Prop firms
What is a prop firm, really?
A proprietary trading firm gives you capital to trade and takes a share of what you make. The modern retail version adds a step in front of that: you pay for an evaluation, and if you pass it you get a funded account. Understanding where the firm's money comes from explains almost every rule you will meet.
The model in one paragraph
You pay a fee for an evaluation account with simulated money and a set of rules — hit a profit target without breaching a daily loss limit or a maximum drawdown. Pass, and the firm gives you a funded account. Trade that profitably and you request a payout, keeping the large majority of the profit, commonly 80–90%.
The evaluation fee is not a deposit and you do not get it back. That is the first thing worth being clear about, because it is the part most often misunderstood: you are buying an attempt, not depositing capital.
- PayA fee for an evaluation account. Not a deposit, not refundable, priced by account size.
- PassHit a profit target without breaching the daily loss limit or the drawdown. Most attempts end here.
- FundedA live or firm-simulated account with the same rules and real payouts.
- PayoutRequest a withdrawal, keep the majority share, subject to whatever consistency and minimum-days rules apply.
Where the firm's money actually comes from
This is the part that explains the rules, and it is worth being unsentimental about.
A prop firm has two possible revenue lines. The first is evaluation fees — every attempt, passed or failed. The second is a share of trader profits. Firms differ enormously in which one dominates, and they do not generally publish the split.
That is not automatically sinister. A business funded by evaluation fees can be entirely legitimate, and the failure rate is high for the ordinary reason that trading profitably inside a drawdown limit is genuinely difficult. But it does explain the shape of the rulebook: a daily loss limit, a trailing drawdown, a consistency rule and a minimum number of trading days are all filters for the same thing — a trader whose results come from a repeatable process rather than from one large bet that happened to land.
Read every rule as an answer to "how would the firm tell those two apart?" and most of them stop being arbitrary.
The rules you will meet, and what each is for
Names vary by firm; the mechanics are broadly consistent. The numbers are always your own firm's — check the current rulebook for your specific account rather than any table on the internet, including this one.
- Profit target
- What you must reach to pass. Usually a percentage of the account size. Only applies to the evaluation stage.
- Daily loss limit
- The most you may lose in one day, measured from a starting balance the firm defines — which is sometimes the day's opening equity and sometimes the previous close. That definition matters more than the number.
- Maximum drawdown
- The floor your account may not fall below. Frequently trailing, meaning it rises with your profit, and sometimes only until it reaches the starting balance. This is the rule that ends most funded accounts.
- Consistency rule
- A cap on how much of your total profit may come from a single day. It filters for a curve built from many ordinary days rather than one exceptional one.
- Minimum trading days
- A floor on how many days you must trade before a payout. Another filter against a single lucky session.
- News and window restrictions
- Periods where trading is disallowed or size is capped. Automated systems do not know about these unless you stop them, which makes them your responsibility.
Trailing drawdown is the one that surprises people
If you only understand one rule properly, make it this one, because it is where funded accounts most often end.
A trailing drawdown moves up as your account makes new highs. Start with a $50,000 account and a $2,000 trailing drawdown and your floor is $48,000. Run the balance to $52,000 and the floor has followed you to $50,000 — you are now able to lose only what you made, not the original buffer.
The consequence catches people out constantly: after a strong start, a normal losing day can breach an account that is still up on the week. Firms differ on whether the trail follows closed balance or unrealised equity — the second is stricter, because an open position that goes your way and comes back can raise your floor without ever giving you the profit.
Which of those two your account uses is worth knowing before you find out.
What to check before paying for an evaluation
None of this requires trusting a review, including this page. All of it is in the rulebook or in support's written answer.
- 01How is the daily loss limit measured? Opening equity or previous close, and does unrealised P&L count. The same number means two very different things.
- 02Is the drawdown trailing, and does it trail on equity or on closed balance? Equity-trailing is materially stricter and is the single most common cause of a breach nobody saw coming.
- 03What are the payout terms? Minimum days, minimum amount, how often you may withdraw, and whether a consistency rule gates the first one.
- 04Which platform and data feed? It decides what tooling you can use — and whether automation or copying across your accounts is even technically available.
- 05What does the contract say about automation and copying? Search for "copy", "mirror", "duplicate", "multiple accounts" and "automated". If a clause is ambiguous, ask support and keep the answer in writing.
- 06What actually happens on a breach? Immediate closure, a reset fee, or a grace period — firms differ, and the difference is the cost of one bad afternoon.
Running more than one
Most traders who pass one buy another, and the operational problem starts there rather than at the strategy.
Each account has its own balance, its own drawdown floor and its own daily limit, which means the same trade has a different correct size on each one. Doing that arithmetic live, across four platforms, while the market moves, is where the mistakes come from — and the account you forget is generally the one already holding a position.
The tooling answer is per-account sizing and per-account limits: one account leads, the others reproduce the trade at a multiple appropriate to their own balance, each checked against its own cap before the order is sent. Our position size calculator handles the leader; Copy Trader handles the rest.
Whether you may do that at all is a contract question, not a technical one, and it differs by firm and by account type. Copy trading and prop firms covers which clauses decide it and why firms write them.
Common questions
What is a prop firm?
A proprietary trading firm that provides capital for traders to trade, taking a share of the profits. The modern retail model adds a paid evaluation in front: you buy an attempt, and passing it earns a funded account with a profit split commonly around 80–90% in the trader's favour.
Is prop firm trading legitimate?
The model itself is ordinary — firms have funded traders for decades. What varies is the individual firm, and the questions worth asking are about the rulebook and the payout record rather than about the concept. Evaluation fees are not refundable deposits, which is the most commonly misunderstood part.
How do prop firms make money?
Two lines: evaluation fees from every attempt, passed or failed, and a share of the profits their funded traders make. Firms differ in which dominates and rarely publish the split. It explains the rulebook — every rule is a filter for traders whose results come from a repeatable process.
What is a trailing drawdown?
A minimum account balance that rises as your account makes new highs, so profit reduces your remaining buffer rather than adding to it. Some firms trail on closed balance and some on unrealised equity; the second is stricter and is a common cause of unexpected breaches.
Why do most people fail prop firm evaluations?
Because trading profitably inside a drawdown limit is genuinely hard, and because the limits interact — a trailing drawdown means a good week can leave less room to be wrong than you started with. Position sizing against the drawdown rather than the account size is the most common fix.
Can I trade several prop firm accounts at once?
Technically yes, and many traders do. Each account has its own balance and limits, so the same trade needs a different size on each, which is what per-account sizing tools are for. Whether mirroring trades across them is permitted is set by each firm's contract for that account type.
Start on a simulated account.
Connect a sim or evaluation account and run the whole product against it before you point anything at live money. Nothing about the setup changes when you do.