What is a Prop Firm (FTMO) and How It Works
Heard of "FTMO" or a "funded account" but don't get how people trade with someone else's money? This guide explains the prop firm model from scratch.
What is a prop firm?
A prop firm (proprietary trading firm) lets traders trade its money instead of their own. You prove your skill, get a large account and share the profit with the firm. Popular ones: FTMO, FundedNext, The 5%ers, Funding Pips.
How it works (step by step)
- You pay for a challenge (evaluation) — e.g. ~€155 for a $10,000 account.
- You trade by the rules and hit a profit target (e.g. +10%) without breaching loss limits.
- Once passed, you get a funded account with the firm's money.
- You trade and keep 80–90% of the profit; the firm keeps the rest.
What is a challenge?
A challenge is the evaluation stage where you show you can be profitable and control risk. Typical rules:
- Profit target — e.g. +10% in Phase 1, +5% in Phase 2.
- Max daily loss — e.g. 5%.
- Max total loss — e.g. 10%.
Pros and risks
Pro: you only risk the challenge fee (e.g. €155) while trading a large funded account. Risk: if you fail, you lose the fee. Without discipline it's easy to break the rules.
Who is it for?
Prop firms suit those who already have a profitable, rules-based strategy (e.g. ICT/SMC) and manage risk well. For a beginner: demo first, then a small real account, then a challenge.
This is not investment advice. Trading involves risk.
Frequently asked questions (FAQ)
👇 Click a question to see the answer
What is a prop firm?
A prop firm (proprietary trading firm) gives a trader its own money to trade. You pass a "challenge" (an evaluation), and if you succeed you get a funded account (e.g. $10,000) and share the profit (usually 80–90% to you).
How much does an FTMO challenge cost?
It depends on account size. A $10k challenge costs around €155. If you pass, the fee is often refunded with your first profit payout.
What is my risk?
Only the challenge fee (e.g. €155). If you fail, you lose only that, not $10,000. That is the main advantage of a prop firm.
Is it worth it for a beginner?
Only once you already have a profitable strategy on a demo/real account. Challenges have rules (max daily loss, profit target), so they require discipline and risk management.
⚡ Try GoldenEagle free
Automated XAUUSD signals with a precise entry, stop loss and 3 take profit levels straight to your app. First month free, no commitment.
📩 Get free guides by email
New guides and tips on XAUUSD trading. No spam.
By subscribing you agree to receive emails. Unsubscribe anytime.
✅ Thanks! Guides are on the way.
This article is for informational purposes only and is not investment advice. Trading in financial markets involves the risk of capital loss.