The definition
Proprietary trading is trading with a firm's money rather than your own. In its traditional form it is a job at a bank or trading house. In the online form that has grown since 2015, it is a product: you pay a fee for an evaluation on a simulated account, and if you meet the profit target without breaching the loss limits, the firm gives you a funded account and pays you a share of its profit, typically 80 to 90 percent.
How the money works
The trader's downside is the evaluation fee, usually a few hundred dollars for a 100,000-dollar account. The firm's downside is the payouts it makes to traders who pass. Because most evaluations fail, fee income from failed attempts funds the payouts to the few who succeed, and the firm hedges some of its funded traders in real markets to turn their profits into real gains rather than costs. The funded account is nearly always simulated; the payout is real.
Who it suits
- Traders with a tested method and small personal capital, for whom a funded account is the cheapest route to size.
- Traders who benefit from external rules: the loss limits impose the discipline many people lack on their own money.
- Not traders still finding a method: a challenge is an expensive way to learn what a demo teaches for free.
What it costs
Fees are not refunded on failure and most attempts fail, so a budget for attempts is the first decision. Rule breaches on funded accounts end them without appeal. And the firm is an unregulated counterparty whose willingness to pay is your only protection, which is why its history and transparency matter more than its marketing.
Trading forex, CFDs and other leveraged products carries a high risk of losing money. This guide is general education, not advice.