What Makes a Funded Challenge Different from Regular Trading?

Funded accounts have gained immense popularity in the last few years. Many aspiring traders wonder which trading account is better: trading with a prop-funded account or a personal account. There are actually arguments for both funded accounts and personal accounts. Some traders are in favor of prop firms, whereas others strongly oppose funded accounts. Let us explore how a funded challenge is different from regular trading. 

What is Funded Trading About 

Funded accounts are funded by prop firms instead of the traders themselves. The funded account might be a demo account. If the trader makes profitable trades, the profits will then be copied to the live account of the prop firm, in which the trader performs trades with real capital. Unlike with general trading, with funded trading, the potential traders will use the funds of the prop firms for trade instead of their own. 

What is General Trading About 

General trading accounts include risking their own funds and do not use the capital of the prop firm for trading. Essentially, with general trading, you risk your own capital and buy assets. Since you invest your own capital, you are responsible for bearing the complete risk of your potential losses. With regular trading, you get to keep all the profits of your successful trades, which isn’t the case with funded trading. 

What Are the Pros of Funded Trading? 

There are many benefits linked with funded trading, such as a greater ability to secure profits, access larger capital, trade in a less stressful environment, and enjoy limited risks as a prop trader. As a funded trader, you can gain access to larger capital, which means that you can trade from large accounts, which can come in quite handy. As a beginner, you probably won’t have much capital to invest, which is why you are off to a good start with funded trading, where you can use the funds of the prop trading firm. 

Large Profits with Funded Challenge

With a funded trading account, you can tap into larger profits. As a rule of thumb, the bigger the account is, the bigger the profits will be, too.  However, you should know that with a funded challenge, you must share your profits with the prop firm. However, to earn large profits, you must be mindful of effective risk management.

Risks Are Limited with Funded Challenge

Another pro of funded trading comes down to the fact that the risks are relatively limited. Suppose you are trading with other people’s money; you are essentially risking other people’s money for trading. Trading with a funded challenge means that you will be using the prop firm’s money. If you fail the challenge, you will lose your funded account. However, it is possible to recover from the loss of your funded account compared to recovering from the loss of a general trading account.

Conclusion 

The main goal with a funded challenge account is simply passing the challenge and getting access to a funded account. On the other hand, general trading refers to investing your own money and bearing the loss yourself in case the trade goes wrong.