What Is a Prop Firm?
Rules for capital: how prop firms work, how they make money, and where the risks lie.
The Core Model
A proprietary trading firm provides you with a funded (simulated) account. You pay for an evaluation (Challenge), trade in a simulated environment, and hit profit and risk targets under the rules. Once you pass, the account becomes a funded account and you split the profits.
In short: you bring skill and time, the firm brings capital and a risk framework, and both share profits by rules. Your own capital is not at risk — but the firm is not a charity either: most people fail, and evaluation fees are one of its revenue streams.
How Firms Make Money
- Evaluation fees: the most stable revenue — failed traders buy again
- Monthly / activation fees: some firms charge PA fees
- Profit share: a cut of your payouts
- Reset / upgrade fees: when you restart or scale
Industry data shows pass rates typically between 5% and 15% — that is the business foundation of the evaluation-fee model.
Risks & Boundaries
Most "funded" accounts are simulated capital plus profit split — not a real pool of money. Firms can change rules at any time or refuse payouts. The industry has seen sudden closures and refusals citing "rule violations".
So: choose firms with a long track record, transparent payout history and good risk ratings. Keep your trade logs and screenshots of the terms. Our reviews and risk warnings track these signals continuously.
Information compiled from public sources and subject to change — always confirm with the official website.
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