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Funded Futures Trading Explained

Futures Trading General

New To Futures Trading and/or Funded Futures Prop Firms? All Your Questions Answered Below

First Things First – What Is Day Trading Futures?

You’ve probably heard of day trading stocks, crypto and options. People buying and selling specific stocks/options/crypto for short term gains. Both buying and selling within the same day. By definition “day trading” means being in and out of these trades within the same day. The term for having no open positions at the end of the day is “being flat”.

Futures trading is basically the same, except in a different market place which trades contracts on the future price of different instruments. There are multiple categories of product types – equity indices, treasury products, energy products, metals, softs and a few more. There is quite a bit to understanding the specifics of each type of product and the contracts I recommend you explore.

To start though, know that you’ll be trading a product (let’s say Crude Oil as an example). Each product trades in a specific increment (Crude Oil trades in $10 increments per contract for example). Since these are contracts, they are also for specific months. The “Front Month” will be the next upcoming month being traded.

The price of these contracts goes up and goes down all day long. Your goal is the simple old saying – buy low and sell high. Or in the futures market which allows you to go the other way, sell high, then buy low.

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Funded Futures Trading (Proprietary Firms) Explained

1. Decide which company you want to work with. While overall the concept of funded futures trading (prop firms) is the same, each company has it’s own rules that can vary and one might appeal to you more than another. You can read my reviews which include pros & cons of each firm here – Trader Evaluation Reviews and Overviews

2. Decide on what account size is best for you. Some people prefer to start small with a $25K account, others (like myself) like to go big with a $300K account. The bigger the account, the bigger the number of contracts you can trade. As well that comes with bigger goals to pass.

3. Find the best price. Most companies run deals and promos, some more than others. I am your go to person for these. As someone who has forged exclusive relationships with several of the companies, I always bring you the best prices. Visit my Deals and Discounts page for the latest (I update it daily), as well if you sign up for Email Alerts you’ll really be the first to know.

4. Review the rules and goals. Too many people sign up and jump in without fully understanding what you are doing. There really is never more than a handful of rules. Don’t break any daily draw down or trailing/end of day draw down rules. Don’t trade more contracts than you are allowed. Don’t trade when you aren’t allowed to (certain hours or news events). Hit a specific profit goal. Bingo, that’s the rules summed up. Know what they are for your chosen trader evaluation company and specific program.

5. Start trading! (I’m skipping several small details like install software, log in, etc). You usually will have a minimum number of days you have to trade for to pass the evaluation. Start slow! Look at the various products, find what appeals to you, and when you do, just trade 1 lot to start to get a feel.

6. Complete the evaluation. Reach the profit goal and don’t break any rules. That’s the summary of how to pass.

7. Receive your funded futures contract. Once you pass, depending on the company, you will either automatically receive information on how to move into your funded account, and/or you’ll reach out to their support to let them know you passed. Again this is where knowing the specifics of each company matters.

8. Congratulations, you are a funded futures trader! You’ve graduated to CFT Status of being funded. Know the rules of being funded – for example any scaling plans (some not all have one), withdraw timelines and dates, etc. You’ll sign a contract when you get funded, READ IT. So many people do not. It will have every specific bit of information you need to know.

Questions and Answers About Funded Futures Trading

Why do the funded futures proprietary firms fund traders?

Simply the prop firms are looking to partner with successful traders and deploy their capital for a mutual benefit. You do the trading, make profits, and they put up the money for it. They keep 10% to 20% of the profits you make, you keep the rest. Truly a win-win relationship.

Do I have to pay them if I lose money?

No. These companies first of all are mitigating their risk by only funding traders who pass the evaluation and demonstrated trading ability. As well they mitigate risk by funding multiple traders. There will be set maximum loss amounts on your account, and if you lose too much, you will lose your account. So the downside is protected on their side.

Is there a maximum amount I can make?

No. Trade your heart out. Again, it’s a win-win for you and the funded futures prop firm. They’d be more than happy for you to make as much as you can.

Why don’t I just trade my own money?

All futures products have a specific margin amount you need to put up to trade it. Anywhere from $500 to multiple thousands per contract. For example, Crude Oil is currently $2,000 in margin per contract at a low-cost brokerage. So to trade even 1 lot, you need $2,000 in your account. But you need more than that as well in order to cover any swings in your profit and loss.

Not everyone has $2,000 to put up in margin. By trading with the prop firms, you are leveraging their capital to trade. Imaging signing up for a $300K account with a 35 contract limit. Even if the margin is $1,000 on your chosen product, that’d be $35,000 in margin you’d personally put up in your own account. Compare that to a few hundred to pass an evaluation and get access to the same capital.

I’ll add additional Q&A as I hear questions from traders.

Interested To Learn More?

My website will be a valuable resource for you. I’ve spent the last several years updating it with information for traders both in the futures space in general, as well as the funded futures trading space.

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Risk Disclosure:

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: 

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.

In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

You can read more here: Risk Disclosure

Affiliate Disclosure:

The external links on my site and in my video descriptions to trader evaluation companies and software companies are primarily affiliate links. I earn a commission from these companies on any sale made from people visiting these links. That said, I only recommend companies and software I personally use and actually do recommend. Believe me, I turn down a lot of companies who approach me. You can read my full Affiliate Disclosure here.

Additional Disclosure:

The content provided is for informational purposes only. I do my best to keep the content current and accurate by updating it frequently. Sometimes the actual data, rules, requirements and other can differ from what’s stated on our website. CanadianFuturesTrader.ca is an independent website. You should always consult the rules, faqs, knowledge base and support of any of the websites and companies we link to or talk about on our site. The information on their site will always be what ultimately dictates the current rules of their program, software or other. While we are independent, we may be compensated for advertisements, sponsored products, or when you click on a link on our website. The contributors and authors are not registered or certified financial advisors. You should consult a financial professional before making any financial decisions.