What a prop firm is
Lesson 1 of 12 in the course “Prop Trading”. Free, with animations and a quiz.
Meet Mira
Mira is 24, works as a barista in Dubai and has traded gold and EUR/USD on a demo account for six months. Her real account holds $600: even a great +5% month is just $30. She heard that prop firms “give you $100,000” and can’t see the catch. Throughout the course we figure it out with her: how it works, what it costs and how to pass the exam without blowing up.
A prop firm in plain words
A prop firm (from proprietary trading) gives a trader an account to trade and shares the profit with them. But first comes an exam, called a challenge. You pay a fee and trade a test account under strict rules. Pass it and you get a funded account and keep most of the profit, usually 80–90%.
Your own money vs a prop firm
With her own $600 Mira risks the whole deposit and earns pocket change. On a $100,000 prop account the same +5% is $5,000, and about $4,000 of it is hers. Meanwhile she only risks the fee, usually around $500 for an account that size. The price of this deal is the rules: one step past a loss limit and the account is closed.
From fee to payout
The usual path: pay for the challenge. Phase 1: make 8–10% without breaking the limits. Phase 2, verification: about 5% more. Then a funded account and, a couple of weeks later, the first payout. Fail and you can buy a new attempt. Many firms no longer set a time limit, so there’s no rush.
What a prop firm is not
It’s not a job with a salary: no profit, no pay. It’s not an investment or a loan: if a funded account goes red, nobody hangs a debt on you, you just lose the account. And it’s no money guarantee: few people pass the exam. Why that is, we unpack in the next lesson.
What’s next
Four levels, from easy to harder: how prop firms work, the rules people fail on most, risk that fits the limits, and payouts plus picking a firm. The finale is a $100,000 training challenge in the Brainax simulator. You can come back to the simulator as often as you like to test your strategy and your knowledge.
Check yourself
- What does Mira get if she passes the challenge?
Correct answer: A funded account and most of the profit, usually 80–90%. The firm gives her an account to trade, and Mira keeps most of the profit she makes on it. - What does Mira risk when she trades with a prop firm?
Correct answer: The challenge fee. The most a trader loses is the fee. If the account is closed for a breach, the trader owes nothing. - What does a prop firm ask of a trader in return?
Correct answer: Follow the rules: a profit target and loss limits. Losing trades are normal. What matters is staying inside the limits and reaching the target.