Prop firms 101: the model in plain terms
The deal in one line: a prop firm lets you trade its money. You pay to take a test, and if you pass, most of the profit is yours.
How the deal works
Prop means proprietary trading. Firms want traders who can control risk, so instead of a big deposit they charge one fee for a test: the challenge.
You trade a demo account with fixed rules: hit a profit target, stay inside the loss limits. Manage that and you get a funded account, usually keeping 80–90% of the profit.
Where the firm's money comes from
Most firms keep funded traders on simulated accounts and pay profits out of their own pocket. Challenge fees are the core business, since many traders fail.
Our tip: that's why the firm you pick matters most. Years in business and a strong Trustpilot rating are the best signals.
What you're risking
Just the fee. Fail and you owe nothing more; plenty of firms even refund the fee with your first payout.
A $100,000 challenge typically runs $300–650. Live prices are on our cheapest prop firms list.
Who it's for
Traders who work to a plan, size each trade on purpose and can sit through a losing streak without tearing up their rules. New to this? Demo first, then read how to pass a challenge.
Quick answers
Is a prop firm a broker?
No. A broker holds your money and fills your orders. A prop firm sells a test and splits the profit on its account.
Can I lose more than the fee?
No. The fee is the ceiling.