Prop firms

What is a prop firm: the evaluation, the split, and the one rule that decides more than any of it

Pay a fee, trade a simulated account to a set of rules, keep a share of what it makes if you pass. The model is simple to state and easy to misjudge, because almost everything that actually matters is in the rules, not the pitch.

Last verified 26 October 2026 · how we check

A prop firm, in this sector, sells one product: a paid attempt at a profit split on an account that is almost always simulated. You pay an evaluation fee, trade toward a profit target without breaking a set of rules, and if you clear it, the firm funds an account, usually also simulated, and pays you a share of what it makes. That’s the whole model. What decides whether it’s worth the fee is entirely in the part most pitches spend the least time on: the rules.

The three stages, and what each one actually is

Stage	What it is	What ends it
Evaluation	A simulated account, paid for, with a profit target	Hitting the target, breaking a rule, or running out of time on timed plans
Funded	Simulated at almost every firm; a small number route a later stage to a real brokerage account	Breaking the same category of rules that governed the evaluation
Payout	A share of simulated profit paid to the trader from the firm’s own funds	N/A; this is the output, not a stage with an exit condition

The word “funded” is doing real work in that table. It does not mean the account holds real capital at a broker on your behalf, for the large majority of firms in this sector; it means the firm has agreed to pay you a share of what a simulated account produces. Futures prop trading firms covers why that structure is the sector’s standard legal position rather than something specific to any one brand: a firm selling an evaluation on a simulated account isn’t, on its own argument, providing a financial service to a client, which is why most of them carry no licence from a register like ASIC or CySEC to check in the first place.

The rule that decides more than the profit split headline

Every pitch leads with the profit split, commonly 80% to 90% to the trader. The number that actually decides most outcomes is the drawdown rule, specifically whether it’s measured from a fixed starting balance or trails the account’s high-water mark. A static drawdown measured from the initial balance is materially more forgiving than a trailing one that rises every time the account makes a new high; under a trailing rule, profit raises the floor beneath the account rather than building a cushion against it. Prop firm challenges goes through the full mechanics and the specific numbers firms publish.

Layered on top of drawdown: a consistency rule, which caps how much of total profit can come from a single best day, and in some contracts a list of prohibited trading behaviors ranging from a hard numeric cap, like a 200-trade daily limit, to a vaguer standard like conduct the firm considers to be in bad faith. The second kind of rule is the harder one to manage, because it isn’t a number you can check your own activity against in advance; see prop firm prohibited strategies for what six actual contracts say, side by side.

Timed and untimed evaluations trade one risk for another

Some evaluations impose a minimum number of trading days, a maximum window to hit the target, or both; others impose neither. A timed evaluation forces a decision about pace: trade cautiously and risk running out of time, or trade faster and risk breaking the drawdown rule trying to hit the target before the clock runs out. An untimed evaluation removes that particular pressure, which is genuinely more trader-friendly on paper, but it doesn’t remove the drawdown rule itself, and a trader who takes the extra time to overtrade a plateaued account can still fail on the same terms a rushed trader would. Neither structure is inherently safer; each just moves where the pressure shows up.

The evaluation fee itself is close to universal in one respect

Contracts from six different firms, read in full rather than summarised from a sales page, agree on one thing without exception: the evaluation fee is non-refundable once the account is active, regardless of outcome. A handful carve out a narrow exception for the firm declining to open the account at all, but nobody refunds a failed evaluation, and nobody refunds a change of mind after starting. That term is rarely the headline on a pricing page, and it’s worth reading before treating an evaluation fee as a low-stakes way to “try” a firm.

The number that should set expectations before the fee is paid

The best published pass-to-funded-payout figure we found across the sector, from a firm that actually discloses it, is 1.01%: roughly one in a hundred evaluation purchasers reaches the point of a real payout. Most firms in this sector don’t publish a figure at all, which the CFTC’s own Rule 4.41 anticipates directly: results from a simulated account are hypothetical performance, and hypothetical results have “not been executed,” which is precisely why disclosure of the simulated nature of the track record matters before a trader extrapolates from a firm’s marketed success stories to their own odds. See prop firm pass rates for the full comparison of who publishes a number and who doesn’t.

Why this isn’t the same product as a broker, even when it’s marketed next to one

A broker holding a retail permission takes your deposit, executes your orders against a real market, and typically sits behind a compensation scheme if the firm fails. A prop firm’s evaluation fee buys an attempt at a simulated target, and nothing it funds afterward is required to be a real account anywhere. The two show up in the same search results for things like “best firm to trade someone else’s money,” and a sweep of the licences actually behind each category found only a minority on the broker side held a permission that clearly covers a retail client at all. See prop firm vs broker for the full licence-by-licence breakdown.

What to check before paying an evaluation fee

Whether the drawdown is static or trailing, and against which balance it’s measured. This one rule shapes the entire trading plan more than the profit split headline does.

Whether the firm publishes a pass or payout rate at all, and if it does, whether the figure covers passing the evaluation or actually receiving a payout. Those are different numbers, and marketing sometimes blurs which one is being quoted.

What “funded” means for this specific firm, because it is not the same thing at every one of them. A small number route a later stage to a real account at a registered broker; most don’t, and the terms say which in language that’s worth reading rather than assuming.

Which prohibited-conduct clauses are numeric and which are discretionary. A 200-trade cap is something you can track. A clause banning whatever the firm considers bad-faith trading is a standard you find out you’ve violated after the fact, not before.

None of this makes the model a scam by default. It makes it a product whose actual terms matter more than its headline number, in a sector where the headline number is the part every firm agrees to advertise.

Sources

Figures were checked on 26 October 2026 and change over time — confirm current terms with the provider. Nothing here is investment advice; see therisk disclaimer.