What is a prop firm? - PropTrading.online (2025)

Table of Contents

What are Prop Firm Funding Models? 2 Phase Challenge Model FTMO - Standard Challenge MyForexFunds - Evaluation 1 Phase Model Traders with Edge - Turtle Instant Funding Model The 5%ers Instant Funding MyForexFunds - Accelerated FAQs

A proprietary trading firm is a company who provides their capital to individuals to trade with in return for a share of the profits. Typically this was done in trading rooms in wall street and London etc. Over the past 5 to 10 years many new prop firms have been opening to operate solely online.

These relatively new companies have a wide range of options, capital allocation and rules for traders, so its important to understand how each company expects you to operate with their money.

What are Prop Firm Funding Models?

Prop firms typically have a large amount of risk when they provide capital to the trader. Therefor its important to these companies that the traders who are going to use their capital are competent, profitable and understand good risk management. These online prop firms tend to do this by way of an evaluation or challenge. These evaluations come in many shapes but I will outline the main ones below.

2 Phase Challenge Model

This is the most common model you are likely to see when searching for an online prop firm. After paying some kind of enrollment fee, the trader is provided with a demo account in which to trade. The trader should treat this as real money and demonstrate their ability. The prop firm will monitor this account and ensure all their rules are being followed such as:

Maximum drawdown – The balance or equity of the account should not go below a certain level, for example 10%.
Daily drawdown – The balance or equity of the account should not go below a certain level during the trading day, for example 4%
Minimum trading days – The minimum number of trades a trader should make trades, this shows the trader has consistency and not just a one hit wonder
Max trading days – The maximum number of day allowed to complete the challenge
Profit target – The amount of profit needed to complete that phase of the challenge, For example 10%
EA/Copier – Some prop firms do not allow expert advisers/bots or copy trading.
News Trading – Some firms do not allow you to trade close to major news events such as the non farm payroll.
Restrictions on Strategies – Some prop firms do not allow certain strategies such as martingale or hedging.

After the trader has completed their first phase they are given a new demo account, generally with slightly relaxed rules. The goal of this account is to prove your consistency and didn’t “fluke” the initial phase. After successfully completing this phase, the trader will be given live funds and will start receiving their share of the profits.

Some Examples of prop firms which use the 2 phase model are:

FTMO - Standard Challenge

Best suited for:FTMO has been the market leader for a while now. They have a great reputation for their support and are generally all round reliable. Therefor this will suit the trader who wants a tried and tested firm to trade with.

Overall Ratings

Models on offer: 8/10
Cost: 8/10
Rule Fairness: 8/10
Support: 10/10
Profitability: 9/10
Scaling System: 9/10
Overall: 8.7/10

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MyForexFunds - Evaluation

Best suited for:Models to suit all kinds of traders. Rapid model is particularly good for beginner traders as it allows you to earn while you learn.

Overall Ratings

Models on offer: 9/10
Cost: 9/10
Rule Fairness: 8/10
Support: 7/10
Profitability: 9/10
Scaling System: 9/10
Overall: 8.5/10

Join My Forex Funds

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1 Phase Model

The 1 Phase model is much like the 2 phase model, however the trader only has to complete a single phase before being given live funds. This allows the trader to begin to earn real money faster. Some examples of 1 phase models are:

Traders with Edge - Turtle

Best suited for:This prop firm offers an excellent scaling model in which would allow a consistent trader to build a huge account with relative ease.

Overall Ratings

Models on offer: 8/10
Cost: 9/10
Rule Fairness: 8/10
Support: 8/10
Profitability: 9/10
Scaling System: 9/10
Overall: 8.7/10

Join Traders with Edge

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Instant Funding Model

This model generally costs more than the challenge models, and usually provides less capital, however it gives the trader access to live funds immediately. Many prop firms have fast scaling up plans to increase the capital available to the trader as they demonstrate their skills.

Some examples of live funding accounts are:

The 5%ers Instant Funding

Best suited for:They offer a fantastic instant funding model for traders who want to get into the action right away.

Overall Ratings

Models on offer: 10/10
Cost: 8/10
Rule Fairness: 8/10
Support: 9/10
Profitability: 9/10
Scaling System: 9/10
Overall: 8.8/10

Join the5%ers

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MyForexFunds - Accelerated

Best suited for:Models to suit all kinds of traders. Rapid model is particularly good for beginner traders as it allows you to earn while you learn.

Overall Ratings

Models on offer: 9/10
Cost: 9/10
Rule Fairness: 8/10
Support: 7/10
Profitability: 9/10
Scaling System: 9/10
Overall: 8.5/10

Join My Forex Funds

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FAQs

What is a prop firm? - PropTrading.online? ›

Also known as "prop trading," this type of trading activity occurs when a financial firm chooses to profit from market activities rather than thin-margin commissions obtained through client trading activity. Proprietary trading may involve the trading of stocks, bonds, commodities, currencies, or other instruments.

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How do online prop firms make money? ›

To make money for the company, they typically participate in speculative trading, which can involve both short- and long-term trading. Proprietary trading firms typically allow their traders autonomy in making trading decisions. However, they establish a limit known as the maximum drawdown level.

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What do prop trading firms do? ›

What is Proprietary Trading? Proprietary Trading (Prop Trading) occurs when a bank or firm trades stocks, derivatives, bonds, commodities, or other financial instruments in its own account, using its own money instead of using clients' money.

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Is prop firm trading illegal? ›

Currently, prop trading companies only have to follow laws such as consumer protection rules, data protection rules, and conditions for international sanctions. The registration of such companies is concentrated in the US, the UK, the UAE, and Saint Vincent and the Grenadines. Yet, many are registered within the EU.

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Is prop firm trading worth it? ›

Pros of Prop Trading Firm

They provide high earning potential. Prop firms offer access to significant capital. Besides, they offer cutting-edge technology and resources. To develop the trader's skills, they give continuous professional development training.

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What are the negatives of prop firms? ›

👎 Cons of Prop Trading

It's advisable to only deposit amounts that you can afford to lose. High Fees: Prop trading firms often charge significant fees for software and other services, with monthly costs starting around $200, which can be higher than those faced by retail clients.

How do prop firms pay you? ›

Proprietary trading firms, also known as prop firms, make money through several channels. They trade with their own capital, making them a profit when their trades are successful. Also, they use a profit-sharing model where they split profits with their traders.

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What happens if you lose money with a prop firm? ›

Proprietary trading firms often provide evaluation accounts where you prove your trading skills. Usually, you pay a one-time fee to enter this “challenge.” If you lose money during this evaluation, you won't owe anything beyond the initial fee.

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How much does a prop firm cost per month? ›

How much does it cost to join prop trading firms? This is one of the most common questions beginner prop traders usually ask. Many prop trading firms typically charge a monthly subscription fee of $150 to $25000. It is essential always to compare the fees and the benefits the company offers before joining one.

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Is proprietary trading risky? ›

Since proprietary trading uses the firm's own money rather than funds belonging to its clients, prop traders can take on greater levels of risk without having to answer to clients.

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Do you need a license to start a prop firm? ›

Prop trading firms are less heavily regulated than regular brokerages and broker-dealers. However, if such laws apply, you must still properly register your business and get licensed.

Can you make a living with prop trading? ›

Also known as “prop trading,” it offers higher earnings potential much earlier in your career than jobs like investment banking or private equity. It's arguably the most merit-based industry within finance: if you make millions of dollars for your firm, you'll earn some percentage of it.

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How hard is prop trading? ›

It requires considerable skill and risk management abilities to succeed in this fast-paced and competitive environment. However, it is not suitable for everyone, as the pressure and risks involved may not be appealing to some individuals.

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Which is the most trusted prop firm? ›

The most popular prop trading firms and funded programmes

Axi Select.
FTMO.
The Forex Funder.
E8 Markets.
The 5%ers.
Funded Next.
Funded Trading Plus.

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Do people actually make money with prop firms? ›

Yes. Prop firms do pay out, but the amount of money that a trader can make will depend on their performance and the terms of their agreement with the firm.

How stressful is prop trading? ›

How stressful is prop trading? Prop trading can be highly stressful due to the fast-paced nature of markets and the pressure to make split-second decisions.

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How much do prop firm owners make? ›

In conclusion, the income of prop firm traders can vary greatly depending on several factors such as experience, performance, and the size of the firm. On average, a junior prop trader can expect to earn anywhere between $50,000 to $100,000 per year, while a senior trader can make upwards of $500,000 annually.

How do prop firms split profits? ›

The Profit Split Model

The few retail traders that pass the challenge receive a funded account with a profit-split model, where the prop firm makes between 10% and 50% of revenues. Prop traders must consider this against the monthly subscription fee to compute their break-even point.

What percentage do prop firms payout? ›

Statistics on Average Trader Payouts

Profit Split: The average prop firm will offer a 80-20 profit split once you become a funded trader. TFT, on the other hand, gives up to a 90% split, — even as high as 95% in some promotions — the highest in the industry.

How does FTMo make money? ›

By virtue of the FTMO Account Agreement, the FTMO Trader agrees that his trading data may be used by FTMO for trading on its own account. Therefore, FTMO can actually profit from the simulated trading performed by FTMO Traders.

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