Prop Firm Guide — Complete Guide
Complete guide to proprietary trading firms. Learn how prop firms work, challenge rules, funded account strategies, and tips for passing evaluations.
What Are Prop Firms?
Proprietary trading firms (prop firms) provide traders with funded accounts to trade with the firm's capital. Instead of risking your own money, you trade the firm's money and share the profits — typically keeping 70-90% of what you earn.
Prop firms solve the biggest barrier in trading: capital. A skilled trader with $500 can access $100,000+ in buying power by passing a challenge evaluation.
How Prop Firms Work
The Business Model
- You pay a challenge fee (typically $100-$500 depending on account size)
- You trade a demo account with specific rules and targets
- If you pass, you receive a funded account with real capital
- You trade the funded account and keep 70-90% of profits
- If you violate rules, you lose the funded account
Typical Challenge Structure
| Phase | Goal | Duration | Key Rules |
|---|---|---|---|
| Phase 1 (Evaluation) | Hit 8-10% profit target | 30 days | Max 5% daily DD, 10% total DD |
| Phase 2 (Verification) | Hit 5% profit target | 60 days | Same drawdown rules |
| Funded Account | Trade profitably | Unlimited | Same drawdown rules, profit splits |
Popular Prop Firms
| Firm | Account Sizes | Profit Split | Challenge Fee (100K) |
|---|---|---|---|
| FTMO | $10K - $200K | 80-90% | ~$500 |
| MyFundedFX | $5K - $300K | 80-85% | ~$450 |
| The Funded Trader | $5K - $400K | 80-90% | ~$500 |
| Funded Next | $6K - $200K | 80-90% | ~$500 |
| E8 Funding | $25K - $250K | 80% | ~$450 |
The prop firm industry changes rapidly. Some firms have shut down unexpectedly. Always research a firm's reputation, payout history, and reviews before investing in a challenge. Never use money you cannot afford to lose on challenge fees.
Challenge Rules Explained
Daily Drawdown (Typically 5%)
- Your daily loss cannot exceed 5% of starting equity for that day
- Resets every day at a specific time (varies by firm)
- Example: $100,000 account = max $5,000 loss per day
- This is the #1 reason traders fail challenges
Total/Maximum Drawdown (Typically 10%)
- Your account cannot drop more than 10% from initial balance
- Some firms use trailing drawdown (moves up with equity, never comes back down)
- Example: $100,000 account = account cannot go below $90,000
Profit Target
- Phase 1: Usually 8-10% of account size
- Phase 2: Usually 5% of account size
- Must be achieved within the time limit
Additional Rules
- Minimum trading days: 4-10 days required
- No holding over weekends: Some firms restrict this
- News trading restrictions: Some firms prohibit trading during high-impact news
- Lot size limits: Maximum position size may be capped
- Consistency rules: Some firms require no single day to contribute more than a certain percentage of total profit
Strategies for Passing Challenges
1. Risk Management First
- Risk 0.5-1% per trade maximum (not 2%)
- Lower risk = more trades to hit target = more consistent
- Example: 1% risk on $100K = $1,000 per trade
- Need 8-10 winning trades at 1:1 R:R to pass Phase 1
2. Trade Your Best Setup Only
- Do NOT experiment during a challenge
- Use your highest win-rate setup exclusively
- Quality over quantity — 2-3 trades per day maximum
3. Session Selection
- Trade only during your best-performing session
- For most traders: London or London-NY overlap
- Avoid low-liquidity periods (Asian session for forex majors)
4. Scale Gradually
- Start conservatively: risk 0.5% for the first week
- Once you have a profit buffer, increase to 0.75-1%
- Never max out your daily drawdown limit
5. Plan Your Math
For a $100,000 account, 8% target = $8,000 needed:
| Strategy | Risk/Trade | Avg R:R | Trades Needed |
|---|---|---|---|
| Conservative | $500 (0.5%) | 1:2 | 8 winners |
| Standard | $1,000 (1%) | 1:2 | 4 winners |
| Moderate | $1,000 (1%) | 1:1.5 | 5-6 winners |
6. Protect Your Drawdown
- If down 2-3% for the day, stop trading immediately
- If down 5% overall, reduce risk to 0.25% until you recover
- Your only job is to not get disqualified
Funded Account Management
Once funded, your priorities change:
Priority 1: Keep the Account
- Your funded account is an asset worth far more than any single trade
- Trade even more conservatively than the challenge
- Risk 0.5-0.75% per trade
Priority 2: Consistent Payouts
- Most firms require a minimum trading period before payout (14-30 days)
- Aim for steady 2-4% monthly returns
- Small, consistent profits beat occasional big wins
Priority 3: Scaling
Many firms offer scaling plans:
| Performance | Account Growth |
|---|---|
| 10% profit (consistent) | Account doubled ($100K to $200K) |
| Continued performance | Further scaling available |
| Multiple payouts | Profit split may increase to 90% |
Tips for Bangladeshi Traders
-
Time zone advantage — London session starts at 2:00 PM BD time, NY overlap at 7:30 PM. Perfect evening trading schedule.
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Challenge fee payments — Use international payment methods (Wise, Payoneer, or crypto payment if available)
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Payout methods — Check if the firm supports withdrawal methods accessible in Bangladesh (Wise, Payoneer, crypto)
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Start small — Try a smaller account size ($10K-$25K) for your first challenge to minimize fee cost
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Practice first — Pass a simulated challenge on a demo account before paying for a real one
Common Mistakes
❌ Over-leveraging — Risking 3-5% to hit target fast. One bad day and you are disqualified.
❌ Not tracking daily drawdown — Forgetting that daily DD resets. Getting kicked for exceeding daily limit, not overall limit.
❌ Revenge trading — Taking a loss, then immediately taking another trade to recover. This cascades into bigger losses.
❌ Trading during high-impact news — NFP, FOMC, CPI can cause 100+ pip moves in seconds. Many firms restrict this.
❌ Changing strategy mid-challenge — Stick with what you know. A challenge is not the time to learn new setups.
❌ Treating it as gambling — A challenge is a professional evaluation. Trade it like a job interview, not a casino.
Challenge Preparation Checklist
- ✅ Have a proven strategy with 50+ demo trades showing profitability
- ✅ Know your exact win rate and average R:R
- ✅ Read ALL challenge rules completely (every single rule)
- ✅ Practice the challenge on a demo account first
- ✅ Calculate how many trades you need to hit target
- ✅ Set daily loss limits stricter than the firm requires
- ✅ Choose your trading sessions in advance
- ✅ Prepare mentally — treat it as a job, not a game
Summary
| Aspect | Key Points |
|---|---|
| What | Firms that fund traders with their capital |
| Cost | $100-$500 challenge fee |
| Profit Split | 70-90% to the trader |
| Key Rules | 5% daily DD, 10% total DD, 8-10% target |
| Best Strategy | Low risk (0.5-1%), high-probability setups |
| Timeline | 30-90 days to get funded |
| Success Rate | Industry average: about 10-15% pass rate |
| Golden Rule | Protect the account first, profit second |
Related Topics
- Risk Management — Essential for challenge survival
- Trading Plan — Create a plan before starting
- Position Sizing — Calculate correct lot sizes
- Trading Psychology — Mental game for challenges
- Trading Journal — Track challenge performance