Prop Firms: Complete Guide to Proprietary Trading Firms 2026

Proprietary trading firms, commonly known as "prop firms," are financial institutions that provide capital to skilled traders who can demonstrate consistent profitability and sound risk management. Instead of trading with their own limited capital, traders can access significant funding from the firm—ranging from $10,000 to over $1 million—and share a percentage of the profits they generate.

This model allows talented individuals to scale their trading operations without personal financial risk. Prop firms have revolutionized the trading industry by democratizing access to substantial trading capital, making it possible for traders worldwide to participate in markets that would otherwise require significant personal investment.

The prop firm industry has grown exponentially since 2020, with hundreds of firms now operating globally. These firms typically focus on forex, futures, stocks, crypto, and other financial instruments, each offering different account sizes, profit splits, and trading conditions.

Key Characteristics of Prop Firms

• Capital Provision: Firms provide trading capital, eliminating the need for traders to risk their own money
• Evaluation Process: Most firms require traders to pass a challenge or evaluation before receiving funding
• Profit Sharing: Traders typically receive 50-90% of profits, with the firm taking the remainder
• Risk Management: Firms implement strict rules including drawdown limits, daily loss limits, and consistency requirements
• Technology Access: Many firms provide access to professional trading platforms and tools

Prop firms employ a rigorous evaluation process, often called a "challenge" or "evaluation," where prospective traders must meet specific profit targets and adhere to strict drawdown limits within a set timeframe. This process typically involves two phases:

Phase 1: Evaluation Challenge

Traders receive a demo account with specific rules they must follow:

• Profit Target: Usually 8-10% of the account size
• Maximum Drawdown: Typically 5-10% of starting balance
• Time Limit: Usually 30-60 days to complete Phase 1
• Trading Rules: No news trading, no weekend holding, consistency requirements

Phase 2: Verification

After passing Phase 1, traders enter Phase 2 (verification) with similar but often slightly relaxed rules. Successful completion of both phases leads to a funded account.

Funded Account

Once funded, traders can trade with the firm's capital and receive profit splits. Payouts typically occur weekly, bi-weekly, or monthly, depending on the firm's policies. Some firms offer instant funding, bypassing the evaluation process entirely.