Crypto trading is speculating on the price of digital coins and tokens, such as Bitcoin or Ethereum, for profit.
  3. Commodities and Metals: This involves the buying and selling of physical commodities and metals such as oil, gas, gold, silver, and other precious metals.
  4. Indices (US30, aka Dow Jones): Indices trading is the buying and selling of financial indices on a stock exchange, similar to stock trading.

For a funded trader, the ideal markets are forex and crypto.

Funded trader 101: the beginner's handbook
Navigating the trading markets | Source: Shutterstock

Forex Trading

Forex is the process of anticipating and speculating on currency prices to make a profit. You typically trade currencies in pairs. A trader speculates whether one currency will rise or fall in value against the other.

There’s no physical exchange in forex trading. It’s conducted entirely online with traders around the world.

The foreign exchange market has a daily trading volume of more than $5 trillion and welcomes both new and experienced traders. You can trade forex as an individual or through a brokerage firm. Forex trading can be a high-risk, high-reward investment, with the potential for large gains or large losses.

Benefits of Forex Trading:

  • Forex trading has the highest daily trading volume in the world.
  • Thanks to its large volume, it offers the most liquidity, making it easier to enter and exit a position in forex.
  • Forex trading requires less initial capital while following almost the same rules as regular trading.
  • It’s much easier to start compared to stocks.
  • Forex trading is more decentralized than stocks or bond markets.
  • This type of trading is ideal if you want to multiply your profits.

Cons of Forex Trading:

  • It’s high-risk.
  • There’s a steep learning curve for individual forex traders.

Cryptocurrency Trading

Crypto trading is the buying and selling of digital currencies, also known as cryptocurrencies, on online marketplaces called cryptocurrency exchanges.

Cryptocurrencies are digital coins or tokens. They’re decentralized, meaning they operate independently of central banks or governments. The most well-known cryptocurrency is Bitcoin, but there are thousands of other popular coins, such as Ethereum, Litecoin, and Ripple.

Trading cryptocurrency is similar to trading forex. With crypto, you typically trade crypto/dollar pairs or crypto/crypto pairs.

You can trade crypto in two ways—by buying and selling coins on an exchange or through a contract for difference (CFD). A crypto CFD lets traders speculate on the price movements without actually owning the crypto. It’s basically a contract between you (the buyer) and the seller, where you agree to pay the difference between the current value of a cryptocurrency and your speculated value.

Crypto traders use various tools to analyze the market, such as technical analysis, charting, and fundamental analysis. They also use trading platforms and other software to execute trades and manage their positions. As with forex trading, cryptocurrency trading can be highly leveraged, which can lead to large gains or large losses.

It’s important to note, however, that crypto trading is largely unregulated. There have been instances of fraud and hacking in the past. Therefore, traders should be careful when choosing a cryptocurrency exchange and only trade on reputable platforms.

Benefits of Crypto Trading:

  • The crypto market is self-governed and managed, so it’s secure and private.
  • It’s decentralized.
  • Because of its lower transfer rate, cryptocurrency trading is an excellent way to send or receive money all over the world.

Cons of Crypto Trading:

  • The crypto market can be extremely volatile.
  • Some coins may have low liquidity, which makes it difficult to trade large amounts.
Source: Shutterstock

What Is Funded Trading?

A funded trading program offers capital, so you can trade without risking your own assets. Essentially, a prop firm lets you manage their funds and agrees to split profits with you. The profit split can go as high as 80:20 for most firms (The Funded Trader gives 90:10 after scaling your account—the highest in the industry).

Many traders use funded trading to make a living. So, if you’re serious about trading, a funded trading account can be a valuable asset for your growth.

However, to earn a funded trading account, you must prove your skills by passing one of their trading challenges, i.e. Standard, Rapid, Royal, or Knight’s Challenge. It’s an attractive opportunity for traders who have a proven track record of success but lack the resources to trade on their own. As a funded trader, you can access larger trading capital and increase your earning potential. Funded trading also provides advanced technology and trading tools.

Benefits of Funded Trading

There are numerous advantages to becoming a funded trader:

Low Risk

Funded trading lets traders access the market with a minimal amount of capital and risk. Because the prop firm finances the trade, the investor doesn’t risk losing their own money.

Access to Leverage

Funded trading allows traders to access leverage, which can increase their return on investment (ROI). Leverage is a powerful tool that can help traders increase their profits, but it also carries a risk of losses.

Low Cost

Funded trading is generally cost-effective. Most funded trading programs have very competitive fees and commissions for traders. The costs are often lower than those charged by traditional brokerage firms.

Professional Support

Funded trading gives traders professional support from experienced traders. These professionals can lend valuable assistance, which helps new traders make better decisions.

Retail Trading vs. Professional Trading

Retail traders are individual investors or traders who buy and sell assets on their own. Professional traders, on the other hand, are employed by large firms or organizations to actively manage and trade assets.

Retail traders use online platforms or brokers to access the market. This type of trading is generally done with a lower amount of capital to take advantage of market opportunities for short-term gains. However, retail traders are more susceptible to market volatility as they usually have less access to tools and resources to plan their trades.

By contrast, professional trading involves large amounts of capital traded on behalf of a firm or organization and is typically more focused on long-term gains. Such traders have access to advanced trading platforms that offer deeper analysis and faster execution. Professional trading also generally involves more sophisticated strategies, such as arbitrage and hedging.

Professional traders also have more access to market information than retail traders, which gives them an edge when making informed trading decisions. In addition, they have more capital to invest and can take advantage of larger market opportunities than retail traders.

Overall, there are advantages and disadvantages to both types of trading. Retail trading is more suitable for short-term traders without significant capital to invest, while professional trading is better for investors with the resources and experience to manage large amounts of capital.

Retail vs. Funded Trading Account

A retail trading account is owned by an individual investor. With a funded trading account, a prop trading firm gives the trader capital.

The main differences between a retail trading and funded trading accounts are the amount of capital and access to the markets. In a retail trading account, individual traders and investors typically have access to smaller amounts of capital, which limits their ability to trade larger positions.

With a funded trading account, investors have access to large amounts of capital and leverage and can trade large positions in the markets.

Source: Shutterstock

Types of Trading Based on Time Frame

Trading based on time frame can be divided into three main categories: day trading, swing trading, and scalping.

Day Trading

Day traders enter and exit trades within the same day and don’t hold positions overnight. They mostly aim to profit from short-term price fluctuations in the market.

This type of trading requires a high level of focus and discipline, as you’ll need to make quick decisions and react to real-time price movements. It also requires a solid understanding of market trends and technical analysis to determine the best times to enter and exit trades to maximize profit.

This is high-risk, high-reward trading, so you should have a strong risk management strategy in place before entering a trade.

Overall, day trading is challenging because tracking tiny price fluctuations throughout the day can be stressful and demanding. As such, it may not be suitable for everyone. Before choosing this strategy, consider whether you have the right mindset and discipline for it.

Swing Trading

Swing traders typically hold their positions for several days or weeks. It involves identifying a potential trend in the market and then taking a position that will benefit from that trend.

Swing traders look for short-term momentum in forex pair prices. They study chart patterns, which may indicate a trend in the price. Swing traders also use fundamental analysis and track economic and political factors that can affect forex prices.


Scalping is a high-pressure, fast-paced trading style. It involves taking small profits, often on multiple trades, over a period of time. Scalpers enter and exit trades at very short intervals and usually hold open positions for only a few minutes, sometimes even seconds.

Scalping attempts to capitalize on small price movements and is often used to target small and fast profits. To make large profits, a scalper should be able to handle a large number of trades within a short period of time.

This type of trading requires access to real-time market data and a fast Internet connection.

How to Get Started as a Funded Trader

If you wish to become a funded trader, you must develop the skills and knowledge required to operate successfully in the market. Start with research to understand the different forex pairs. Then, develop an effective trading strategy and create a trading plan. This plan should include managing risk, learning the basics, and trading through a reputable prop firm.

Have a Risk Management Strategy in Place

No one wins 100% of the time. Risk management requires a thorough understanding of the financial markets along with the strategies and techniques used to alleviate risk.

It’s the trader’s responsibility to identify, measure, and manage the risks associated with their trading activities. Start by identifying your risk tolerance. How much money are you comfortable losing? Based on this, set an investment goal. You can also utilize stop-loss and take-profit orders that automatically close the trade. In addition, you can diversify your trades and use low leverage when starting out.

Learn the Basics of Trading

As a funded trader, you must understand the basics of trading. A firm grasp of the fundamentals will help you understand the markets and make better-informed decisions.

To become a successful funded trader, you must have a deep understanding of the different trading strategies and the factors that drive the markets.

Learn the basic concepts, such as the types of orders, different markets, trading strategies, and types of analysis. This will help you make informed trading decisions to maximize your profits.

Trade Through Reputable Prop Firms

If you’re a new funded trader, it’s important to trade through reputable prop firms. This will ensure your trading activities are secure and protected. Look for platforms that have official licenses and regulations, have proven their reliability, and offer top-notch customer service.

Additionally, look for platforms that offer the features and services you need. Consider the trading tools they provide, the fees they charge, and their security measures. You can also check the user reviews and feedback on the firm before deciding.

Should You Become a Funded Trader?

Becoming a funded trader is a low-risk, low-cost way to begin trading forex and crypto. If you invest time to learn about trading and the markets, you can see great profits. Choosing a reputable prop firm is also essential—especially for beginners. This ensures a positive future and potential benefits without the risk of being exploited.

The Funded Trader levels the playing field. Whether you’re new or experienced, anyone can become a funded trader and manage hundreds of thousands of dollars in capital.

Enroll in The Funded Trader Challenges to start building your trading empire today.