Proprietary trading firms, also known as “prop firms,” provide traders with access to institutional-grade capital in exchange for a share of the profits they generate. Unlike traditional brokerage accounts, where traders risk their personal money, prop firms like FundingPips take on the financial risk while setting stringent conditions to ensure that only competent traders get funded. To maintain the integrity of the program, FundingPips implements specific trading rules that traders must follow throughout the evaluation and live trading phases.
What Is a Proprietary Trading Firm?
A proprietary trading firm (prop firm) is a financial institution that provides traders with capital to trade in exchange for a percentage of the profits generated. Unlike retail trading, where individuals trade using their personal funds, prop traders use the firm’s money while adhering to predefined trading rules.
Prop firms operate by evaluating traders’ skills through structured assessment programs, which typically involve simulated trading phases. Traders who demonstrate consistency, risk management, and profitability during the evaluation phases are granted access to live funded accounts. Prop firms profit by taking a portion of the trader’s earnings, ensuring a mutually beneficial relationship.
How FundingPips Operates
FundingPips provides an opportunity for traders to prove their trading skills through evaluation models before managing a live-funded account. The firm imposes specific rules to ensure that traders operate within defined risk parameters, protecting both the trader and the firm’s capital.
FundingPips offers two primary evaluation models:
- The 2-Step Evaluation Model
- The 3-Step Evaluation Model
These models assess a trader’s ability to meet profit targets while managing risk effectively. Traders must complete each phase without violating any trading rules to qualify for a funded account.
Evaluation Models
The 2-Step Evaluation Model
FundingPips’ 2-Step Evaluation Model is designed to assess traders based on their ability to generate consistent profits while managing risk effectively. The evaluation consists of two phases:
Step 1: The Student Phase
- Objective: Assess trading skills and define the trader’s profile.
- Profit Target: 8% profit without breaching risk rules.
- Minimum Trading Days: At least 3 trading days.
- Outcome: Successful traders advance to the Practitioner Phase.
Step 2: The Practitioner Phase
- Objective: Confirm trading consistency and discipline.
- Profit Target: 5% profit without breaching risk rules.
- Minimum Trading Days: At least 3 trading days.
- Outcome: Traders who pass this phase receive a funded account.
Traders must adhere to risk management guidelines, including maximum drawdown limits and daily loss caps. Any violation results in disqualification from the program.
The 3-Step Evaluation Model
The 3-Step Model introduces an additional phase to ensure further assessment before granting traders access to funded accounts. It consists of three phases:
The Student Phase
- Objective: Evaluate basic trading skills.
- Profit Target: 5% profit without breaching rules.
- Minimum Trading Days: At least 3 trading days.
- Outcome: Traders who succeed advance to the Practitioner Phase.
The Practitioner Phase
- Objective: Confirm trading consistency.
- Profit Target: 5% profit without rule violations.
- Minimum Trading Days: At least 3 trading days.
- Outcome: Successful traders progress to the Senior Phase.
The Senior Phase
- Objective: Conduct final assessment before granting live trading access.
- Profit Target: 5% profit while adhering to trading rules.
- Minimum Trading Days: At least 3 trading days.
- Outcome: Successful traders receive a funded account.
The additional step in this model ensures traders demonstrate prolonged discipline and consistency before managing live funds.
FundingPips Trading Rules
Maximum Loss Limits
To protect capital, FundingPips imposes strict loss limits on traders:
- Maximum Daily Loss:
- Definition: The highest amount a trader can lose in a single day.
- Calculation: 5% of the day’s starting balance or equity (whichever is higher).
- Reset Time: Resets daily at 00:00 Central European Time (CET).
- Example: For a $100,000 account, the daily loss limit is $5,000. If the day’s starting balance is $105,000, the trader’s equity must not drop below $101,650.
- Maximum Overall Loss:
- Definition: The highest total drawdown a trader can experience.
- Calculation: 10% of the initial account size.
- Example: For a $100,000 account, the maximum allowable drawdown is $10,000, meaning the account balance must not fall below $90,000.
Prohibited Trading Strategies
FundingPips enforces restrictions on certain trading strategies:
- Latency Arbitrage
- High-Frequency Trading (HFT)
- Server Spamming
- Tick Scalping
- Hedging Between Accounts
- Copy Trading from External Vendors
- News Trading with High Volatility Exploitation
Violating these rules results in immediate disqualification from the program.
Strategic Approaches to Trading
Developing a Winning Trading Mindset
Successful trading requires discipline, patience, and risk management. Traders must control emotions such as fear and greed to make rational trading decisions. Key strategies include:
- Maintaining a trading journal.
- Sticking to a well-defined trading plan.
- Managing risk effectively by using stop-loss orders.
Risk Management Strategies
- Risk-Reward Ratio: Ensure risk per trade is lower than potential reward.
- Diversification: Avoid overconcentration in a single market.
- Position Sizing: Adjust trade sizes to manage risk exposure.
Conclusion
FundingPips Proprietary Firm Trading Rules are designed to ensure responsible trading while protecting the firm’s capital. By adhering to the outlined guidelines, traders can successfully navigate the evaluation process and manage a funded account. Following proper risk management strategies and maintaining discipline are key to long-term success in proprietary trading.
Frequently Asked Questions (FAQs)
Can I trade during major news events?
No, FundingPips prohibits high-risk news trading strategies.
Are Expert Advisors (EAs) allowed?
Yes, but only for risk management purposes, not for arbitrage or automation.
What happens if I violate a trading rule?
Violations result in account disqualification.
How long do I have to complete each evaluation phase?
There is no time limit; traders can progress at their own pace.
What trading platforms does FundingPips support?
The firm supports MetaTrader 4 (MT4) and MetaTrader 5 (MT5).
Can I use multiple accounts?
Yes, but traders must not engage in hedging between accounts.
Is there a fee for the evaluation process?
Yes, traders must pay a one-time fee to participate in the evaluation phase.
