In prop trading, choosing the right Forex account type is crucial for newer traders and experienced traders. Finding the right account option for your skill level, experience, and trading style can help you give you a better chance for success.
In the last chapter of our guide, we reviewed how to choose a reliable prop firm that gives you the tools needed to be a successful trader. There’s another major step to think about before you actually start trading. That is, choosing the right Forex account for the challenge phase.
The challenge phase is your chance to prove your skills as a trader and set yourself up to trade with a funded account, earning profit splits on a regular basis. So, what should you look for when you choose a Forex account? Keep reading to find out about the best Forex accounts for beginners as well as more accomplished traders.
Attributes and Features of Forex Challenge Accounts
Certain features, rules, and other qualities have a major impact on the Forex account challenge experience. With several different types of Forex accounts to choose from, you can find the option that best aligns with your approach to trading.
Loss Limits and Drawdowns
Drawdowns are one of the most important rules of a challenge account. The maximum daily drawdown on an account is the loss limit — which is the most you can lose on a trade or multiple trades without breaking the rules and losing the challenge.
For example, say you have a $100,000 challenge Forex account with a 10% drawdown. In this case, the most you can lose while trading in that cycle without failing the challenge is $10,000.
For newer traders, a higher starting value for an account offers a higher loss limit, meaning more room to adjust and recover from a losing trade or string of them.
For more experienced traders, there’s more freedom because they tend to better understand the risks involved. When opening an account, choose the value and drawdown limit that works best for you.
Time Limits
Time limits are a common rule in forex trading challenges. Many accounts include them, but you will often find options with no time limits as well.
Time limits tend to put pressure on traders, especially newer ones. Without much experience, it’s easy to feel under the gun. You might feel pressure to go for a risky trade, or a trade you wouldn’t consider, because you want to hit the profit goal inside the time limit.
Our suggestion for new traders is to look for challenges that don’t include a time limit in the trading conditions, like our Express and Stellar 1-step & Stellar 2-step models. This allows you to focus on making the best trades without any outside influence.
Profit Targets
Profit targets are a pretty simple rule but are also at the heart of every challenge. You need to hit the profit target while following all other rules to succeed and start trading beyond the challenge.
Higher profit targets are harder to achieve. Why? Because not all trades will win in the big picture, and you need more winning trades to hit a higher profit target.
Lower profit targets are easier to reach. So, it’s generally a good idea to look for a more modest profit target if you’re a newer trader starting out with Forex prop trading.
Pressure in General
Overall, stricter challenge account rules tend to put more pressure on traders. When looking at types of trading accounts for Forex challenges, new traders should lean toward options that give them a little more freedom and extra opportunities to bounce back from a few bad decisions.
Look at all of the rules and think about how they’ll affect your trading style. For example: don’t want to deal with holding fees for keeping a trade overnight? Consider a challenge that offers a swap free account for Forex trading.
For experienced traders, that pressure can be worth it because stricter rules can also offer valuable benefits.
For example, our Stellar 1-Step model has a less lenient profit target and drawdown limit than many of our other challenges. However, it also offers traders the chance to complete a challenge in one step instead of two. Where as our Stellar 2-Step model has a lower profit target with a higher daily and overall loss limit, but the trader has to complete the challenge in two phases instead of one.
FundedNext’s Challenge Account Options
FundedNext offers a variety of Challenge Accounts for traders of all experience levels. Additionally, if you want to test the waters first, FundedNext also allows traders to practice using a free trial account.
Free Forex Demo Account for Beginners
We want to answer one vital question before you review our challenge accounts. Which Forex account is best for beginners or people who are just starting to learn about trading?
The answer is – a free trial account, like the trial account offered by FundedNext. A free trial account lets you try out your trading strategy, as Investopedia explains, as well as adjust it and improve it over time.
There’s no risk or cost to using a free trial account to trade and we can’t recommend it enough to new traders. Use a free trial account before jumping into a challenge!
Stellar 2-Step Challenge for Confident Newer Traders
The Stellar 2-step challenge model is a great choice for newer Forex traders because:
- It is lenient on losses, with 5% daily and 10% overall drawdown limits.
- It has low minimum trading day requirements: only five days!
- It offers some of the lowest profit targets, 8% for step 1 and 5% for step 2.
- It does not include a time limit.
In the big picture, the Stellar 2-step challenge is more forgiving than many others. Although it still sets some challenging objectives for traders, it offers a lot of room for newer traders to adjust and grow as they trade.
H3: Stellar 1-Step Challenge for Experienced Traders
As an experienced trader, you have a good grasp of what’s expected in prop firm challenges. You know your trading strategy and how to best execute it, too.
The Stellar 1-Step challenge is a great choice for experienced traders because:
- It includes just one challenge step instead of two, helping you get to a funded account faster.
- It only has two minimum trading days.
Find the Forex Account Challenge That’s Right for You
Finding the right challenge account helps you continue your journey as a Forex trader. Now that you know more about challenge accounts, you’re ready for the next chapter in our guide: comparing prop firms and traditional brokers.
Compare all our challenges for yourself. Find the right path for you on your trading journey.
