Prop firm trading is a great way to up your earnings from trading when you have a small bankroll at the start of your career. You will discover that prop firm accounts come in two different flavors: instant funding accounts, and evaluation accounts. This guide will explain the differences between the two different types of accounts, and help you figure out which to choose.
What are Evaluation Accounts?
An evaluation account is one where you have to pass an evaluation before you can start trading with the prop firm’s funds. There is often a fee charged to take the evaluation.
What are Instant Funding Accounts?
An instant funding account is exactly what it sounds like. It is a funded prop firm account you can qualify for without passing an evaluation. You simply pay the fee, and immediately gain access to the funded account.
Pros and Cons of Instant Funding vs. Evaluation Accounts
You might guess at a glance that an instant funding account is better than an evaluation account since you don’t have to pass a challenge. But there are upsides and downsides to both types of accounts. The best way to figure out which type of account suits you is to get to know these advantages and drawbacks.
We’ll start by going over the pros and cons of evaluation accounts. Then we’ll dive into the pros and cons of instant funding accounts. You’ll see that neither option is inherently “better” than the other.
Evaluation Account Pros
- Not all evaluation accounts require fees. Those that do typically have lower fees than instant funding accounts.
- Evaluation accounts typically feature higher profit shares for traders. The risk associated with giving you the account is lower than if you didn’t pass a challenge, so you get rewarded with better payouts.
- Many prop firms let you retake the evaluation if you fail it. You might even be able to do that multiple times if necessary.
- You might qualify to trade more capital than traders with instant funding accounts.
Evaluation Account Cons
- You can’t get this type of account until you pass the evaluation. It is not always easy. It may take you repeated attempts.
- If there is an evaluation fee, that is an element of financial risk. The fee is lost if you don’t pass. The fees can add up if you try more than once.
- Depending on the nature of the evaluation, you may or may not be able to pass it at all, even with a viable strategy. Not all strategies suit all evaluations.
- You might be stressed out by having to pass an evaluation, which in turn might make it harder to pass, since your nerves could cause you to make mistakes.
Instant Funding Account Pros
- It’s easy and straightforward to join a prop firm with this type of funded account. You get to skip the hard work, stress and uncertainty of an evaluation altogether, and begin trading immediately.
- Multiple account sizes may be available to you, with higher fees for larger accounts and lower fees for smaller ones.
- You can begin profiting right away, rather than having to wait until you get through an evaluation (a process that may take some traders weeks or months, depending on their skill level and the nature of the challenge).
Instant Funding Account Cons
- You likely will pay higher fees for instant funding accounts than you would for evaluation accounts.
- You may not be eligible to trade with as much capital in an instant funding account as you might qualify for if you were trading with an evaluation account after passing a challenge.
- You may not receive as high a percentage of the profits with an instant funding account as you would if you were trading with an evaluation account. As a result, it may take you longer to build up your trading funds.
- Trading evaluations for prop firms can help you to familiarize yourself with how each individual prop firm operates and learn more about its rules for traders. The rules for a funded account may differ from those for a challenge, but the challenge still serves as a pretty good introduction. You miss out on that if you go with an instant funding account instead.
Which Type of Forex Prop Firm Account Should You Choose?
Choosing whether to get an instant funding account or an evaluation account involves assessing your priorities and needs. Here are some questions you could ask yourself that will help you identify the type of prop firm account that is better for you.
- How much can you afford to spend on evaluation fees or instant funding account fees for a prop firm account?
- How many attempts do you think you would need to pass an evaluation for a prop firm? Take note that your estimate might vary depending on which prop firm you are looking at since evaluations differ between them.
- Is your strategy compatible with the evaluations for the prop firms you are thinking about joining?
- What profit share are you looking for? Can you get it without an evaluation? Or will an evaluation be necessary?
- What account size do you want?
- How much patience do you have with the evaluation process? What about with growing your account afterwards?
- Would an evaluation stress you a lot, or do you feel like you can handle it?
The answers to these questions can guide you in your choice. You might think of some additional questions as well while you are considering your options.
For example, let’s say you really want a high profit share, and you just are not finding that for instant funding accounts. It would make sense for you to get an evaluation account instead.
On the other hand, let’s say you are using a trading method that just is not going to work with the challenge rules you are seeing for most of the prop firms that interest you. If you have extra money for a higher fee, and you don’t mind potentially lower profit shares and capital amounts, then you might be better off with an instant funding account.
There could even be scenarios where you go with an instant funding account at one prop firm and an evaluation account at another. Whatever you decide to do, good luck with your trading. Be sure to check out the rest of our guides so you can navigate the evaluation process effectively, and build a long-term relationship with your prop firms.
