What is a Prop Firm?
A complete guide to understanding prop firms, how they work, and whether prop trading is right for you.
January 1, 2025
What is a Prop Firm?
A proprietary trading firm (prop firm) provides capital to traders in exchange for a share of the profits. Instead of risking your own money, you trade the firm’s funds after passing an evaluation.
How Do Prop Firms Work?
Most prop firms follow a two-step process:
- Evaluation phase — You trade a simulated account and must hit a profit target while staying within drawdown limits.
- Funded account — Once you pass, you receive a real funded account and split profits with the firm.
Is Prop Trading Right for You?
Prop trading suits traders who have a proven strategy but lack the capital to trade it at scale. If you’re consistently profitable on small accounts, a prop firm can multiply your earning potential.
Key Things to Look For
- Profit split percentage
- Maximum drawdown rules
- Daily drawdown limits
- Evaluation cost and reset policy
- Payout speed and reliability
Browse our prop firm reviews or use the comparison table to find the right firm for your trading style.