Perhaps you’ve heard the term ‘funded firm’ and wondered what exactly it is? In this article, we will break down what these firms are, how they work, and how you can get started trading with one.

A funded firm (also called a proprietary trading firm or prop trading company) is a financial institution that provides qualified traders with access to firm capital with amounts ranging anywhere from $10,000 to $400,000 or more. Traders then use this capital to trade - without risking their own money.

But, how exactly do these firms find qualified traders who can trade using the firm's capital?

The way it works is the following:

These companies evaluate traders through various ‘challenge programs’, and then fund successful candidates, allowing them to manage and trade actual trading accounts without risking their own funds.

Unlike a traditional broker, where you trade your own money, funded firms let you trade with their capital – and take a portion of your trading profits in return.

The profit split is usually around 70-90%, meaning the trader keeps the majority of the profit, and the firm takes its ‘cut’ from the balance, usually 10-30%.

This may sound like a ‘too good to be true’ scenario, however, the reality is that only about 7-15% of traders successfully navigate the firm's evaluation process. This is the funded firm's way of protecting their capital by only funding traders who demonstrate responsible trading and risk management during the firm's evaluation process. This single statistic reveals both the opportunity and harsh reality check waiting in proprietary trading.

Seacrest Markets stands apart in this space with its unique broker-backed model, which provides additional security and transparency compared to traditional prop firms.

Unlike many competitors who operate purely as proprietary trading companies, Seacrest's broker-backed structure offers traders enhanced protection and reliability, combined with some of the industry's highest profit splits and scaling opportunities up to $1 million.

Although the prop trading industry is made up of many established firms with proven track records, you’ll want to understand how these firms actually work before diving into a challenge.

What exactly is a funded firm?

Picture a funded firm as a talent agency – but for traders. Instead of scouting for actors or musicians like a traditional talent agency would, they’re searching for traders who make consistent profit in the financial markets. The idea’s straightforward: funded firms have available capital to put to use, and they need skilled traders to make more money using this capital.

This concept is not a ‘free for all’ though. It involves a thorough testing phase before a firm will fund your account. Traders need to demonstrate their ability to trade profitably using various trading strategies through a firm’s evaluation process, which includes prop firm challenges designed to test both trading skills and risk management.

These prop firm challenges normally involve hitting specific profit targets while exhibiting strict risk management protocols over a pre-determined timeframe.

With these funded firms, ability is not measured in theoretical knowledge, but in actual, real-world trading performance. The relationship between funded firms and traders is predicated on it being a ‘win-win’ partnership. I.e., the trader makes money without using their own capital, and the firm receives a portion of profits in return.

If you exhibit consistent profitability and meet their evaluation criteria, a funded firm will provide you with real capital to trade. If, however you fail the evaluation, you’ll lose the challenge fee which could range somewhere between $50 - $500, depending on several factors.

The evaluation process is normally quite challenging – but still attainable, with profit targets usually around 5-10%. The drawdown (losses) should normally not exceed more than 4-10%. Hitting profit targets is only one aspect; responsible trading and adherence to risk management rules are equally important.

On face value, it may seem simple and attainable, but it’s an excellent way to separate people who actually know how to trade in the real world from those who only know the theory – or worse, are just gambling. These challenges encourage disciplined trading and help minimize personal risk.

When evaluating funded firms, traders should consider key factors such as the firm's evaluation process, risk management protocols, profit-sharing structure, and overall trading conditions.

Funded Firm vs Prop Firm

You might encounter both terms 'funded firm' and 'prop firm' when researching trading opportunities, leading to confusion about the difference between these two. The reality is simpler than it appears: funded firms and proprietary trading firms (prop firms) are essentially the same thing, just different names for the same business model.

Both terms describe companies that provide traders with access to firm capital in exchange for a share of trading profits. Whether a company calls itself a 'funded firm,' 'prop firm,' or 'proprietary trading company,' they all operate using the same fundamental approach - evaluating traders through challenge programs and funding successful candidates to trade with company capital.

The preference for "funded firm" has grown recently as it more clearly communicates the core benefit to traders: receiving funding to trade without risking personal capital. Meanwhile, "prop firm" remains the traditional industry term, short for "proprietary trading," referring to firms trading their own capital rather than client funds.

Revenue streams and business models

You may be wondering: ‘Do these firms actually make money?’ The short answer: Yes – and here’s how.

These firms typically have three primary sources of income:

• Challenge Fees

• Profit Splits

• Monthly Fees for Funded Accounts

Challenge fees are an upfront source of income for funded firms and are essentially the money that people pay to participate in a funded challenge. These fees can range anywhere from about $99 for a $10,000 funded account to $499 for a $100,000 funded account (or any other amount set by the funded firm).

Regardless of whether a participant passes or fails a challenge – the challenge fee is a fixed cost (and hence revenue for the funded firm).

Another aspect of the business model and revenue stream is the profit split.

Profit sharing only begins once your account is actually funded and you are trading using live capital. This approach works well because the trader is incentivized to perform, and the firm makes money in accordance with how well the trader is doing.

In some cases, monthly fees may be charged for platform access and/or account maintenance. Also, some firms provide a proprietary trading platform or advanced trading platforms, often equipped with integrated risk management tools to help traders manage risk effectively while trading with the firm's capital.

Different program structures

Since its arrival, the funded trading space has evolved into several distinct evaluation formats. Each targets different trader preferences and experience levels, often supplemented by educational resources. Understanding these options helps you select the right match for your trading style and risk tolerance – an important consideration.

One-step evaluations are the most straightforward: hit your profit target within the drawdown limits, and you receive funding. No multiple phases, no extra hurdles.

These programs often provide faster funding paths. But they frequently come with tighter risk parameters or lower profit targets to balance the streamlined process. Some programs also require a minimum number of trading days, ensuring traders demonstrate a certain level of consistency before qualifying for funding.

Two-step evaluations are the most common in the industry. Here’s how they normally work:

Phase one emphasizes profit generation (usually 8-10% target), while phase two focuses on consistency with lower profit targets (4-5%) but similar risk rules. This method lets firms observe both your ability to generate returns and risk management over time.

A minimum number of trading days may also be required with these programs, reflecting the importance of consistent performance.

Three-step programs include an additional evaluation layer, though they’re less common. The extra phase usually requires trading for an extended period at reduced risk limits. This provides firms with more data about your long-term consistency.

These additional phases are part of the prop firm's rules to ensure traders can maintain performance over time. These programs often result in higher funding amounts but demand more patience and consistency from traders.

Requirements and evaluation process

Every funded firm establishes specific requirements that traders must meet during evaluation (if they are to be funded). These rules aren’t suggestions – they’re non-negotiable metrics which must be met.

The most common requirement is the profit target, usually ranging from 5-10% of the starting account balance. This profit target usually needs to be hit while also staying within strict risk parameters.

Drawdown limits is probably the biggest stumbling block for most traders. Daily drawdown limits (usually 4-5%) prevent you from losing too much in a single day.

Maximum drawdown limits (6-10%) cap your total losses from the account’s highest point. If you violate either rule, your evaluation often ends immediately.

Most firms also impose position sizing limits to prevent overleveraging. You might be restricted to risking 1-2% of your account per trade or limited in the number of lots you can trade simultaneously.

These rules force traders to implement proper risk management, but can frustrate traders accustomed to more aggressive position sizing

Time limits also add another element of pressure, with most evaluations required to be completed within 30-60 days. Seacrest Markets removes this pressure by offering unlimited time to complete evaluations.

Some firms also provide access to a variety of trading instruments, including futures trading, and offer opportunities to trade in global markets. This lets traders wait for optimal setups rather than forcing trades to meet deadlines. This improves pass rates because traders can wait for the right time to execute their trading strategy without the added pressure of time constraints.

Getting started with a prop firm

Embarking on your trading journey with a prop firm should start with thorough research and self-assessment. With so many prop firms in the market, it’s crucial to compare their reputations, funding programs, and trading conditions to find the best fit for your trading style and goals.

Look for transparency in profit targets, risk management rules, and fee structures – these are the backbone of any successful relationship with a prop firm.

Once you’ve selected a prop firm, take the time to study their specific requirements. Every firm sets its own risk limits, profit targets, and guidelines for traders. Understanding these rules is essential, as even minor violations can end your evaluation or funded account prematurely.

Take time to familiarize yourself with the trading platform and any advanced trading tools the firm provides, ensuring you’re comfortable with placing orders, risk management features, and reporting dashboards.

Last, but not least, have a solid trading plan that aligns with the firm’s risk management rules and your own strengths. This plan should outline your approach to position sizing, stop-loss placement, and how you’ll adapt to changing market conditions.

By preparing thoroughly and respecting the firm’s risk parameters and targets, you’ll maximize your chances of passing the evaluation and building a sustainable path in proprietary trading.

Choosing the right funded firm

When choosing a funded firm, it’s important to consider multiple factors beyond all the marketing hype. Choose a firm with a good track record and a strong commitment to a disciplined trading approach.

Profit splits and fee structures are obviously important considerations, since they will impact how much you earn.

Seacrest’s attractive profit splits come without hidden fees or artificial restrictions on withdrawals. This makes us more transparent than many of our competitors.

The scaling potential represents another critical factor often overlooked by new traders. Some firms cap accounts at the initial funding level. Others provide clear paths to larger amounts. Seacrest’s scaling program can eventually reach $1 million in trading capital for consistently profitable traders - a genuine career-building opportunity rather than just a side hustle.

UK-specific considerations

UK traders face a unique regulatory landscape that affects their funded trading options significantly. The Financial Conduct Authority (FCA) has implemented strict rules around retail trading, including leverage restrictions and suitability requirements. These don’t directly apply to funded trading but influence how firms operate in the UK market.

Most UK-based prop firms actually operate under complex regulatory structures to navigate FCA requirements. Some classify their programs as education or simulation-based services rather than direct investment products.

This regulatory gray area means UK traders need to understand exactly what protections (if any) apply to their funded trading activities. Importantly, funded trading with prop firms helps UK traders minimize personal financial risk, as the firm provides trading capital and absorbs losses, unlike self-funded trading, where traders bear the full risk of their own capital.

Tax implications for funded trading profits can get complicated quickly. Profits from funded accounts might be treated as employment income, business income, or potentially capital gains, depending on your trading frequency and approach.

The lack of clear HMRC guidance means many funded traders end up consulting tax professionals to ensure compliance. Not ideal, but definitely necessary.

Seacrest Markets’ FSCA regulation provides UK traders with clearer regulatory oversight than many alternatives. UK traders should also consider the practical aspects like withdrawal methods, currency conversion fees, and support hours that coordinate with London market times.

Swing trading and market access in funded firms

Swing trading has become a go-to trading strategy for many traders, especially those looking to capitalize on larger price movements in volatile markets. Unlike day trading, swing trading allows you to hold positions for several days or even weeks, giving you the flexibility to ride out short-term fluctuations and target more substantial gains.

To support swing trading, most prop firms equip traders with advanced trading tools and, increasingly, automated trading capabilities. These resources help traders analyze market trends, manage risk, and execute trades efficiently, even when monitoring multiple positions across diverse markets.

Technical analysis is especially important for swing traders, as it helps identify entry and exit points and manage trades through periods of heightened volatility.

The psychology behind funded trading success

Most traders who fail funded evaluations don’t fail because they lack market knowledge. They fail because they can’t handle the psychological pressure of evaluation. Trading with someone else’s money while being constantly monitored creates unique mental challenges even experienced traders may struggle with initially.

The evaluation process amplifies every normal pressure of trading. Profit targets can push traders toward overtrading or taking excessive risks to meet deadlines. Drawdown limits can create fear that leads to premature exits or hesitation on valid setups. The combination often results in trading behavior that’s completely different from a trader’s normal approach.

Successful funded traders develop specific mental frameworks for dealing with evaluation pressure. They treat the evaluation like a job interview rather than a trading contest, focusing on showcasing their trading skills and demonstrating consistency rather than impressive returns.

The evaluation process is specifically designed to encourage disciplined trading and responsible risk-taking, ensuring traders follow structured strategies while maintaining flexibility. This mindset shift from "I need to make money quickly” to “I need to prove I’m reliable” makes a huge difference in pass rates.

The transition from evaluation to live funding creates another psychological hurdle. Suddenly you’re trading real capital with real profit potential, which can trigger completely different emotions than the evaluation phase.

Many traders who pass evaluations struggle initially with live funded accounts because the stakes feel different, even though the rules remain the same. These are common emotional challenges.

Risk management in funded environments

Risk management takes on a completely different importance when trading funded capital versus your own money. The firm's rules aren’t just guidelines - they’re 'non-negotiables' that either make or break your evaluation. This forces traders to develop much more disciplined approaches to managing risk than they might use with personal accounts.

Position sizing also requires careful consideration in funded environments. With daily and total drawdown limits, you need to calculate maximum position sizes that prevent rule violations even in worst-case scenarios.

Many successful funded traders use position sizing calculators or spreadsheets to ensure they never accidentally oversize positions.

Stop-loss discipline also takes on extra importance from "probably should" to "absolutely must" in funded environments. The inability to hold losing positions hoping for reversals forces traders to develop cleaner entry and exit strategies. This discipline often improves overall trading performance even beyond the funded environment - a silver lining to all the strict rules.

Community and support for funded traders

A strong sense of community and good support systems are key advantages offered by many prop firms, setting funded traders up for long-term success in proprietary trading.

Most prop trading firms foster environments where traders can connect, share insights, and learn from each other - whether through online forums, social media groups, or live events. These networks not only provide motivation but also serve as valuable sources of real-time market analysis and trading strategies.

Access to experienced traders and mentors is another hallmark of the best prop firms. Seasoned professionals can offer guidance on everything from risk management to refining your trading skills, helping you avoid common pitfalls and accelerate your development as a funded trader.

Many prop firms also provide educational resources, such as webinars, trading guides, and video tutorials, ensuring that traders stay up-to-date with the latest market trends and technical analysis techniques.

This collaborative environment not only enhances individual performance but also helps traders stay resilient and adaptable in the fast-paced world of proprietary trading.

Building a scaling career

What you’re really after in funded trading isn’t just initial funding. You want to build a sustainable trading career with growing capital allocation and access to significant capital. Companies like Seacrest that provide clear scaling paths can turn funded trading from a side income into a primary profession over time, allowing traders to grow their accounts and develop their trading careers.

Scaling programs generally demand consistent profitability over multiple months before increasing capital allocation. Requirements differ, but usually include maintaining positive monthly returns while staying within risk parameters. Some firms need minimum profit thresholds before qualifying for larger accounts.

Seacrest offers potential growth to $1 million in trading capital for consistently profitable traders. This advancement from initial funding through multiple levels creates real career development opportunities that match what skilled individuals can find in other professional fields.

Success in scaling comes from maintaining the same disciplined approach that secured your initial funding. Account size increases often pressure traders to generate proportionally larger profits, but the best scaled traders keep consistent risk-per-trade percentages regardless of account size.

Avoiding predictable mistakes

New funded traders consistently make avoidable mistakes, with overtrading ranking as the number one issue. Overtrading almost always leads to increased losses and rule violations.

Another common issue is revenge trading after losses. The combination of drawdown limits and profit pressure creates an environment ripe for emotional trading decisions. Successful funded traders know when to step away and take a break after losses rather than trying to immediately recover.

Another common trading mistake (especially during the evaluation) is ignoring time-of-day considerations. Market volatility, spreads, and liquidity change throughout the trading day, yet evaluation pressure can push traders to trade during suboptimal hours. Understanding when your strategies work best and sticking to those times improves success rates significantly.

Platform unfamiliarity leads to technical mistakes that end evaluations prematurely. Something as simple as accidentally placing a market order instead of a limit order can violate position sizing rules. Spend adequate time practicing on the firm’s platform before starting any paid evaluation.

Industry evolution and trends

The funded trading industry keeps changing rapidly as competition grows and technology advances. Regulatory clarity is improving in major markets, which should lead to better trader protections and more legitimate business models.

AI and automated evaluation systems are slowly starting to replace manual review processes at some firms. This could result in more objective assessments and faster funding decisions. It might also create new obstacles for traders who rely on discretionary decision-making.

Meanwhile, geographic expansion into previously underserved markets continues to create opportunities for both firms and traders. As internet infrastructure improves worldwide, talented traders from emerging markets will also be able to access funded programs that were once limited only to developed economies.

FAQ Section: Frequently Asked Questions About Funded Firms

How much does it cost to join a funded firm?

The challenge fees vary per firm. The amounts can range anywhere from about $99 to $99. This challenge fee covers the evaluation, and is a non-negotiable cost, whether you pass the evaluation or not. Some firms may also charge a monthly fee once you're funded.

What percentage of traders pass funded firm evaluations?

Only about 7-15% of traders actually pass the evaluation process and eventually get funded. This low pass rate is indicative of the strict risk management rules and profit targets. These tight parameters exist to separate consistently good traders from others.

How much money can you make with a funded firm?

Traders normally keep 70-90% of all trading profits, with the firm keeping the other 10-30%. Your earnings depend on account size, trading performance, and the firm's profit-sharing structure. Successful traders can continue scaling up their funded accounts, with some firms, like Seacrest, offering the ability to scale up to $1 million in trading capital.

Are funded firms regulated and safe?

Regulation varies by firm and jurisdiction. Many funded firms operate in regulatory gray areas, which is why it's crucial to choose firms with proper oversight. Seacrest Markets operates under FSCA regulation, providing traders with clearer regulatory protection than many alternatives.

Can UK traders use funded firms?

Yes, UK traders can participate in funded firm programs, though they face unique considerations due to FCA regulations. Most UK-accessible prop firms operate under complex regulatory structures to navigate FCA requirements. UK traders should consider tax implications, as profits might be treated as employment income, business income, or capital gains depending on trading frequency and approach.

How long does it take to get funded?

The evaluation process typically takes 30-60 days for most firms, depending on the program structure (1-step, 2-step, or 3-step challenges). Seacrest offers an unlimited evaluation period. Some firms offer unlimited time to complete evaluations, which can improve pass rates by allowing traders to wait for optimal market conditions. Once you pass, funding usually occurs within 1-2 weeks.

What happens if you lose money in a funded account?

The firm absorbs the losses up to the account balance - you don't owe money beyond what's in the account. However, violating risk management rules (like daily drawdown limits of 4-5% or maximum drawdown limits of 6-10%) typically results in immediate account termination. This is why strict risk management is essential for funded trading success.

Moving forward in funded trading

The funded trading landscape is a viable opportunity for skilled traders with a flexible approach who can withstand the pressure of the evaluation and strict performance parameters.

Success needs more than just market knowledge - it requires discipline, emotional control, and the ability to perform under pressure. Traders seeking long-term success in prop trading should look for firms with a proven track record and attractive profit splits, as these factors can significantly impact earning potential and overall experience.

Seacrest Markets combines high profit splits, unlimited evaluation time, and clear scaling paths to create one of the more trader-friendly environments in the current market.

The funded trading industry provides a legitimate path to professional trading careers without the traditional barriers of large capital requirements or institutional connections. The real question is whether you have the discipline and skill to make the most of these opportunities.

Risk Warning: Trading involves substantial risk of loss and may not be suitable for all investors. Past performance doesn’t guarantee future results.