What Is a Prop Firm? How Prop Trading Firms Work
Proprietary trading firms, the evaluation model, how they make money, and how they differ from brokers.
Last updated 23 Oct 2026A prop firm, short for proprietary trading firm, is a company that trades with its own capital rather than clients’ money. Today the term mostly means firms that fund retail traders: you pay a fee, pass an evaluation, and trade an account the firm backs, keeping most of the profit. This guide explains both kinds of prop firm, how the retail model works and makes money, and how it differs from a broker or a hedge fund.
Traditional prop firms and retail prop firms
Traditional proprietary trading firms hire traders, give them the firm’s money and keep the profit. Market makers and high-frequency trading firms work this way. They recruit like any employer, and you don’t pay to join.
Retail prop firms, the kind EvalSaver compares, sell access instead. Anyone can buy an evaluation online, trade it from home on platforms like MetaTrader 5, NinjaTrader or Tradovate, and get a funded account by hitting a profit target without breaking the loss limits. They cover futures, forex & CFDs and crypto perpetuals.
How the retail model works
- You buy an evaluation at a size, for example a 50K futures account or a 100K forex account.
- You trade it to a profit target, such as 6% in one step or 8% then 5% in two steps, without breaking a daily loss limit or a max loss.
- You get a funded account with similar limits and no target.
- You request payouts and keep a split, usually 80% to 90%, sometimes 100%.
The rules are the product. Two firms with the same price can be very different to trade because of how the drawdown moves, whether there is a consistency rule, and when you can withdraw. Our guide to funded trading accounts goes through each stage with real prices.
How prop firms make money
Most retail prop firm revenue comes from evaluation fees. Many traders fail an evaluation and buy another, and those fees pay for the payouts to traders who pass and keep making money. Many firms say their funded accounts are simulated: FundingPips calls its program “a fully simulated environment” and E8 Markets calls its accounts SimFi. Trades don’t reach the real market, but payouts are paid in real money.
That model is why payout rules matter. Payout caps, consistency rules, minimum profitable days and buffers control how much the firm pays out and when. Firms that publish them clearly and pay on schedule are the ones worth your fee.
Prop firm vs broker
A broker holds your money and sends your orders to the market; your profit and loss are your own. A prop firm doesn’t hold a trading deposit from you: you pay a fee, trade the firm’s account under its rules, and receive a share of the profit. You can lose your fee with a prop firm, but not more than that, while with a broker you can lose your whole deposit.
Prop firm vs hedge fund
A hedge fund invests clients’ money and charges them fees. A proprietary trading firm trades only its own capital, with no outside investors to answer to. A retail prop firm adds a third model: its income comes from the traders who buy evaluations.
What a prop trader does
A prop trader trades for a prop firm and is paid from the profit. At a retail firm that means trading your own strategy inside the firm’s limits: a set daily loss, a max loss, sometimes news or weekend rules, and a payout schedule. Many prop traders run accounts at several firms at once.
Are prop firms legit?
Many are, and some have closed or stopped paying. Before you pay, check that the firm publishes full rules and payout terms, names the company behind it, has a track record of payouts, and accepts residents of your country. Our guide on whether prop firms are legit has the full checklist.
How to choose a prop firm
- Start with the market you already trade.
- Compare first-month cost at your size, including any activation fee and discount code.
- Check the drawdown type, daily loss and consistency rule against how you trade.
- Read the payout rules: split, schedule, minimum and caps.
- Check country restrictions before you buy.
FAQ
A proprietary trading firm. Today it usually means a firm that funds retail traders after a paid evaluation and shares the profit with them, usually 80% to 90%.
Mostly from evaluation fees. Payouts to funded traders are paid from that revenue, and many firms run funded accounts on simulated capital.
No. A broker holds your deposit and you trade your own money. A prop firm charges a fee and you trade its account under its rules for a profit share.
No sign-up requirement, but the evaluation tests risk control. Most people who pass already have a strategy they trade with small, consistent size.