If you've spent any time around trading, you've probably seen the term "prop firm" — usually next to a promise of trading with someone else's money and keeping most of the profit. This guide explains what a proprietary trading firm actually is, how funded accounts work, and what to look for before you put down a dime.

What is a prop trading firm?

A proprietary ("prop") trading firm is a company that puts up its own capital for traders to trade. Instead of risking your own savings, you trade the firm's money and split the profits.

Modern online prop firms — the kind most retail traders mean today — work a little differently from old-school institutional desks. Rather than hiring you as an employee, they let you prove your skill on an evaluation first. Pass it, and you're given a funded account backed by the firm's capital. Trade it profitably, and you withdraw your share of the gains.

The appeal is simple: skilled traders are often capital-constrained. A prop firm removes that ceiling — you can trade a $100,000 or $250,000 account without ever risking $100,000 or $250,000 of your own.

How does a prop firm work?

The funded-account model has three stages:

  1. Evaluation (the "challenge"). You trade a simulated account to a profit target while respecting risk rules — typically a maximum daily loss and a maximum overall drawdown. This proves you can be profitable without blowing up an account.
  2. Funding. Pass the evaluation and you receive a funded account. At 100X Club, before your funded account goes live you complete a quick KYC verification (identity check) — standard practice across regulated-adjacent finance.
  3. Payouts. You trade the funded account and withdraw your share of the profits on a set schedule.

The firm makes money from evaluation fees and from the firm's side of the profit split; you make money from your share of what you earn. Good firms want you to pass and stay funded — a profitable funded trader is a recurring revenue stream, not a cost.

What is a trading challenge (evaluation)?

The challenge is the skills test. The exact rules vary by firm and program, but they almost always include:

  • A profit target — e.g. reach +8% to pass a phase.
  • A maximum daily loss — how much you can lose in a single day.
  • A maximum overall loss (drawdown) — your account's hard floor.
  • Sometimes minimum trading days or a consistency rule so a single lucky trade doesn't qualify you.

Where firms differ most is the number of phases:

1-Step

One evaluation phase, then you're funded. Fastest route — you hit a single profit target while staying inside the risk rules. See the 1-Step Challenge.

2-Step

Two phases (a "challenge" then a "verification") before funding. Targets are usually lower per phase, which suits more conservative, consistent traders. See the 2-Step Challenge.

Instant Funding

Skip the evaluation entirely and start on a funded account immediately. You trade live capital from day one under the funded-account risk rules. See Instant Funding.

Not sure which fits you? Our how it works section walks through the full path step by step.

Profit splits and payouts

Two numbers matter most once you're funded: how much of the profit you keep, and how often you can withdraw it.

  • Profit split. This is your cut of the gains. At 100X Club the split starts at 80% and can go up to 95% with the Profit Booster add-on — i.e. you keep almost everything you earn.
  • Payout frequency. At 100X Club your first payout can be requested 10 calendar days after your first live trade, and every 10 days after that. With the On-Demand Payout add-on the wait is removed entirely — request a payout whenever you want.

A high headline split means little if payouts are slow, capped, or buried in conditions — always read the payout terms, not just the marketing number.

What to look for in a prop firm

Before you buy a challenge, sanity-check these:

  • Clear, published rules. Daily loss, overall drawdown, profit target, consistency, time limits — all stated up front, not buried.
  • No surprise time limits. Pressure to hit a target by a deadline pushes over-trading. Firms that remove time limits (100X Club's challenges have no time limit) let you trade your actual edge.
  • Realistic profit split + payout schedule. Know the default split, what raises it, and exactly when and how you get paid.
  • Transparent platform & pricing. You should know the trading platform, the account sizes (100X Club funds up to $250K), and the fees before checkout.
  • Responsive support and a real company. A contactable team and a public track record matter — you're trusting them with your payouts.

A word on risk

Prop trading is skill-based, not a shortcut. The evaluation exists precisely because consistent profitability is hard — most traders who attempt a challenge don't pass on the first try. Trade with a plan, respect the risk limits (they're there to protect both you and the firm's capital), and treat the evaluation fee as the cost of an opportunity, not a guaranteed return. Never risk money you can't afford to lose.

Getting started with 100X Club

If you're ready to put your strategy to the test, 100X Club offers 1-Step, 2-Step, and Instant Funding programs with funded accounts up to $250K, up to a 95% profit split, fast payouts, and no time limits.