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Prop firm

Prop Firm (Proprietary Trading Firm)

Firm terms

Definition

A firm that sells traders an evaluation on a simulated account, and whoever passes it receives a funded account and a share of the profits they withdraw. In Israel, this is called a "prop account". The trader pays for the evaluation and does not deposit their own capital into the account.

Detailed explanation

The model is simple: you pay for an evaluation, meet the profit target without exceeding the loss limits, and receive a funded account where every payout is split between the trader and the firm. In most firms, the funded account is also a simulation, and the transition to a live account with real capital only comes at a later stage, and only for some traders. What distinguishes firms is not the account size but the rules: the type of drawdown threshold, the consistency rule, payout conditions, and activation fees. Therefore, compare rule against rule, and not just price against price.

An example from the prop world

A trader buys a $50,000 evaluation at FTMO Futures on the Growth plan. After a profit of $3,000 without touching the drawdown threshold of $2,000, they receive a Sim-Funded account of the same size, and 90% of every approved payout goes to them.

Evaluation

The first stage at a prop firm: a demo account where you need to reach a profit target without crossing the loss limits. Those who pass get a funded account.

Funded account

The account you get after passing the evaluation. At most firms it's still a simulated account, and its profits are paid out under the firm's payout rules.

Live account

A stage where orders are sent to the exchange with the firm's real capital. Only some traders get there, and each firm has its own rules for moving up.

Profit split

The percentage of an approved payout that the trader receives. A 90/10 split means 90% to the trader and 10% to the firm.

מימון מיידי

A plan where you receive a funded account immediately upon purchase, without an evaluation. You skip the target phase, and in return, the rules in the account are usually stricter, especially the consistency rule and payout conditions.

Renewal

An action that happens automatically every month (or every 30 days), meant to extend the evaluation account's subscription and ensure continuous access so you can keep trading.