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What Is a Prop Firm? — How Prop Firms Work

Understand how proprietary trading firms operate, their business models, revenue sources, and what to look for when choosing one.

📖 ~3,000 words•pillar

What Is a Prop Firm?

A proprietary trading firm (prop firm) is a company that provides traders with funded accounts to trade financial markets. The firm supplies the capital, and the trader receives a share of the profits generated.

How Do Prop Firms Make Money?

Prop firms generate revenue through evaluation fees, profit splits, and technology/data fees. A-Book firms also earn through order flow, while B-Book firms internalize trades.

What to Look For in a Prop Firm

Key factors include: payout reliability, drawdown rules, profit split percentage, entry cost, platform support, track record, and regulatory status. Use our 9-metric scoring model to compare.

Frequently Asked Questions

How do prop firms work?
Prop firms provide capital for traders. You pay for an evaluation, prove your skills, and receive funding to trade with the firm's money.
Are prop firms safe?
Legitimate prop firms are safe. Look for verified payout history, transparent rules, and established track records. Check our Integrity Hub.

Related Reading

What Is Prop Trading? →A-Book Prop Firms →Are Prop Firms Legit? →