What is a prop firm and how does it work?
A prop firm gives you a trading account backed by its own capital. You pay a fee to take an evaluation, and once you pass you keep most of the profit you make.
The idea in two minutes
“Prop” is short for proprietary trading. A prop firm is looking for traders who can control risk. Instead of asking you to deposit a large sum, it charges a one-off fee for an evaluation: the challenge.
During the challenge you trade a demo account under clear rules: a profit target and loss limits. Hit the target without breaking a rule and you get a funded account, keeping a share of the profit, usually 80–90%.
Where does the money come from?
Most firms keep running simulated accounts even after you're funded and pay profits out of their own pocket. Their core business is challenge fees, because many traders don't pass.
That's why picking a firm that genuinely pays out matters so much. Trustpilot ratings and years in business are the best clues.
What you pay and what you risk
You only ever risk the challenge fee. Lose the account and you owe the firm nothing. Many firms refund the fee with your first payout.
A $100,000 challenge usually costs between $300 and $650, roughly £230–£500 depending on the exchange rate. Current prices are on our cheapest prop firms list.
Is it for you?
A prop firm makes sense if you trade to a plan, know exactly how much you risk per trade and can sit through a losing run without breaking your own rules. If you're new, practise on a demo first and read the common mistakes.
Frequently asked questions
Is a prop firm a broker?
No. A broker holds your money and executes your orders. A prop firm sells you an evaluation and pays you a share of the profit on its account.
Can I lose more than the fee?
No. With a prop firm the most you can lose is what you paid for the challenge.