How prop firms work, and why they exist
A prop firm gives you a trading account funded with its own money. You pay a fee to prove yourself, and if you pass, you keep most of the profit you make.
What a prop firm actually is
The word prop comes from proprietary trading. A prop firm wants to find traders who can manage risk. Rather than asking you to put down a large deposit, it charges a one-off fee for a test, which is called the challenge.
In the challenge you trade a demo account under clear rules: reach a profit target without crossing the loss limits. If you manage that, you're given a funded account and usually keep 80–90% of the profit.
Why the model works for the firm
Most firms keep funded traders on simulated accounts and pay profits out of their own money. Their main income is challenge fees, because a lot of traders don't pass.
This is exactly why it matters which firm you choose. How long a firm has been around and its Trustpilot reviews are the most reliable clues that it pays.
What you put at risk
Only the fee. If the account fails, you owe nothing more, and many firms even return the fee with your first payout.
A $100,000 challenge usually costs between $300 and $650. Current prices are on our cheapest prop firms list.
Is it a good fit for you?
It suits you if you trade with a plan, know exactly how much you risk on each trade, and can get through a losing run without abandoning your rules. If you're new, practise on a demo first and read about the common mistakes.
Questions people ask
Is a prop firm the same thing as a broker?
No. A broker holds your money and carries out your trades. A prop firm sells you a test and shares the profit you make on its account.
Could I lose more than the fee?
No. The most you can lose is the price of the challenge.