# Business Model of Prop Firms

#### **Evaluation Process**

Most prop firms require traders to go through an **evaluation or assessment phase** before providing access to the firm's capital. This process typically involves:

* **Demo Trading:** Traders trade on a simulated account under specific rules and targets.
* **Performance Targets:** Achieving a certain profit target without violating risk management rules.
* **Time Constraints:** Completing the evaluation within a set number of days or trades.

#### **Funding Traders**

Upon successful completion of the evaluation, traders receive access to a funded account with the firm's capital. The amount of capital provided often depends on the trader's performance during the evaluation.

#### **Profit Splits**

Prop firms and traders agree on a **profit-sharing arrangement**. Common splits range from **50/50 to 80/20**, with the larger percentage typically going to the trader as an incentive.

#### **Fees and Costs**

* **Evaluation Fees:** Traders often pay a fee to participate in the evaluation process. This fee may be one-time or recurring.
* **Platform Fees:** Some firms charge for the use of their trading platforms or data feeds.
* **Refundable Deposits:** In some cases, evaluation fees are refundable upon meeting specific criteria.