Prop Firm

A prop firm (short for proprietary trading firm) puts up the trading capital so you do not have to. In the modern futures funding model, you pay a fee to attempt an evaluation on a simulated account. Hit the profit target without breaking the risk rules and the firm gives you a funded account.

How it works, step by step. First you buy an evaluation, sometimes called a challenge or combine. Second you trade it to a profit target while staying inside the rules: a maximum drawdown, often a daily loss limit, sometimes a consistency rule or a minimum number of trading days. Third, once you pass, you get a funded account. At most futures firms that account is still simulated, but the payouts are real money, and some firms move steady traders to a live account later. Fourth you request payouts from your profits, keeping a split that is usually 80 to 100 percent.

A prop firm is not a hedge fund. A hedge fund invests money from outside investors; a futures prop firm backs traders and earns from evaluation fees, resets, activation fees and its share of funded profits. That is why the rules are built to filter for disciplined trading.

The trade-off for you is capped risk: the most you can ever lose is what you paid, while the upside is a payout stream from a far larger account than most traders could fund themselves. The catch is that most traders never pass, and fees add up across attempts.

Before you buy, check four things: the all-in price (evaluation plus any activation fee), the drawdown type, the payout rules (wait, minimums, caps, buffer), and the firm's record of actually paying. Every firm page on this site lists all four.