Prop firm
A proprietary trading firm gives traders access to the firm's capital to trade, splitting any profits. Modern retail prop firms typically grant that access only after a trader passes a paid evaluation with defined profit targets and loss limits.
The traditional meaning of a prop firm is a company that trades its own capital and hires traders to do it — a job, with a desk, a salary or draw, and internal risk oversight. That model still exists and is genuinely selective.
The modern retail prop firm is a different business. A trader pays a fee to attempt an evaluation; passing grants a funded account, and profits are split. Access is open to anyone who pays, which is the fundamental structural difference from the traditional model.
Understanding the business model
Evaluation fees are revenue regardless of outcome. Where firms publish pass rates, they are typically in the low single-digit to low double-digit percentages, meaning the majority of fees are collected from traders who do not reach a funded account. This does not make the model illegitimate, but it does mean the incentive structure deserves clear-eyed reading before you pay.
It is also worth establishing whether a given firm's funded accounts route to a live market or remain simulated, and how payouts are actually funded. Terms vary substantially between firms and change frequently.
The single most common failure mode is not strategy. It is a trader who has never traded a rule-bound account attempting an evaluation with a daily loss limit for the first time, and breaching it behaviourally rather than analytically.
Related terms
Maintained by Jared Sinclair, Founder · Syrax Global FZCO · Definitions are educational, not financial advice.
Knowing the vocabulary is the easy part.
Every term here can be learned in an afternoon. Applying them consistently under pressure is the part that decides outcomes — and the part we measure.