What a prop firm is legally
Most online prop firms are ordinary companies selling a service, evaluation on a simulated account, that is not a regulated financial activity in most countries. They hold no client money on trust, they are not brokers, and their obligations to you are those of any company to a customer under its terms of service. That is changing slowly as regulators look at the sector, but for now a firm's reputation is your protection.
How a firm earns
- Evaluation fees, mostly from attempts that fail.
- Resets, add-ons and higher-tier products.
- The firm's share of funded traders' profit, real where the trader is hedged.
- Simulated losses cost the firm nothing; only payouts do.
Firm types
| Type | Markets | Examples | Character |
|---|---|---|---|
| Forex and CFD firms | Forex, indices, commodities, crypto CFDs | FTMO, FundedNext, FundingPips, The5ers, Alpha Capital Group | One-off evaluation fee, two-step common, static drawdown common |
| Futures firms | CME futures | Topstep, Apex, Take Profit Trader, Tradeify | Monthly subscription evaluation, trailing drawdown common, US-based |
Telling a good firm from a bad one
Years in business, a named legal entity and people, published terms with clear definitions, a public record of paying, and rules that are the same for the evaluation and the funded account. Warning signs are payout delays discussed in forums, sudden new consistency rules, broker relationships ending, and marketing that leads with a scaling cap nobody reaches. Our prop-firm methodology scores these factors.
Trading forex, CFDs and other leveraged products carries a high risk of losing money. This guide is general education, not advice.