By Marco BösingWhat Is Prop Trading?
Prop trading (proprietary trading) is a model where traders trade with capital provided by an external company rather than using their own money. The prop trading firm provides the trading capital — often $25,000 to $200,000 or more — and the trader keeps an agreed share of the profits, typically 70–90%.
In modern prop trading, traders must first pass an evaluation phase — known as the challenge — to receive a funded account. During this phase, they must demonstrate that they can reach a profit target without exceeding the prescribed risk limits (such as the daily loss limit or maximum drawdown).
Prop trading enables talented traders to trade professionally without significant personal capital and earn a living from trading.