What is Prop Firm Trading
Prop Firm Trading (Proprietary Firm Trading) is when traders use a firm’s capital to trade in the financial markets instead of their own money. In return, the firm and the trader share the profits.
The core concept is simple: you trade, and the firm provides the funding.
Prop firms look for skilled traders who can manage risk and generate consistent profits. Instead of paying you a salary, they provide you with a trading account, often ranging from $10,000 to $500,000, and expect you to follow specific rules.
If you perform well, you keep a share of the profits (usually between 70% and 90%), while the firm takes the remainder.
How Prop Firm Trading Works
1. Evaluation or Challenge Phase
Before funding you, most prop firms require you to pass an evaluation or challenge phase:
- You must reach a profit target, often 8–10%.
- You must stay within drawdown limits.
- You must trade for a minimum number of days.
If you pass, you move to the next stage, often called the Verification or Funded phase.
2. Verification Phase
In a two-step challenge system, this phase requires you to reach a smaller profit target (for example, 5%) while following the same risk management rules.
