Prop Firm

A prop firm is a business that allocates its own money for traders to trade, in exchange for a share of the profits. Online "evaluation" prop firms — the kind most retail traders mean today — sell a challenge: you pay a fee, trade a simulated account, and must hit a profit target while respecting loss limits to qualify for a funded account. The firm makes money from evaluation fees and from its cut of trader profits, and it manages its own risk by enforcing strict drawdown rules and removing traders who break them. Funded accounts at many firms are still simulated, with the firm hedging or mirroring profitable flow in the live market; this varies by firm and is worth understanding before you join. None of this changes the core trade-off: you get leverage on someone else’s capital, but you trade entirely on their terms.

In plain English — A proprietary ("prop") trading firm puts up the trading capital instead of you risking your own savings. Most modern online prop firms first run you through a paid evaluation; if you pass and keep following their rules, you trade a funded account and split the profits with the firm. You are bound by their risk rules at all times, and breaking one can cost you the account.

You pay a $500 fee for a $100,000 evaluation. After passing, you trade the firm’s $100,000 account under their rules and keep, say, 80% of the profits you generate.