What is a prop firm?
In simple terms, what is a prop firm? You can enter a paid trading test provided by a company. Once you pass a test in a simulated account, the company divides your funded trading account profits with you.
How do prop firms work?
You pay to take an evaluation, which is a trading test in a practice account that uses fake money. Once you choose an account size, you take a challenge from a prop firm with a set profit goal. The firm pays you your profit split from the winnings in your simulated account.
You advance to a funded account after passing the test. Trading continues online within a simulated environment, usually from a home computer. You request a withdrawal, then the company deposits actual cash in your bank account.
- An entry fee opens your simulated test account.
- You must meet the profit goal and stay within the loss limit.
- Trade in a funded account, then withdraw the profit split you earned.
What is a prop firm compared to a traditional desk?
On Wall Street, proprietary desks hire licensed employees who invest the company's real cash in trades on live exchanges. Retail evaluation companies work differently because anyone can sign up from home.
Working as an independent contractor, you pay a fee for a simulated test. You receive no live market cash from a retail prop firm, and its practice account holds your trades. Winners receive payment from the company's own corporate funds.
A worked example of a Topstep account
The Standard Path at Topstep for the 50K Trading Combine costs $49 each month. Without an activation fee, a path at Topstep costs $95 each month. Your profit must reach $3,000 before you can clear the 50K test. How much the account can lose before the firm closes it depends on its maximum loss limit. At Topstep, the daily ending balance sets this limit, which can only rise.
You can pass in 2 days at Topstep if your best day is below 55% of the $3,000 target. Passing the Standard Path adds a $149 activation fee at Topstep for an Express Funded Account. Your total payment at Topstep comes to $198 if you finish during the first month. Under Topstep pricing rules, funded traders get 90% of profits, and a $125 payout is the minimum available. Our Topstep review covers the $1.5B+ that Topstep reports paying to traders.
Rules you must follow to receive payment
Strict risk rules apply to every funded trading account to protect the company. The firm closes your account immediately if you break a rule. You must pay for either a test reset or a new evaluation.
- Your trailing loss limit rises as your balance grows, but dropping below the floor closes your account.
- Consistency rules limit the share of your total profit that one trading day can bring in.
- Tradeify and similar firms don't allow overnight positions, so you must close them before the afternoon market close.
- Apex Trader Funding and similar firms ban automation, so trading bots aren't allowed.
Fees and account costs across firms
With Topstep and Take Profit Trader, monthly subscriptions remain due until you pass or cancel. Each of Lucid Trading, MyFundedFutures, and Tradeify charges one upfront price, and no monthly renewal applies.
Tradeify charges $145 upfront for a Growth 50K evaluation. After a rule violation, the reset fee is $95. For $492, Tradeify offers a Lightning Funded 50K account without requiring you to take the test. Resets aren't available with that instant plan. According to Tradeify's price reference, the simulated funded split is 90%, and neither plan has an activation fee.
Revenue and pass rates for prop firms
Most revenue at retail firms comes from test fees that can't be refunded, along with reset and activation charges. According to the beginner guide from Topstep, just 16.8% of Trading Combines finished in 2025.
Most traders don't pass the test. Customers fail, but their failures cost the company no market cash because they trade in simulated accounts. According to how prop firms make money, entry fees cover company costs and winners' payouts.
Prop trading meaning in futures and forex
A futures contract is traded on a central exchange and covers trading in a commodity or market index. Customers from the United States are accepted by most futures prop firms. Topstep, Apex Trader Funding, and Lucid Trading are included.
Forex involves trading one currency against the currency of another country. Federal currency rules cause many forex prop firms to limit what they offer United States customers. Both FTMO and FundedNext belong to that group.
Would a funded trading account be worth the cost?
Evaluations take place in simulated accounts, and most traders never receive a payout. This isn't investment advice. A beginner who hasn't made a profit in a free practice account will probably lose the fee.
Before you spend money, try a free practice trial from a firm such as FTMO. The fee for any evaluation should be an amount you can afford to lose.
Traders' questions
What happens when you lose money at a prop firm?
Market losses in a simulated account can never leave you owing money to the company. Once your balance drops beneath the loss limit, the firm closes the account. You never risk more cash than what you paid as an entry fee.
Is prop trading lawful?
In the United States, prop trading is legal. Federal regulators continue to watch for fraud among firms. My Forex Funds faced a lawsuit from regulators over fee claims made by the firm. The regulators claimed that the firm made money when clients suffered losses. Later, a federal judge threw out the case and sanctioned the agency.
How are prop traders paid?
After satisfying the payout minimum and consistency requirements set by the firm, traders request a withdrawal. FundedNext and Lucid Trading pay out quickly, but Apex Trader Funding takes several working days. According to the Internal Revenue Service, independent contractors working for themselves report the payouts as nonemployee income.
Can you earn money through prop firms?
Established firms, including FTMO and MyFundedFutures, pay skilled traders. Even so, withdrawal rules can lower the amount you ultimately keep. At Apex Trader Funding, each account has a total payout cap, and small withdrawals carry a fee at Take Profit Trader.