Prop Trading: What It Is, How It Works, and What You Need to Know

When you hear prop trading, a practice where traders use a firm’s money instead of their own to buy and sell financial assets. Also known as proprietary trading, it’s how many professional traders get access to big capital without risking their savings. Unlike regular retail trading, where you put up your own cash and keep or lose what you make, prop trading firms give you funding, tools, and sometimes mentorship — but only if you prove you can trade consistently and manage risk.

This model relies on trading firms, companies that hire or contract traders to generate profits using their capital. These firms don’t care if you’re a day trader, swing trader, or algorithmic trader — they care about your edge. You’ll usually go through a challenge or evaluation, where you hit profit targets while staying under loss limits. If you pass, you get funded accounts with real money. The best firms take a cut of your profits — often 80/20 or 70/30 — and let you keep the rest. But not all firms are honest. Some charge high fees, hide terms in fine print, or vanish after you pay for a challenge. That’s why knowing the difference between legit firms and scams is critical.

What makes prop trading different from just trading on your own? It’s not just about the money. It’s about structure. You’re held to rules: maximum daily loss, maximum drawdown, trade frequency limits. These aren’t punishments — they’re training wheels. Real prop traders learn discipline faster because their mistakes cost the firm, not just them. And because they’re trading larger sizes, small edge strategies that wouldn’t work with $1,000 can become profitable with $50,000 or more. That’s why many successful traders start in prop firms before launching their own hedge funds or managing client money.

But here’s the truth: prop trading isn’t for everyone. If you’re looking for quick cash or think you’ll magically turn $100 into $10,000, you’ll fail. It demands patience, emotional control, and a solid trading plan. The posts below cover exactly that — real reviews of trading firms, breakdowns of evaluation challenges, how to avoid scams, and what strategies actually work under firm rules. You’ll find guides on risk management, trading psychology, and how to pass your first funded account challenge. No fluff. No hype. Just what you need to know before you put your name on the line.