Prop firms explained: how funded trading works
A prop firm lets you trade an account backed by its money. You pay for an evaluation, and if you pass you keep the larger share of the profits.
The basic deal
Prop is short for proprietary trading. These firms want traders who manage risk well. Rather than asking for a big deposit, they charge a one-off fee for a test, called the challenge.
In the challenge you trade a demo account with fixed rules: reach a profit target and stay inside the loss limits. Do that and you are given a funded account, where you usually keep 80–90% of the profit.
How firms make money
Most firms keep funded traders on simulated accounts and pay profits from their own funds. Challenge fees are the main source of income, since many people fail.
So choosing a firm that actually pays matters. Years in business and a strong Trustpilot rating are the best signals you have.
Your real risk
The fee is the most you can lose. If the account fails, you owe nothing more, and many firms return the fee with your first payout.
A $100,000 challenge normally costs $300–650. Today's prices are on the cheapest prop firms list.
Who it suits
It suits traders who follow a plan, size every trade deliberately and can handle a losing streak without abandoning their rules. New traders should practise on a demo and read our list of common mistakes first.
Common questions
Is a prop firm the same as a broker?
No. A broker holds your money and fills your orders. A prop firm sells you a test and shares the profit made on its account.
Can I lose more than I paid?
No. Your maximum loss is the challenge fee.