Prop firm basics: what it is and how it works
A prop firm gives you a trading account with its own money. You pay a fee for a test. If you pass, you keep most of the profit.
The idea
Prop means proprietary trading. A prop firm looks for traders who control risk well. You do not deposit a large amount. You pay one fee for a test, called the challenge.
In the challenge you trade a demo account with clear rules: a profit target and loss limits. Reach the target without breaking a rule and you get a funded account. You keep a share of the profit, usually 80–90%.
How the firm earns
Most firms keep funded traders on simulated accounts and pay profits from their own money. Their main income is challenge fees, because many traders fail.
So it is very important to choose a firm that really pays. Years in business and Trustpilot ratings are the best signs.
What you can lose
Only the challenge fee. If you lose the account, you owe nothing more. Many firms return the fee with the first payout.
A $100,000 challenge usually costs $300 to $650. See current prices on the cheapest prop firms list.
Is it right for you?
Yes, if you trade with a plan, know your risk on every trade and can accept a losing period without breaking your rules. New traders: practise on demo first and read common mistakes.
FAQ
Is a prop firm a broker?
No. A broker keeps your money and runs your orders. A prop firm sells a test and shares the profit on its account.
Can I lose more than the fee?
No. The most you can lose is the challenge fee.