A funded account is a trading account offered by a proprietary trading firm that lets a trader operate under the firm's rules and receive a share of eligible profits.
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Many online funded accounts are simulated accounts, not accounts containing cash that you can withdraw. FTMO describes its account as simulated trading capital, while Topstep says its Express Funded Account is simulated but may qualify traders for payouts.
Funded Account at a Glance
| Feature | How funded accounts typically work |
|---|---|
| Provider | A proprietary trading firm, often called a prop firm |
| Capital shown | Usually simulated or notional trading capital |
| Trader's deposit | Often an evaluation fee or subscription, not trading capital |
| Qualification | Meet profit targets and stay within loss limits |
| Earnings | Receive a percentage of eligible profits or performance rewards |
| Main risk | Losing access to the account, plus fees and payout restrictions |
| Live trading | Sometimes available after further review or an invitation |
How Does a Funded Account Work?
Most funded-account programs follow four stages:
- Choose an account size and program.
- Complete a trading evaluation.
- Trade a funded or simulated-funded account.
- Request a payout if you meet the firm's rules.
1. Choose an Account Size
A trader may choose an account described as $10,000, $50,000, $100,000 or more. This figure usually represents the account's nominal buying power, not money deposited into the trader's personal bank account.
For example, Topstep explains that an Express Funded Account can show a $0 balance while still providing the selected account size as buying power.
2. Pass the Trading Evaluation
The evaluation tests whether the trader can make a profit without exceeding the program's risk limits. Common rules include:
- Profit target
- Maximum daily loss
- Maximum total loss or drawdown
- Minimum trading days
- Consistency requirements
- Restrictions on news trading, overnight positions or specific strategies
FTMO's published example for a $100,000 simulated account uses a $10,000 profit target, a $5,000 maximum daily loss and a $10,000 maximum loss. Those figures are an example, not an industry standard.
Topstep also requires traders to meet a profit target while staying above its maximum loss limit during the Trading Combine evaluation.
3. Trade the Funded Account
After passing the evaluation, a trader may receive access to a funded-level account. The account can still be simulated.
FTMO says traders on its standard FTMO Account trade with simulated capital and may receive a reward based on simulated profits. Topstep describes its Express Funded Account as a simulated funded-level account that can provide payouts.
Some firms later move selected traders to a live account using real capital. That change is not automatic. FTMO says progression to a Live Funded Account is at the company's discretion. Topstep describes its Live Funded Account as a separate stage that follows consistent performance.
4. Receive a Payout
If the trader follows the rules and produces eligible profits, the firm may pay a percentage of those profits.
FTMO, for example, says traders can receive up to 90% of simulated profits on its standard program. Other firms set their own profit splits, payout caps, waiting periods and eligibility rules.
A displayed profit balance is not always immediately withdrawable. A program may require a certain number of winning days, impose payout limits or keep part of the profit in the account.
Is a Funded Account Real Money?
Usually, the account balance is simulated, but the payout can be real money.
That distinction separates a simulated funded account from a standard brokerage account:
- Simulated funded account: The trading balance is fictional or notional. The firm may use the trader's market data and pay rewards based on performance.
- Live funded account: Trades are placed with real capital under the firm's risk controls.
- Personal brokerage account: The trader deposits their own money and trades directly through a broker.
FTMO states that its standard FTMO Account is a simulated demo account rather than a live margin account. Its futures documentation also distinguishes between a Sim-Funded Account and a Live Funded Account.
Funded Account Versus Margin Account
A funded account is different from a margin account.
| Funded account | Margin account |
|---|---|
| Usually provided through a prop trading program | Provided by a brokerage firm |
| Often uses simulated capital | Uses deposited money plus borrowed funds |
| Requires compliance with the firm's program rules | Requires compliance with broker and market rules |
| May charge an evaluation fee or subscription | May charge interest on borrowed funds |
| Payouts depend on the firm's agreement | Gains and losses belong to the account holder |
| The account may be terminated after a rule breach | Losses reduce the account holder's capital and may create additional obligations |
Investor.gov defines a margin account as a brokerage account in which the broker lends money to purchase securities, using the investor's account as collateral. Margin increases buying power but also increases potential losses.
What Are the Main Benefits of a Funded Account?
A funded account may appeal to a trader who wants to:
- Trade a larger nominal account without depositing the full amount
- Limit personal market exposure to program fees, subject to the agreement
- Follow defined risk limits
- Demonstrate trading discipline
- Receive performance-based payouts
A funded account does not remove trading risk. A trader can lose evaluation fees, subscriptions or activation fees. The firm can also remove access after a rule breach.
What Are the Main Risks and Limitations?
Before paying for a funded-account program, check:
- Whether the account is simulated or live
- How the maximum drawdown is calculated
- Whether losses are measured from the starting balance, end-of-day balance or highest account value
- The profit split and payout cap
- Minimum trading days and payout waiting periods
- Reset, activation and monthly subscription fees
- Rules on news trading, overnight positions, automation and copy trading
- The firm's refund and account-termination policy
- Whether the firm operates in your country
- The conditions for moving from simulated trading to live trading
The CFTC warns that hypothetical or simulated trading results have important limitations and should not be treated as evidence that a trader will achieve similar results with real money. The CFTC also warns that leveraged trading can produce substantial losses.
Bottom Line
A funded account gives a trader access to a prop firm's trading program in exchange for meeting defined performance and risk rules. The advertised account size is often simulated or notional, not cash personally owned by the trader. The trader earns money only when the program permits a payout and the trader satisfies its conditions.
Before joining, ask one question: Am I trading real capital, simulated capital, or a hybrid program with separate simulated and live stages?