Prop Firms FAQ

A proprietary trading firm (prop firm) provides traders with capital to trade financial markets. Instead of using your own money, you trade the firm's capital and share the profits. Typical split: 70-90% to you, 10-30% to the firm. You first pass an evaluation to prove your skills, then get funded with real capital ranging from $10K to $400K+.

Evaluation fees range from $49 to $1,299 depending on account size. For example: $10K account = $99-$155, $50K account = $299-$345, $100K account = $499-$599. Most firms refund the fee after your first payout, making it essentially free if you pass. Budget 1-3 months of evaluation time before getting funded.

Yes, but only 15-20% of traders pass evaluations. Those who do can earn $2K-$10K+ monthly depending on account size and skill. Reality check: Most beginners fail 2-3 evaluations before passing. Successful prop traders have solid strategies, strict risk management, and treat it like a business, not gambling.

Technically no, but practically yes. Most firms have no experience requirements, but passing evaluations requires real trading skills. Recommendation: Practice 3-6 months in demo, develop a proven strategy, understand risk management, and trade profitably on a personal account before attempting prop evaluations. Trying too early wastes evaluation fees.

Brokers: You trade your own money, keep 100% of profits, but risk 100% of losses. No evaluation needed. Prop Firms: You trade their capital after passing evaluation, keep 70-90% of profits, risk only the evaluation fee (~$299). You can control $50K+ without risking your own capital. Prop trading is capital-efficient but requires skill.

An evaluation is a test account where you must hit profit targets while following rules (max drawdown, daily loss limits, minimum trading days). Common structures: 1-phase (reach 8-10% profit), 2-phase (8% then 5%), or instant funding (pay more, skip evaluation). You trade demo money during evaluation. Once you pass, you get real funded capital.

Varies by firm: Time-limited firms (30-60 days average), Unlimited time firms (2-6 months average). Most traders who pass do so in 1-3 months. Fastest: 7-14 days for experienced traders. Slowest: Some take 6+ months or never pass. Key factors: Your skill level, strategy, available trading time, and emotional discipline.

Your account is terminated, and the evaluation fee is NOT refunded (only refunded if you pass and get funded). You can immediately purchase a new challenge with no waiting period. Common failure reasons: Hitting daily loss limit (60%), exceeding max drawdown (25%), or breaking rules (15%). Advice: Analyze your failure, fix the issue, practice 30+ days in demo, then retry.

Depends on the firm: EA-Friendly: 4PropTrader, Funded Next, The5ers, E8 Funding. Restricted: Some firms allow EAs but prohibit HFT, arbitrage, or certain strategies. Not Allowed: Rare, but some futures firms restrict bots. Always check the specific firm's rules. If using EAs, backtest thoroughly and ensure compliance with all trading rules.

Consistency rules limit how much profit can come from your best trading day. Example: FTMO limits best day to 30-40% of total profit. This prevents "one-trade wonders." Firms WITHOUT consistency rules: 4PropTrader, Take Profit Trader, Apex, TopStep. Firms WITH consistency rules: FTMO, some Funded Next programs. No consistency rules = more freedom but requires sustainable strategy.

Unlimited at most firms. You can purchase new challenges immediately after failure with no cooldown period. However, each attempt costs the full evaluation fee. Smart approach: After 2 failures, stop and identify the root cause. Fix your strategy, improve risk management, or practice more before attempting again. Repeated failures without improvement waste money.

Max drawdown is the maximum loss allowed on your account, calculated from your starting balance OR highest balance (trailing). Types: Static (from start): If you start with $50K and have 10% max DD, you can't drop below $45K ever. Trailing (from peak): If you grow to $54K, your max DD becomes $48.6K (10% from new peak). Most firms use static during evaluation, trailing when funded.

Daily loss limit is the max you can lose in a single trading day (usually 4-5% of account). Key detail: It includes OPEN positions at end of day. Example: $50K account, 5% daily limit = $2,500 max loss. If you're down $2,400 and hold overnight, you have only $100 wiggle room next day before violating. Best practice: Close all positions before daily reset or use very wide stops.

Firm-specific: Allowed: 4PropTrader, Funded Next, MyForexFunds, E8 Funding. Restricted: Some firms prohibit weekend holding or charge fees. Check rules. Risk: Weekend gaps can violate daily loss limits instantly on Monday open. If holding weekend positions, use wider stops and lower position sizes to account for gap risk. Many successful traders close all positions Friday.

Depends on firm: Fully Allowed: 4PropTrader, Take Profit Trader, Apex, TopStep. Restricted: FTMO prohibits trading 2 minutes before/after major news. Check specific rules. News trading is high-risk: NFP, FOMC, CPI releases cause extreme volatility. You can hit daily loss limits in seconds. If trading news, use smaller positions and be prepared for slippage and rapid losses.

Commonly prohibited: Arbitrage (exploiting price differences between brokers), Tick scalping (exploiting order book), Account management (trading for others), Copy trading (some firms), Hedging across accounts (if you have multiple), High-frequency trading (HFT) - some firms only. Always read the full terms. Violating prohibited strategies = immediate account termination without refund.

Instrument availability varies: Forex specialists: FTMO, Funded Trading Plus, MyForexFunds. Futures specialists: TopStep, Apex, Take Profit Trader, Earn2Trade. Multi-asset: Funded Next, E8 Funding, 4PropTrader (forex + indices + commodities + crypto). Choose based on what you trade. Don't try to learn new instruments during evaluation.

You receive a percentage of profits you generate. Common splits: 70-80% (standard), 80-90% (competitive), 90-100% (top tier, some firms after milestones). Example: You make $5,000 profit on a $50K account at 80% split = you get $4,000, firm keeps $1,000. Higher splits sound better, but factor in rules strictness and pass rates. An 80% split you can achieve beats a 90% split you can't.

Timing varies: Fastest: Apex (1-3 days after profit), TopStep (7-10 days). Standard: 14 days after first funded trade (4PropTrader, FTMO, MyForexFunds). Monthly: Some firms require 30 days. After first payout: Most firms allow bi-weekly or monthly withdrawals. Your evaluation fee is typically refunded with the first payout, so your first withdrawal includes fee + profits.

Common methods: Bank Wire Transfer (most common, 2-5 days), Cryptocurrency (Bitcoin, USDT - fastest, same day), Wise/TransferWise (low fees, 1-2 days), PayPal (fast but limited to some firms), Check/ACH (US only, slower). Fees: Bank wire $0-$50, Crypto $0-$20, Wise $5-$15. Minimum payout: Usually $100-$500. Choose based on your country and fee preference.

Fees: Some firms charge $0, others charge $20-$50 per withdrawal. Wise is usually cheapest (~$15). Crypto can be free. Limits: Minimum: $100-$500 per withdrawal. Maximum: Usually unlimited, but some firms cap first payout at $2K-$5K. Frequency: Bi-weekly or monthly maximum. Making 4 withdrawal requests per month might incur extra fees. Plan withdrawals strategically.

Yes, in most countries. Tax treatment: USA: 1099 income (self-employment tax applies). EU: Varies by country, often personal income tax. Canada: Business income, capital gains rules may apply. UK: Self-employment income. You're typically an independent contractor, not employee. Recommendation: Set aside 25-40% of profits for taxes. Consult a tax professional familiar with trading income in your country. Keep detailed records.

They can if: You violated rules (even unknowingly), Suspicious trading patterns detected, Incomplete KYC verification, Account under review. Legitimate delays: 3-5 days processing is normal. 7-14 days if compliance review needed. Red flags: Delays beyond 30 days, making up new rules, asking for deposits. Choose established firms with verified payout history. Read reviews before joining.

Common platforms: MetaTrader 4/5 (MT4/MT5): Most forex firms. Industry standard. MetaTrader 5: Better for multi-asset, more timeframes. cTrader: Faster execution, cleaner interface, great for scalping. NinjaTrader: Futures specialist, used by TopStep, Earn2Trade. TradingView: Some firms offer it as alternative. Choose firms offering your preferred platform. Don't switch platforms during evaluation—master one first.

No. Prop firms provide their own broker/platform accounts. You must use their designated broker. Why: They need to monitor your trading, enforce rules, and manage risk. You can't connect your personal broker account. However, you can practice your strategy on your personal broker account, then execute it on the prop firm's provided account during evaluation and when funded.

Usually NO, but check firm policy: Most firms allow your natural IP location. Some firms prohibit VPN use (violates terms). When VPN is required: If you're in a restricted country (some firms don't accept traders from certain jurisdictions). Recommendation: Don't use VPN unless specifically required. Using VPN when prohibited can get your account terminated without refund.

Minimum requirements: Computer: Any modern PC/Mac from last 5 years works. MT4/MT5 are not demanding. Internet: Stable connection, 10+ Mbps recommended. Wired > WiFi for reliability. Latency: <100ms ping to broker server for non-scalpers, <20ms for scalpers. VPS: Not required but recommended for EA traders or unstable internet. Costs $10-$30/month. Don't need a $5K trading setup—strategy matters more than hardware.

Use VPS if: You run EAs 24/5, Your home internet is unstable, You travel frequently, You're a scalper needing low latency. Don't need VPS if: You're a manual day trader with stable internet, You close all positions daily. VPS benefits: 100% uptime, low latency to broker, run EAs 24/5 without leaving PC on. Cost: $10-$30/month. Popular providers: Vultr, AWS, ForexVPS. Most prop firms don't require VPS.

Yes, at most firms! Strategies: Multiple accounts same firm: Buy 2-3 accounts, scale faster. Example: Three $50K accounts = $150K buying power immediately. Multiple firms: Diversify across FTMO, Apex, 4PropTrader, etc. Reduce single-firm risk. Rules: Each account has independent rules. Manage risk separately. Don't correlate trades across accounts (opens all EUR/USD long = risky). Best for experienced traders with proven strategies.

Scaling paths: Single account scaling: After 3-6 months of consistent profit, request scale-up (e.g., $50K → $100K → $200K). Multiple accounts: Buy additional challenges once funded. Mix of both: Scale primary account + add secondary accounts. Scaling criteria: Consistent profitability (3+ months), No rule violations, Good risk management, $5K-$15K minimum cumulative payouts. Don't rush scaling—many traders fail after scale-ups by overleveraging.

Immediate consequences: Account terminated instantly, All open positions closed, No final payout (you lose any unrealized profits), Evaluation fee NOT refunded. Common violations: Hitting daily loss limit, Exceeding max drawdown, Trading prohibited strategies, News trading during blackout. Prevention: Set alerts at 75% of limits, Use stop losses religiously, Read and understand ALL rules, Trade conservatively—funded account = marathon, not sprint.

Depends on firm: Inactivity policies: Some firms require minimum trades per month (e.g., 1-3 trades). Others have no activity requirement. Account expiration: Inactive 60-90 days may lead to account review or closure. Recommendation: Trade at least 1-2 times per month to keep account active. If taking extended break (vacation, personal), inform support. Some firms allow "pause" status. Always check your firm's specific inactivity policy.

Yes. If you violate rules and lose funded account: You must purchase a NEW evaluation, Pass evaluation again from scratch, Your previous funded status doesn't carry over. There's no "resume" option. Exceptions: Some firms offer "reset" for fee (cheaper than new eval), but you restart funded account at original size. This is why discipline is critical—losing funded account means starting over completely.

Check: Established history (2+ years operating), Verified trader payouts (screenshots, testimonials on social media), Transparent rules (clear terms, no hidden clauses), Active social media presence, Professional website and support, Trustpilot reviews (but be critical—fake reviews exist). Red flags: Requiring deposits beyond evaluation fee, Changing rules retroactively, Consistent payout delays, No social proof, Too-good-to-be-true offers (99% splits, instant $500K accounts).

Most prop firms are NOT regulated like brokers, and that's normal. Why: They're providing proprietary capital, not accepting client deposits for investing. Different regulatory category. However, some have business licenses and operate legally. Regulated firms (rare): Some have financial licenses in their jurisdictions. Unregulated ≠ scam: FTMO, Apex, TopStep are unregulated but legitimate with 5-10+ year track records. Focus on reputation and transparency over regulation status.

Risk: You lose access to your funded account, Unrealized profits are lost, You're NOT protected like with regulated brokers, Your evaluation fee is gone. Protection strategies: Don't put all eggs in one basket—diversify across 2-3 firms, Withdraw profits frequently (bi-weekly minimum), Research firm financial health before joining, Avoid brand-new firms—stick with established names (2+ years). Choose stable firms: FTMO, Apex, TopStep have multi-year track records.

Yes, they have full access to: All trades (entry, exit, size, duration), Your P&L and equity curves, Trading times and patterns, Order types used. They CANNOT see: Your personal accounts elsewhere, Other prop firm accounts, Your broker accounts outside their platform. Why they monitor: Enforce rules, Detect prohibited strategies, Manage firm risk. Your strategy is safe—they're not trading against you. Most traders' strategies aren't unique anyway.

Scam types: Upfront capital requirement: Real firms never ask for capital beyond evaluation fee. Guaranteed profits: No legitimate firm guarantees you'll make money. Fake payouts: Check independent reviews, not just their website testimonials. Rule changes: Adding rules mid-evaluation to make you fail. No real funding: Some "prop firms" are just profitable evaluation businesses with no real funded traders. How to verify: Check Trustpilot (but read between lines), Find real traders on Discord/Reddit, Verify payout proof, Start with smaller account to test.

Best beginner-friendly firms: Unlimited time: 4PropTrader (no time pressure, learn at your pace). Lower targets: Funded Trading Plus (easier profit targets). Multi-asset: E8 Funding (Forex, Futures & Crypto from $38). Educational: Earn2Trade (includes trading courses). Avoid as beginner: TopStep, Apex (stricter rules, time limits). FTMO (expensive, stricter). Recommendation: Start with unlimited time firms to build confidence without pressure. Master risk management before attempting time-limited evaluations.

Top EA-friendly firms: 4PropTrader: No restrictions, unlimited time, fully automated OK. Funded Next: Multiple EA-friendly programs, copy trading allowed. The5ers: Instant funding for EAs, progressive scaling. E8 Funding: HFT allowed, very permissive. Avoid for EAs: Firms with anti-HFT clauses, News trading blackouts (hard for 24/5 EAs), Consistency rules (some EAs have irregular patterns). Test your EA in demo first—ensure it respects daily loss and max DD rules.

Futures specialists: TopStep: Industry leader, 12+ years, 90% split, largest community. Apex Trader Funding: 90-100% splits, daily payouts, aggressive scaling. Take Profit Trader: Single-phase eval, fastest path to funding. Earn2Trade: Best education, Helios backing, structured path. Why futures firms: Direct market access (DMA), Lower fees than forex, Regulated exchanges, Better price discovery. Futures require different account sizes—start with $50K minimum for liquidity.

1-phase pros: Faster to funding (pass in 2-4 weeks possible), Lower total profit target, Simpler rules. 1-phase cons: Usually stricter daily rules, Higher evaluation fee, More pressure. 2-phase pros: Proves consistency over two stages, Usually more forgiving rules, Refundable fees common. 2-phase cons: Takes longer (2-4 months typical), Higher total profit requirement (8% + 5% = 13%). Choose 1-phase if: Experienced trader, Proven strategy, Want fast funding. Choose 2-phase if: Still developing, Need practice time, Prefer gradual progression.

Profit split matters, but NOT most important. Consider: 70% split + easy rules + high pass rate > 90% split + strict rules + low pass rate. Math example: 70% split, pass on first try: $299 fee, make $5K = $3,500 - $299 = $3,201 net. 90% split, fail twice first: $299 × 3 = $897 fees, make $5K = $4,500 - $897 = $3,603 net. Factors more important than split: Rule flexibility, Pass rate, Time limits, Daily loss limits, Your comfort with the firm's structure. Choose firm matching your trading style, not just highest split.