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.