What is a prop firm?
How prop firms work
Traditional proprietary trading firms hire traders to trade the firm's own capital. Online prop firms turned that into a product: anyone can pay a fee, trade a demo-like account under strict rules and qualify for a funded account without an interview.
The business model depends on the fee. Most buyers never reach a payout, and the fees they pay fund the payouts of those who do. That is why the rules, not the headline account size, decide whether a firm is a good deal for you.
Evaluation types
Two-step challenges have two phases with separate targets, often 8% then 5%. One-step challenges have a single phase with a higher target or tighter drawdown. Instant accounts skip the evaluation entirely and cost more.
Which program types firms offer
The rules that fail most traders
Daily loss limit: a cap on how much equity you may lose in one day, usually 3-5%. Maximum loss: the absolute floor, usually 6-10%. It can be static (fixed to the starting balance) or trailing (it rises with your peak balance or equity). Consistency rules stop one lucky day from producing most of your profit. Minimum trading days force you to trade for several days before passing.
Example: FundedNext $100K two-step
What it costs
Compare price per $10K of funding, not the sticker price. Across all accounts we track, the median is $70.10 per $10K. Futures firms often charge a monthly subscription plus an activation fee after you pass; forex and crypto firms mostly charge once and sometimes refund the fee with your first payout.
How payouts work
Once funded you request withdrawals on a schedule (daily, weekly or bi-weekly), often with a minimum amount and sometimes a cap per cycle. Payouts are usually paid by crypto, bank transfer or services such as Rise. Read the payout rules as carefully as the trading rules.
Next steps
Read how prop firms make money and how to get funded. Then start with our prop firms for beginners list, compare the cheapest challenges, or see the full prop firm ranking.
FAQ
Do prop firms use real money?
Most funded accounts at retail prop firms are simulated. The firm pays you a share of the simulated profit from its own revenue, which is why payout rules matter as much as trading rules.
How much does it cost to start?
The median cheapest challenge across the 90 firms we track is $40. A $100K account usually costs a few hundred dollars.
What percentage of traders pass?
Firms rarely publish audited pass rates. Industry estimates commonly cited are in the single digits for reaching a payout, so treat the fee as the price of an exam, not an investment.
Are prop firms legit?
Many pay reliably; some have closed and left traders unpaid. Check the company behind the brand, its track record, independent payout reports and the exact payout rules before buying.