Prop Trading
Prop firms, trading challenges and funded accounts: how they work, their rules, costs and risks.
beginner
- Are Prop Firms Legit? Regulation, Risks and How to Check
Are prop firms legit or scams? How prop firms are regulated, past industry problems, red flags and a checklist for checking whether a prop firm is legit.
- How Do Prop Firm Payouts Work? Profit Split, Timing and Rules
How prop firm payouts work: profit split, payout schedule, first payout timing, payout rules and caps, fee refunds, methods and fees, with firm examples.
- How Do Prop Firms Make Money? The Prop Firm Business Model
How do prop firms make money? The prop firm business model explained: challenge fees, resets, add-ons, simulated accounts, payouts and conflicts of interest.
- Prop Firm Challenge Explained: One-Step, Two-Step and Instant Funding
How a prop firm challenge works: one-step vs two-step evaluations, instant funding, profit targets, drawdown limits, trading days, fees and refunds.
- Prop Firm vs Broker: Funded Account or Your Own Account?
Prop firm vs broker: who owns the capital, simulated vs live accounts, who bears losses, regulation, profit split and withdrawals compared, with an example.
- What Is a Prop Firm? How Prop Trading Firms Work
What a prop firm is and how prop trading firms work: challenge fees, prop firm evaluations, funded and simulated accounts, profit splits, rules and risks.
intermediate
- Prop Firm Consistency Rule: How It Works, With Examples
The prop firm consistency rule explained: how the best day percentage is calculated, what happens if you exceed it, and FTMO, FundedNext and Topstep rules.
- Prop Firm Drawdown Rules: Static vs Trailing Drawdown Explained
Prop firm drawdown rules explained: daily drawdown, maximum drawdown, static vs trailing and end-of-day trailing, balance vs equity, with worked examples.
Key terms
- Challenge fee
A challenge fee is the price a trader pays a prop firm to take an evaluation (a challenge) with a profit target and loss limits; it pays for a service, is kept by the firm if the challenge fails, and some programmes refund it after a qualifying payout.
- Consistency rule
A consistency rule is a prop firm condition that limits how much of a trader's total profit may come from a single day or trade, so that results are not driven by one outsized gain.
- Daily drawdown
Daily drawdown, also called the daily loss limit, is the most an account may lose within one trading day under a prop firm's rules; the limit is recalculated at a reset time set by the firm.
- Equity drawdown
Equity drawdown is the fall in an account's equity, its balance plus floating profit and loss on open trades, from a reference level such as the starting balance or a previous high.
- Funded account
A funded account is the prop firm account a trader receives after passing a challenge, or directly through instant funding, on which profits are shared under the firm's profit split.
- Instant funding
Instant funding is a prop firm programme in which a trader pays a fee and receives a funded account straight away, without passing an evaluation.
- Payout
A prop firm payout is the payment of a funded trader's share of eligible profits, made by the firm under its profit split and payout rules.
- Payout cap
A payout cap is the maximum amount a prop firm pays a funded trader in a single payout or payout cycle; profit above the cap stays on the account or is paid in later cycles, depending on the programme.
- Profit split
A profit split is the percentage of eligible profits on a funded prop firm account that the firm pays to the trader; the firm keeps the rest.
- Profit target
A profit target is the gain, usually a percentage of the initial account size, that a trader must reach to pass a stage of a prop firm challenge.
- Simulated account
A simulated account is a trading account that uses fictitious capital and does not execute trades in the real market; many prop firms use simulated accounts for challenges and for funded accounts, and pay real payouts from their own revenue.
- Static drawdown
Static drawdown is a maximum loss limit fixed at a set level below an account's initial balance; unlike trailing drawdown, it does not rise when the account makes money.
- Trailing drawdown
Trailing drawdown is a maximum loss limit that rises as an account reaches new highs, staying a fixed distance below the highest balance or equity reached, and never falls.