Funded and Simulated Accounts

Why simulated

• A regulated broker cannot lend a stranger 100,000 dollars to trade at 1:100 leverage; a simulated account has no such limit.
• The firm avoids counterparty risk with a broker and the capital cost of funding thousands of accounts.
• Losses on simulated accounts cost the firm nothing; only payouts do.
• The firm can hedge selectively, copying only the traders it wants exposure to.

What it means for you

Your trades do not affect the market and the market does not affect your fills in the way it would on a real account, although most firms add simulated slippage and commissions so results are realistic. Your profit is real only when paid. And the account can be closed for a rule breach without any of the protections a regulated broker owes a client, because you are not a client in that sense; you are a customer of an evaluation service.

Firms that use real accounts

A few firms place funded traders on live broker accounts, either from the start or after a track record. They usually offer smaller sizes and lower leverage, because they are now risking real capital. Whether that is better for you depends on whether you value the firm's commitment more than the larger simulated size; both are legitimate models when disclosed.

The word funded

Firms use funded loosely, and so does this course, because it is the industry's word. When you see it, read it as an account the firm will pay you a share of the profit on, and check the terms for how simulated or real it is.

Key takeaways

• Funded accounts are usually simulated; profit is real only when paid out.
• Simulation lets firms offer large sizes without regulatory or capital constraints.
• You are a customer of an evaluation service, not a broker's client, with fewer protections.
• Some firms fund real accounts at smaller sizes.