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What is a prop firm?

Updated October 16, 2026. PropFirmNerd editorial team

A retail prop firm sells you a trading test. You pay a fee, trade a practice account under strict rules, and if you hit a profit target without breaking a loss limit, the firm gives you a "funded" account and pays you a share of its profits.

How an evaluation works

  1. You buy an evaluation. A 50K futures evaluation typically costs somewhere around $50 to $200 after discounts, either once or every month until you pass. Forex firms usually charge once.
  2. You trade under rules. The two that matter most are the profit target (for example $3,000 on 50K) and the max loss (for example $2,000). Many firms add a daily loss limit, a minimum number of trading days and a consistency rule.
  3. You pass or fail. Hit the target without touching the limit and you pass. Touch the limit and the account is closed; you can usually reset or buy again.
  4. You trade the funded account. Some firms charge an activation fee here. You then request payouts under the firm's payout rules and keep the agreed split, often 80% to 100% of profit up to a cap.

Where the firm's money comes from

For most retail firms, revenue comes from fees: evaluations, rebills, resets and activations. Most buyers do not pass, so those fees fund the payouts to those who do. That is why rules like trailing drawdown and consistency requirements exist, and why they change when payouts run high.

Futures firms vs forex firms

Futures firms (Apex, Topstep, Tradeify and others) trade exchange-listed contracts such as ES and NQ, often with one-step evaluations and trailing drawdown. Forex and CFD firms (FTMO, FundedNext and others) trade currencies, indices and metals through a broker-style platform, often with two-step evaluations, a daily loss limit and a static max loss. See the comparison table for each firm's exact rules.

What to check before you buy

  • How the max loss moves: static, end-of-day or intraday trailing.
  • Whether there is a consistency rule, and whether it applies to the evaluation, the payout or both.
  • The full cost: monthly rebills, activation and resets. Our true cost calculator adds them up.
  • Payout rules: minimums, caps, buffers and how many payouts before a live account.
  • Recent rule changes and the firm's age. Firms change rules often, and some have closed. Read the risks.

Questions traders ask

Do prop firms give you real money?

Usually not at first. Most retail prop firms put funded traders on a simulated account and pay a share of the simulated profit. Some move consistent traders to a live account later.

Are prop firms legit?

Many pay traders as promised, and some have closed or refused payouts. Check how long the firm has operated, its payout rules, recent rule changes and whether its terms let it change rules without notice.

How do prop firms make money?

Mostly from evaluation fees, monthly rebills, resets and activation fees. Payouts to the minority of traders who pass are paid from that revenue.

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