Prop firm — A firm that gives traders access to its capital to trade, usually after an evaluation, in exchange for a share of the profits.
How prop firm works in prop trading
A proprietary trading firm — prop firm for short — lets you trade an account it funds rather than your own savings. In the retail model that dominates the futures and forex space, you pay a fee for an evaluation, prove you can hit a profit target without breaking the risk rules, and are then given a funded account whose profits you split with the firm. The firm's revenue comes from evaluation fees, monthly account fees, resets, and its share of trader profits.
The label covers very different businesses. Traditional prop firms hire traders, pay a desk salary or draw, and put real house capital at risk. Retail prop firms sell an evaluation product to the public, and many run the funded stage in a simulated environment while still paying out real money on performance. Neither model is a broker and neither is a substitute for one — you do not own the account, and your access to it lasts exactly as long as you keep inside the firm's rules.
Key points
- You trade the firm's capital, not your own, and keep an agreed percentage of the profits — commonly 80% to 100% at the funded stage.
- Most retail prop firms charge an up-front evaluation fee that is not a deposit and is generally not returned if you fail.
- Passing an evaluation is not the same as being paid: payout eligibility carries its own separate rules.
- Account access is conditional. A single rule breach can end it regardless of how profitable the account is.
Also known as
- proprietary trading firm
- prop trading company
- prop trading firm
Frequently asked questions
Is a prop firm the same as a broker?
No. A broker holds your money and executes your orders in your own account. A prop firm gives you conditional access to an account it controls, under its own rule set, and can close that access if you break a rule. Many prop firms route their accounts through a broker or platform partner, but your relationship is with the firm.
Do prop firms actually pay out?
Established firms publish payout policies and process them on a stated cycle, and many share payout statistics. Whether you personally get paid depends on meeting the payout conditions — minimum trading days, consistency limits, and any profit buffer — not just on being in profit. Read the payout section of the terms before you pay for an evaluation.
Put this into practice
Prop firm is described here as a plain-language educational definition. Firms, platforms, and account programs may apply different conditions or calculations. Verify the current official terms before using this definition to make an account decision.