What is Proprietary Trading?

Proprietary trading, commonly known as "prop trading," is a model where a financial firm provides capital to traders so they can trade stocks, forex, futures, or other instruments using the firm's money rather than their own. In return, the trader shares a percentage of the profits they generate with the firm.

This arrangement benefits both parties. Traders gain access to significant capital they may not have on their own — often ranging from $10,000 to $1,000,000 or more — while firms profit from the collective skill of their traders without taking on positions themselves. Unlike hedge funds, modern online prop firms do not require traders to relocate to an office. Everything is done remotely through standard trading platforms.

The prop trading industry has exploded over the last five years. What was once an exclusive Wall Street practice has become accessible to retail traders worldwide. Firms like FTMO, Topstep, and FundedNext have democratized access to funded accounts, creating a new career path for skilled traders who lack starting capital.

How Do Prop Firms Work?

Most modern prop firms follow a straightforward model. First, a trader pays a one-time evaluation fee to attempt a trading challenge. This fee typically ranges from $50 to $1,000 depending on the account size. During the challenge, the trader must hit specific profit targets while adhering to risk management rules such as maximum daily drawdown and overall loss limits.

If the trader passes the challenge, they receive a funded account — real capital provided by the firm. From that point, the trader keeps a large share of the profits, typically between 70% and 90%. The firm retains the remainder as compensation for providing the capital and infrastructure.

Some firms like The 5%ers offer instant funding programs where no challenge is required, though these typically start with smaller account sizes. Others, like SurgeTrader, use a single-phase audition process for faster access to funding.

The Evaluation Process

The evaluation, or challenge, is the gateway to a funded account. Most firms use either a one-step or two-step process:

  • One-step evaluation: Hit a single profit target (usually 8–10%) while respecting drawdown limits. Used by firms like Apex Trader Funding and SurgeTrader.
  • Two-step evaluation: Phase 1 requires a higher profit target (8–10%), and Phase 2 requires a lower target (4–5%) for verification. Used by FTMO, E8 Funding, and True Forex Funds.
  • No evaluation (instant funding): Some firms skip the challenge entirely, funding traders immediately with smaller accounts. The 5%ers and MyForexFunds offer this option.

During the evaluation, traders must typically observe minimum trading day requirements, maximum loss limits, and sometimes consistency rules. Violating any rule results in failure, though many firms offer free retries or discounted resets.

Profit Splits Explained

The profit split is the percentage of trading profits the trader keeps. This is the single most important metric when comparing prop firms. Here is how the major firms stack up:

Some firms offer scaling plans that increase the profit split over time as the trader demonstrates consistency. FundedNext is unique in that they share profits even during the evaluation phase, giving traders immediate revenue before they are officially funded.

Choosing the Right Firm

Selecting the right prop firm depends on your trading style, preferred markets, and risk tolerance. Here are the key factors to evaluate:

  • Markets: Forex traders have the most options. Futures traders should look at Topstep or Apex Trader Funding.
  • Evaluation type: If you prefer faster access, choose a one-step evaluation or instant funding firm.
  • Account size: Ranges from $5,000 to $10,000,000 depending on the firm. Lux Trading Firm offers the highest scaling potential.
  • Platform: Ensure the firm supports your preferred platform — MT4, MT5, cTrader, NinjaTrader, or TradingView.
  • Pricing: Compare the challenge fee relative to the account size. Use PropDeals discount codes to save up to 80% on evaluation fees.
  • Reputation: Check for verified payout proof, community feedback, and the firm's track record.

Common Mistakes to Avoid

The majority of traders fail their first prop firm challenge. Here are the most common mistakes and how to avoid them:

  • Over-leveraging: Using maximum lot sizes to hit targets faster is the top reason for failure. Trade with a plan, not with greed.
  • Ignoring drawdown rules: Every firm has strict daily and maximum drawdown limits. Know these numbers before you place a single trade.
  • Revenge trading: After a loss, many traders increase position sizes to recover quickly. This almost always leads to account violation.
  • Trading without a strategy: Treat the evaluation like real money. Have a tested strategy with clear entry and exit rules.
  • Skipping the rules: Each firm has unique restrictions — no weekend holding, consistency rules, or news trading bans. Read the fine print carefully.
The best traders treat prop firm capital with more discipline than their own money. The evaluation is not just a test of skill — it is a test of risk management.

Prop trading offers one of the most accessible paths to trading with serious capital in 2026. Whether you choose FTMO for forex, Topstep for futures, or another firm entirely, the key is to approach the process with a clear strategy and strict discipline. And before you sign up, check PropDeals for the latest discount codes — there is no reason to pay full price for your evaluation.