What is Prop Firm?
A company that provides trading capital ($5k-$4M) to individuals who pass a paid evaluation called a "Challenge."
A Prop Firm (proprietary trading firm) provides trading capital — typically $5,000 to $4,000,000 — to individual traders who pass a paid evaluation called a "Challenge." Once passed, the trader gets a Funded account, trades the firm's capital, and splits the profit (typically 80-90% trader, 10-20% firm).
The Challenge tests whether a trader can hit a profit target (typically 8-10%) within a time limit (30-60 days) without breaking drawdown rules (daily 4-5%, total 8-12%). Two-phase Challenges (Phase 1 + Verification) are the industry standard; 1-step and instant-funded variants are growing.
Challenge fees ($39 to $2,000) cover the firm's evaluation cost and are often refunded with the first payout. Most reputable firms (FTMO since 2014, FundingPips, The5ers, Goat) publish payout proof. Avoid firms with no public payout dashboard or that have changed rules retroactively.