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 page 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 14 days after you receive your funded account, and every 14 days after that. With the Payout Express add-on the wait drops to 5 days.

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.