What Are Prop Firms?
Proprietary trading firms (prop firms) provide capital to skilled traders in exchange for a share of profits. You pass their evaluation, they fund you with $10,000 to $400,000+, and you keep 70-90% of what you make.
Why Trade With a Prop Firm?
Trade More Capital
Turn a $500 challenge fee into access to $100,000+ in trading capital. Multiply your earning potential.
No Personal Risk
Once funded, you're trading firm capital. Blow the account? You lose funding, not your money.
Scaling Path
Many firms offer scaling plans. Hit profit targets → get more capital → earn more.
Forces Discipline
Strict rules enforce good habits. You MUST manage risk properly or lose the account.
⚠️ Reality Check
Only 5-15% of traders pass prop firm challenges on their first attempt. These are serious evaluations that require genuine skill. If you're not consistently profitable on demo first, you're not ready.
How Prop Firms Work
The Typical Process
Choose Challenge
Select account size ($10K-$400K) and pay one-time challenge fee ($100-$1000+)
Phase 1: Evaluation
Trade demo account. Hit profit target (8-10%) without breaking rules. Usually 30 days.
Phase 2: Verification
Prove consistency with lower profit target (5%). Usually 60 days. Some firms skip this.
Get Funded
Receive funded account. Trade real capital (or simulated with real payouts).
Withdraw Profits
Request payouts (typically monthly). Keep 70-90% of profits you generate.
Challenge vs. Funded Account
| Aspect | Challenge Phase | Funded Account |
|---|---|---|
| Account Type | Demo (simulated) | Live or simulated with real payouts |
| Profit Target | 8-10% | None (just trade profitably) |
| Drawdown Limit | 5% daily, 10% total (typical) | Same or slightly relaxed |
| Time Limit | 30-60 days | Unlimited |
| Your Earnings | $0 (it's evaluation) | 70-90% of profits |
Top Prop Firms Compared
The prop firm industry has exploded. Here are the most reputable options as of 2026:
FTMO
Industry LeaderRules: 10% profit target, 5% daily DD, 10% total DD, no news trading, 4 min trade days
✓ Pros: Most trusted, fast payouts, good support
✗ Cons: Stricter rules, no news trading
Funded Trading Plus
Relaxed RulesRules: 10% target, 5% daily DD, 10% total DD, news trading allowed, no time limit
✓ Pros: No time limit, news allowed, scaling plan
✗ Cons: Newer company
The Funded Trader
Popular ChoiceRules: 8% target, 5% daily DD, 10% total DD, multiple challenge types
✓ Pros: Highest funding, multiple options
✗ Cons: Mixed reviews on payouts
True Forex Funds
Instant FundingRules: 8% target (if challenge), 5% daily DD, 10% total DD
✓ Pros: Instant funding option, good reputation
✗ Cons: Higher fees for instant
Do Your Research
The prop firm industry is largely unregulated. Before paying any challenge fee, research the company thoroughly. Check TrustPilot reviews, Reddit discussions, and payout proof. Avoid firms with consistent payout complaints.
Understanding Prop Firm Rules
Breaking any rule = instant failure. Memorize these before you start.
🚨 Daily Drawdown (5%)
Your account cannot drop more than 5% from the day's starting balance. This resets daily at server time (usually midnight EST or GMT).
🚨 Maximum Drawdown (10%)
Your account can never drop more than 10% from the initial balance. Ever. This is your absolute floor.
📈 Profit Target
Reach the target (8-10%) to pass. No time pressure usually, but minimum trading days required.
📅 Minimum Trading Days
Must trade on X different days (usually 4-10). Prevents lucky one-trade passes.
📰 News Trading
Some firms ban trading around high-impact news (2 min before/after). Check specific rules.
🌙 Weekend Holding
Some firms prohibit holding positions over the weekend. Others allow it.
📊 Lot Size Limits
Maximum lots per position or total. Usually generous (20-100+ lots for $100K accounts).
🤖 EA/Copy Trading
Policies vary. Many allow EAs but ban copy trading from other traders.
How to Pass Prop Firm Challenges
These are the exact strategies used by traders who pass challenges consistently.
The Winning Approach
Risk 0.5-1% Per Trade Maximum
With 5% daily drawdown, you can only afford 5 losing trades at 1% risk before failing. Most successful challengers risk 0.5% to give themselves more room.
Aim for 1-2% Per Week
10% target over 30 days = ~2.5% per week. Don't rush. Consistent small gains beat gambling for big wins.
Trade Your A+ Setups Only
This is not the time to experiment. Only take your highest-probability setups that you've proven on demo.
Stop After 2 Losses
Two consecutive losses in a day? Stop. Walk away. Revenge trading during challenges is account suicide.
Protect Gains
Once you're up 5%, reduce risk to 0.25-0.5%. You're already halfway there — don't give it back.
Weekly Profit Breakdown
| Week | Target | Cumulative | Risk Per Trade |
|---|---|---|---|
| Week 1 | +2% | 2% | 0.5-1% |
| Week 2 | +2.5% | 4.5% | 0.5-1% |
| Week 3 | +2.5% | 7% | 0.5% |
| Week 4 | +3% | 10% ✓ | 0.25-0.5% |
Conservative, achievable targets. No gambling needed.
💎 Pro Tip: The Buffer Strategy
Build a 2-3% profit buffer before taking any trades with wider stops or higher risk. This buffer protects you from violating drawdown rules during normal losing streaks.
Common Mistakes That Cause Failure
Overtrading
Taking 10+ trades per day trying to hit target fast. Quality over quantity wins challenges.
Risking Too Much
2-3% risk per trade = account blown in 2-3 bad trades. 0.5% is the sweet spot.
Revenge Trading
Trying to recover losses immediately after a losing trade. This is how accounts die.
Ignoring Daily Drawdown
Not tracking your daily DD. Many fail from daily limit, not total DD.
Trading During News
Forgetting news restrictions and getting disqualified despite being profitable.
Not Reading Rules
Each firm is different. Read the entire rulebook before trading a single lot.
Key Takeaways
Prop Firms = Leverage
Turn $500 into access to $100K+ capital. Your skills, their money.
Risk 0.5-1% Max
With strict drawdown rules, conservative risk management is essential.
Slow and Steady
Aim for 2% per week. Don't rush. Consistency beats gambling.
Know the Rules
Every firm is different. Read, understand, and follow every rule perfectly.