What is a prop firm? How prop trading works

What retail prop firms sell

A retail prop firm sells access to a trading evaluation, often called a challenge. You pay a fee, trade a simulated account, and try to meet profit targets without breaking the firm's rules. Passing can give you access to a funded account and eligibility for payouts. It does not necessarily give you real capital to trade.

Traditional proprietary trading means a firm trades its own capital. The retail challenge model is different: you pay for an evaluation rather than deposit money into a brokerage account. FTMO says all accounts it provides are demo accounts with fictitious funds, including accounts used after passing.

Challenges are paid evaluations on simulated accounts. Most traders do not pass, and the fee is usually lost when they fail. Funded accounts are also simulated at most firms. Compare the payout terms and loss rules rather than treating the advertised account size as money you own.

How a challenge leads to a payout

As listed in October 2026, FTMO's 10K two-step challenge costs €89 one-time. Its Challenge target is 10%, followed by a 5% Verification target. The rules require at least 4 trading days and impose no time limit. Reaching the target does not excuse a loss-limit breach.

FTMO's two-step evaluation limits daily losses to 5% of initial simulated capital and total losses to 10%. Its total-loss floor is static: it stays fixed relative to the starting balance rather than rising with profits. This suits traders who want a fixed floor, but the daily limit still constrains each trading day.

As listed in October 2026, Topstep's 50K Standard Path Trading Combine costs $49 per month, with a $149 activation fee for each Express Funded Account earned. The subscription rebills until you pass or cancel. Its listed $3,000 target comes with a $2,000 maximum loss limit on the 50K account. The account label is not your usable loss allowance.

Topstep's maximum loss floor rises as the end-of-day balance grows, never moves down, and locks when it reaches the starting balance. Risk monitoring includes realized and unrealized profit and loss. Touching or falling below a loss limit triggers immediate liquidation. Topstep separately says its daily loss limit triggers a session break, not a rule violation.

Passing and qualifying for a payout are separate steps. FTMO's two-step reward is up to 90% of simulated profits, and its fee refund comes with the first reward withdrawal. Topstep lists a 90% share on qualifying payouts. Its Standard payout path requires 5 winning days of at least $150, while its broader payout page says requests can be made in as little as 3 days. Confirm which path applies.

Rules also differ between products from the same firm. FTMO's one-step program has a 3% daily loss limit and an end-of-day trailing total-loss floor instead of the two-step program's static floor.

Simulated profits are not market cash

FTMO says all client accounts use fictitious funds in a simulated environment. Apex Trader Funding likewise says all its trading activity uses virtual funds with no live market execution. A simulated profit is not cash generated by your trades in a live market. A payout depends on the firm's reward terms.

The published Topstep pages distinguish Trading Combine, Express Funded Account, and Live Funded Account stages, but do not explicitly state the execution environment for each. The word funded alone does not establish whether an account is simulated or live. Confirm the specific account you would receive.

Evaluation fees are a revenue source: FTMO charges a one-time challenge fee, while Topstep's standard Combine paths charge monthly subscriptions and may charge activation fees. Apex says evaluation fees pay for challenge participation, with possible separate data, platform, and activation charges. These are costs to you even when the trading funds are virtual.

The pages we read do not state a complete revenue breakdown or identify the source of cash for each payout. Do not assume every payout comes from live trading profits. Apex describes its rewards as discretionary and subject to eligibility, compliance, and applicable tax laws.

Published pass rates measure different things

Audacity Capital says there is no independently audited, industry-wide prop firm pass rate. It reports FPFX Technology data, reported by Finance Magnates, showing about 14% of evaluations passed and roughly 7% of all traders received a payout. Those figures describe different outcomes.

Track360 reports a 12.3% blended challenge pass rate across its tracked programs in the 2025–2026 window. It also reports that approximately 45% of traders who reach a funded account receive at least one payout. That figure excludes traders who never reached funding; it is not the payout rate for everyone buying a challenge.

TradersSecondBrain reports that 16.8% of Topstep Trading Combines initiated in 2025 advanced. It separately reports that 51.8% of distinct participants advanced at least once, and that 33.3% of distinct Funded Level participants received a payout. Attempt-level and person-level results can differ because a person can enter multiple evaluations.

These figures do not establish your personal probability of passing. Check whether a statistic counts attempts, people, or funded accounts before comparing prop firms. Passing an evaluation is also not evidence that a trader will receive a payout.

Regulatory questions and fee risk

Track360's industry statistics page reports that the CFTC's 2023 MyForexFunds action alleged $310M in fees from roughly 135,000 customers. Those are reported allegations, not findings stated in the pages we read. The published material does not establish the case's current status or outcome.

Track360 reports that surviving firms migrated platforms, blocked US clients, or restructured as licensed evaluation-service providers after the shake-out. That does not establish a particular firm's regulatory status. Confirm current access for your country and platform before paying.

Apex states that it is not a broker-dealer, futures commission merchant, or financial advisor. Virtual trading funds and the real money you pay for participation are different things. Its discretionary reward terms mean simulated profit alone does not entitle you to payment.

This page is not financial advice. Treat the challenge fee as money you can lose, not a deposit that secures access to capital or income.

What to compare before paying

We read the official firm rules used on this site in October 2026. Compare specific programs and confirm current terms before checkout. A lower entry fee can still come with recurring charges, a moving loss floor, or payout conditions that do not fit your trading.

• Total fees: distinguish one-time charges from subscriptions and activation fees. As listed in October 2026, Topstep's 50K No Activation Fee Path costs $95 per month, versus $49 per month plus $149 activation on its Standard Path.
• Loss allowance: compare the permitted loss, not just account size. Topstep's 50K standard Combine has a $2,000 maximum loss limit, equal to 4% of its starting balance.
• Floor movement: a static floor stays fixed; a trailing floor rises with account growth. Topstep's standard Combine floor rises with end-of-day balance and locks at the starting balance.
• Time and rebilling: FTMO's two-step program has no time limit, but Topstep's standard Combine subscription continues until passing or cancellation. Topstep Labs' Static Combine has a 90-day lifespan.
• Consistency rules: FTMO's one-step Best Day Rule limits the best day to 50% of profitable days' combined profit for passing and reward eligibility. A strategy concentrated in a single strong day can need further profitable trading.
• Payout conditions and refunds: FTMO refunds its two-step fee with the first reward withdrawal; its one-step fee is not refunded after passing. Topstep says most fees are non-refundable.
• Strategy restrictions: FTMO forbids gap trading around scheduled market-moving news and restricts automated strategies to legitimate practices that conform to real market conditions. Topstep's published pages do not state news-trading, weekend-holding, or automation rules.
• Rules after withdrawal: Topstep says the Express Funded Account loss floor becomes $0 after the first payout. The remaining balance becomes your effective loss allowance, so a withdrawal changes your room for losses.