Immediate Funding – How Does It Work?

In recent years, prop trading has undergone significant transformations, with challenges becoming a central aspect. Historically, the path to funding through challenges was uncommon. Initially, prop traders had to:

 

 

• Master a trading strategy;
• Make an insurance deposit;
• Receive additional funds from the prop company, ensuring overall losses did not exceed the insurance deposit;
• Trade according to predefined risk levels.

 

 
This model had unique features, but its major disadvantage was the high entry requirement for traders, necessitating constant reinvestment of profits to scale a simulated trading account. However, the advent of internet technologies has democratized trading, making it accessible to everyone.

 

Prop trading firms have shifted to more affordable financing models via challenges, and traditional models based on insurance deposits have evolved into immediate funding programs. This article explores the concept of immediate funding in prop trading.

 

 

 
Contents

 

• What Is Immediate Funding?

 

• Advantages of Immediate Funding

 

• Who Will Benefit from Immediate Funding?

 

• What Is Immediate Funding?

 

 

Immediate funding programs are a modern evolution of the traditional insurance deposit-based prop trading model. Key features include:

 

• No challenges required.
• Traders receive a simulated funded account immediately after paying a fee.

 

Fees for immediate funding are higher than those for one-step or two-step challenge programs. However, these larger fees help prop trading companies mitigate risks. For example, Spice Prop's Jalapeno program allows traders to withdraw up to 60% of the 10% profit made (covering the entire entrance fee) and offers 100% scaling of the simulated trading account. Scaling occurs each time the account increases by 10%, up to €1,000,000, marking a significant advancement for prop trading companies.

 

 
Advantages of Immediate Funding

 

The primary advantage of immediate funding programs is the absence of challenges. These programs offer significant benefits, especially when strong scaling opportunities are available.

 

For instance, consider two accounts at Spice Prop, each worth €10,000. The first account, Sweet Pepper, involves a two-step challenge for €99. The second account, Jalapeno, offers immediate funding for a €520 fee. Initially, the Sweet Pepper program seems more favorable.

 

However, when modeling trading with a 20% monthly return for the two-step program and a 10% monthly return for the immediate funding program (considering stricter risk requirements), the results reveal a different story:

 

 

• Net profit after one month: €899 (Sweet Pepper) vs €80 (Jalapeno, after subtracting the €520 fee);
• Net profit after two months: €2,499 vs €1,280;
• Net profit after three months: €4,410 vs €3,620 (the gap narrows);
• Net profit after four months: €6,650 vs €8,420 (Jalapeno becomes more attractive);
• Net profit after five months: €9,330 vs €18,080 (immediate funding significantly outperforms the two-step challenge).

 

Over a longer period, immediate funding programs prove more beneficial. In this example, the Sweet Pepper account grew to €19,600 from €10,000 in five months, while the Jalapeno account scaled to €160,000 from €10,000 in the same timeframe.

 

 
Who Will Benefit from Immediate Funding?

 

Immediate funding programs are suitable for a variety of traders:

 

 

• Novice traders can mitigate the risks of completing challenges.
• Experienced traders can leverage long-term scaling advantages.
• Any prop trader can use immediate funding to diversify their portfolio.

 

Overall, immediate funding programs offer a compelling alternative to traditional challenge-based prop trading, providing significant long-term benefits and scalability.