Prop Trading: What Is It and How Does It Work?

Rules checked: October 8, 2026

What is prop trading in practice? You trade a firm's capital instead of your own money: you pay a prop firm for an evaluation, and if you pass, you get a funded account and keep part of the profit you make on it. At most firms the account itself is simulated, but payouts go to your real bank account.

Prop Trading in 3 Sentences

A prop firm gives you access to an account of, say, $50,000, but first you have to pass a paid evaluation under its rules. Once you pass, you keep trading under the same rules and keep 60 to 100% of the profit, depending on the firm and the plan. If you break the rules, you lose the account, but you never lose more than what you paid the firm.

"Prop trading" used to mean mainly banks and funds trading their own capital. Today, when someone asks what prop trading firms are, they usually mean firms like Topstep, Apex or FTMO, which sell evaluations to retail traders. This guide is about them.

How the Challenge and Funded Account Work (Step by Step)

Most prop trading firms follow the same model. They differ in the numbers, not in the order of the steps.

Step 1: You Buy a Challenge

A challenge (a test, called an "evaluation" at some firms) is an account where you show that you can trade by the firm's rules. You choose its size, for example $50,000, and pay once or monthly, depending on the firm. A 50K account at Lucid costs $54.35 today with code BETZ.

Step 2: You Pass the Evaluation

During the evaluation you have to hit the profit target and stay within the drawdown (the maximum loss the account can take). At Lucid, on a 50K account, the target is $3,000 and the drawdown is $2,000. In FTMO 2-Step the evaluation has two phases: 10% profit in the first, 5% in the second, with a maximum loss of 10% and a daily loss limit of 5%.

Some firms add a minimum number of trading days or a consistency rule (more on that below). FTMO, for example, requires at least 4 trading days.

Step 3: You Get a Funded Account

A funded account: what is it, really? It is an account you can withdraw profit from. At most firms it is still simulated: Apex says all trading takes place in a simulated environment with virtual funds, and FTMO says the trader gets access to a demo account with fictitious capital.

Some firms charge an activation fee at this point. At Topstep, on the Standard path, it is $149. Lucid, Tradeify and My Funded Futures charge none at all (as of October 2026).

Step 4: You Withdraw Profit

A payout is the moment simulated profit turns into real money. Topstep puts it plainly: it pays real money based on results from simulated trading. To get a payout you usually need several profitable days, for example at Lucid 5 days with at least $150 profit each.

Step 5: Live Account (Not Always)

Some firms move their best traders to the real market. After the fifth payout, Lucid may move a trader to a live account, but the risk team decides and there is no guarantee. Topstep has a separate Live Funded Account. This is rare: according to Topstep, only 0.71% of traders with an Express Funded Account moved to a live account in 2025.

From my experience: On my first challenge I didn't know where to start. I didn't understand basic terms like consistency rule, contract limit or EOD drawdown, and I only passed on my third attempt. With my first passed account, what surprised me most was how quickly I went from the evaluation to the funded account.

How Prop Firms Make Money (and Why Most Traders Don't Pass)

How do prop trading firms make money? The firms themselves point to two sources. The first is evaluation fees: Topstep says you pay for the opportunity to gain access to the firm's capital, and the fee is not a deposit.

The second is trading based on traders' results. FTMO explains that it may use its traders' trading data to trade on its own account, with its own capital. In our view, though, with simulated accounts the model rests on fees: the firm has to collect more from everyone who buys an evaluation than it pays out to those who succeed.

How Many Traders Pass the Evaluation?

Few firms publish this data. Topstep released its statistics for 2025:

The first figure counts evaluations, not people, because one person can buy several. Topstep also notes that the data covers both simulated and live accounts, and that results say nothing about the future.

Why So Few?

In our view there are three reasons. The drawdown on a 50K account is usually $2,000, and at many firms it moves up with your profit, so your margin for error shrinks fast. Then there is pressure from time and money: if you paid for an evaluation, you want to pass it quickly, and you often risk too much.

The third reason is rules people didn't read before buying, such as a consistency rule or a ban on holding positions after the session closes. You can check most of them in the firm's help center before you pay.

Types of Prop Firms: Futures, Forex/CFD, Crypto, Instant Funding

When choosing your first firm, the most important thing is what you trade. Firms are divided mainly by market, and the rules look a little different in each group.

Futures

Futures firms such as Topstep, Apex, Lucid, Tradeify and My Funded Futures give you access to contracts on CME Group exchanges, for example on the Nasdaq, the S&P 500 or gold. The evaluation usually has one phase, and position size is limited by a contract limit, not by leverage.

Some of them require you to close positions before the session ends. At Apex, for example, all trades must be closed before 4:59 PM New York time.

Forex and CFD

Forex/CFD firms such as FTMO, FundingPips and The5ers give you access to currency pairs and other markets as CFDs. At FTMO these include indices, commodities and stocks. Evaluations are often two-phase, and the drawdown is often static: in FTMO 2-Step the loss limit is a fixed 10% of starting capital.

Accounts can be small here. The smallest account at FTMO is $10,000, and at FundingPips it is $5,000.

Crypto

Crypto is a separate topic, because every firm handles it differently. FTMO lets you trade crypto alongside forex and indices, while FundingPips has only two pairs: BTCUSD and ETHUSD. Topstep offers Bitcoin and Ethereum micro contracts with restrictions, and Tradeify doesn't support crypto at all.

There are also crypto-only firms, but we didn't review them for this guide.

Instant Funding

Instant funding is a funded account without an evaluation. You trade right away on an account you can withdraw profit from, but you usually pay more for it than for an evaluation (this is the case at Tradeify and Lucid, for example). Examples include Tradeify Lightning, LucidDirect and FundingPips Zero.

In our view this is an option for traders who already know their results, not for beginners. The rules can be stricter: FundingPips Zero has a 5% trailing drawdown and a 3% daily loss limit.

The Key Rules: Drawdown, Consistency Rule, Payouts

These three rules decide whether you pass the evaluation and how much you withdraw. Check them before you buy your first account.

Drawdown

The drawdown sets the lowest balance your account can fall to. On a $50,000 account with a $2,000 drawdown, the limit is $48,000. When the balance touches it, the account is gone.

What matters is whether that limit stays put or follows you. A static drawdown (for example FTMO 2-Step) doesn't move. EOD (end of day) moves up once a day, after the session closes, and intraday (real-time trailing) moves up with your open profit, even if you give that profit back later.

Consistency Rule

A consistency rule limits how much of your profit can come from a single day. With a 50% rule and a $3,000 target, your best day can't exceed $1,500. If it does, you usually don't fail, you just have to keep trading until the rule is met.

Payouts

Three things matter for payouts: the profit split, the number of days needed for a payout and the cap on a single payout. At Lucid, on a 50K account, a single payout is at most 50% of profit, up to $2,000.

Here is how these rules look at a few popular firms (as of October 2026):

Topstep and FTMO don't partner with MyPropFirm, but they are among the largest firms on the market, so they had to be included here.

How to Choose Your First Prop Firm (Checklist)

Before you pay for your first evaluation, go through this list. You can check everything on it in the firm's help center in a quarter of an hour or so.

• Market. Start with what you already trade. If you trade US indices, look at futures. If you trade currency pairs, look at forex/CFD.
• Drawdown type. In our view, an EOD or static drawdown is a better start than intraday.
• Consistency rule. Check whether it applies in the evaluation, on the funded account, or both.
• Full cost. Add up the evaluation fee, activation and any reset. Also check whether you pay once or monthly.
• Payout rules. How many profitable days you need, what the cap on a single payout is and what the profit split is.
• Country. As of October 2026, Poland is not on the list of excluded countries at FTMO, Topstep, Apex, Tradeify, Lucid or FundingPips. These lists change, so check them before you buy.
• Platform. Make sure the firm supports the platform you know how to trade on.

If you can't find something from this list on the firm's website, that is information too. Rules that aren't in writing are hard to enforce later.

From my experience: To start, I would pick cheaper firms such as Lucid, Tradeify or Apex. A new trader can easily feel lost at first, so the less you spend on your first account, the better. If you lose it, your wallet won't feel it as much.

Verdict

Prop trading gives you access to a $50,000 or larger account for a fraction of that amount, and your risk ends at what you pay the firm. In our view it is a good path for someone who already has a tested strategy and can stick to loss limits.

The downsides are serious, though. Evaluations often end in failure (at Topstep in 2025, 16.8% of them were passed), accounts are usually simulated, and fees for repeat attempts add up. On top of that, rules can change, so what you checked a month ago may already be out of date.

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