What is a Prop Trading Firm?
A proprietary trading firm gives traders access to capital in exchange for a share of profits. In the modern retail prop model, you pay a challenge fee, pass an evaluation that tests whether you can manage risk properly, and receive a funded account if you do. You keep 80–100% of profits. The firm keeps a cut as their revenue.
The model works for both sides when the firm is legitimate: traders get access to capital they couldn't otherwise trade with; the firm earns from the spread on trades, the profit cut, and failed challenge fees. The challenge fee business model has been criticised for incentivising firms to make challenges hard enough that most people fail — which is why understanding exactly what you're signing up for matters so much.
Read the full guide: What is a Prop Firm? →
How Prop Firm Evaluations Work
Most evaluations have two components: a profit target you need to hit, and drawdown limits you can't breach. Breach the drawdown at any point — even if you're currently profitable — and the account resets. That's the core mechanic.
The Two-Step Model
| Phase | Profit Target | Max Drawdown | Time Limit |
|---|---|---|---|
| Phase 1 (Challenge) | 8–10% | 5–10% | 30 days (or none) |
| Phase 2 (Verification) | 4–5% | 5–10% | 60 days (or none) |
| Funded Account | None | Same drawdown | No limit |
Static vs Trailing Drawdown
Static drawdown is calculated from your starting balance. If you start with $100K and the max drawdown is 10%, the floor is $90K forever — it doesn't move even if you profit. This is the most forgiving type for normal trading volatility.
Trailing drawdown follows your equity high watermark. As you profit, the floor rises with you — meaning unrealised profits you give back raise the floor permanently. This catches traders who assume their winning streak has expanded their safety margin.
Read the full guide: How Challenges Work →
Read the full guide: Drawdown Explained →
Read the full guide: Static vs Trailing Drawdown →
How to Actually Pass a Prop Challenge
The honest answer: traders who pass consistently are the ones who were already profitable before they started. But there are specific things that separate traders who pass from traders who blow the challenge with an otherwise good strategy.
Position size first, target second
Most failed challenges are lost in a single session — usually the result of oversizing into a news event or doubling down after a losing run. The daily loss limit (typically 4–5%) is the one that ends challenges, not the max drawdown. Start by calculating what position size lets you run 3 full-stop losses in a day without breaching the daily limit. That's your max size for the entire challenge.
Don't chase the target
Challenge targets are achievable over the full time period. Traders who pass slowly and consistently are far more likely to get funded than traders who try to hit 8% in two weeks and blow the account trying to recover in week three.
Rules to check before you start
- Minimum trading days — must trade on at least N different calendar days
- Consistency rules — no single day can be more than 30–50% of total profit
- News trading windows — some firms have a 2-min buffer on either side of high-impact data
- Copy trading — most firms flag accounts that mirror signal providers
Read the full guide: How to Pass a Prop Challenge →
Risk Management for Prop Trading
Standard retail trading risk rules don't map directly to prop trading. The daily loss limit creates a hard cap on daily downside that doesn't exist in your own account, and that changes how you should structure position sizing.
A practical framework: Set max risk per trade at 0.5–1% of the account. Set a daily stop at 2–3% (half the daily limit, leaving buffer). If you hit your daily stop, close everything and come back tomorrow. Use the Position Size Calculator to convert your risk percentage into exact lot sizes based on your stop-loss distance.
Read the full guide: Risk Management for Funded Accounts →
Trading Platforms
Understanding Prop Firm Payouts
Payouts are the most important thing a prop firm does. A firm that evaluates well but pays inconsistently or slowly is not worth recommending — which is why verified payout history is a core part of every score on this site.
Payment methods to expect: Bank wire, cryptocurrency (USDT/BTC), Wise, and PayPal are most common. Some firms have geographic restrictions — check before you start if you're outside the US, EU, or UK.
Fee refund policy: The best prop firms (FTMO, FundedNext) refund the challenge fee on your first payout, making the evaluation effectively free if you pass and withdraw.
In-Depth Guides
Dedicated long-form guides on each topic — with tools, examples, and practical frameworks
Best Firms by Category
Filtered rankings for specific trading styles, instruments, and needs
Head-to-Head Comparisons
Side-by-side breakdowns of the most commonly compared prop firms