Prop Firm (Proprietary Trading Firm)
A prop firm evaluates traders with paid challenges, then funds the successful ones with simulated capital and a profit split.
A prop firm funds traders who pass a paid evaluation challenge, splitting profits usually 70-90% while the firm carries the risk. The quality of the firm is the fairness of its rules, not its marketing.
A proprietary trading firm (prop firm) evaluates traders through a paid challenge: hit a profit target without breaching drawdown limits, and the firm funds you with simulated capital on a profit split, typically 70-90%. The trader keeps most of the profit and the firm carries most of the risk. Challenge rules vary widely by firm, and the difference between a good and a bad prop firm is the clarity and fairness of those rules, not the marketing.
How It Works
- Pay a challenge fee, hit a profit target within drawdown limits
- Pass, and get funded with simulated capital on a profit split
- Payouts are made on a schedule (weekly, bi-weekly or monthly)
Trading Tips
Read the drawdown calculation: static versus trailing changes the risk profile completely
Consistency rules (best-day caps) are where traders fail unexpectedly
Check the payout evidence and the firm's track record before paying the fee
Related Terms
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