What Is a Prop Trading Firm?
- Ankit Gupta
- June 25, 2025
A prop trading firm gives traders access to capital so they can trade using the firm’s funds. In exchange, traders share a portion of their profits with the firm. This setup lets traders trade with large amounts of capital without using their own money, while the firm benefits from the traders’ skills and potential profits.
Key Takeaways
- A prop trading firm gives traders access to the firm’s capital to trade.
- Profits are shared between the trader and the firm.
- Traders can access tools, support, and leverage without risking personal funds.
- Success often depends on passing a trading challenge or evaluation.
- Choosing a transparent, reputable firm is key to success
Understanding Proprietary Trading
Proprietary trading involves using the firm’s money to trade. The primary motive behind this is to reap profit from price fluctuations in the market.
Unlike retail trading, which requires investment from the trader himself into the trades, prop trading gives him access to the firm’s capital. In return, a portion of any profits is shared with the firm that provided the capital.
Prop trading is more leveraged compared to retail trading, which means that with prop trading, the traders can manage larger positions without using their own capital. The profits and losses are entirely the trader’s in retail trading, whereas in prop trading, the profit will be shared with the firm, and losses are absorbed by the firm to the extent of the allocated capital.
Simple prop trading definition: Prop trading (short for proprietary trading) is when traders trade with a firm’s own money – not their own funds – to buy and sell financial instruments, aiming to generate profits.
Want to learn more about prop trading? Check out our extensive guide.
How Does Prop Trading Work?
To get started with a prop firm, traders typically pass a prop trading challenge that determines a trader’s ability to generate profit consistently while managing risk. In return, the trader gets access to the firm’s capital.
A few prop trading firms (like Hola Prime) offer crystal-clear rules with no hidden conditions and offer instant payouts for any profit made by the trader.
What Is a Prop Trading Firm?
A proprietary trading firm, or prop firm, provides skilled traders with access to the firm’s capital. In return, traders share a portion of their profits with the firm.
With a prop firm, traders can access professional tools and resources, leverage, and monetary capital that enables them to trade with minimal personal risk.
This setup allows traders to trade with more buying power than they’d have on their own, all without risking their own money.
The prop firm benefits by providing capital to profitable traders and earning a share of their success.
How Do Prop Firms Make Money?
Prop trading firms typically earn revenue in three main ways:
1 – Profit Sharing
Once a trader is funded and begins trading with the firm’s capital, the firm takes a share of any profits earned. This split can range from 65% to 95%, depending on the firm and the trader’s performance.
The better the trader does, the more both parties can gain. Some firms, including Hola Prime, even offer scalable profit splits. This means if you consistently perform well, you will be rewarded with higher percentages over time.
2 – Challenge or Evaluation Fees
Before traders gain access to a simulated funded account, most prop firms require them to pass an evaluation or trading challenge.
These challenges test a trader’s ability to manage risk, follow rules, and trade profitably. To take part, traders typically pay a one-time fee (or, in some instances, a monthly fee), which contributes to the firm’s revenue. These fees also help the firm filter out less skilled traders and reduce the risk of funding underperformers.
3 – Technology or Platform Fees
Some prop firms may also charge fees to access trading tools, platforms, and data. Prop firm may charge for:
- Professional trading platforms with advanced charting and execution tools
- Real-time data feeds and analytics
- Proprietary risk management software or trade dashboards
- Trading journals, mentorship, or educational resources
Usually, these are covered in a monthly subscription fee, or they may be added to the cost of the challenge.
At Hola Prime, we offer traders access to advanced tools and resources, including platforms such as DX Trade, cTrader, Match Trader, MT4, and MT5, alongside backtesting tools and analytical support – all part of our bundled fee structure.
What is a Prop Trader?
A prop trader is someone who trades financial markets using a prop firm’s capital. Traders get evaluated based on:
- Trading strategy
- Consistency
- Risk management
- Ability to generate profit
Prop traders may focus on various asset classes, including forex, indices, commodities, stocks, and crypto.
Unlike retail traders, proprietary traders don’t risk their own money – they trade with their prop firm’s capital and share the profits with the firm.
How Do Prop Traders Make Money?
Prop traders make money by executing successful trades – whether it be stocks, forex, or crypto – and keeping a percentage of the profits.
This is known as a profit split. Some firms offer up to 95% profit share depending on the trader’s performance and experience.
Traders do not usually earn a fixed salary. Instead, their income depends on performance. So, the more successful your trades, the more potential for profit.
In fact, some high-performing traders may earn up to 95% of the profits at firms that reward consistency and low risk.
Types of Prop Firms
Different prop firms offer different models. Some of the main types include:
- Challenge-Based Firms – These require traders to pass a challenge to prove they can trade profitably and manage risk. Once passed, traders get access to firm capital. Learn more about prop firm challenges here.
- Instant Funding Firms – Some firms offer immediate access to capital for a fee –no challenge required. These often come with stricter rules and lower profit shares.
- Desk-Based Firms – These are traditional, in-house trading firms where traders work on-site, often in cities like London or New York. They may provide a salary, training, and a share of profits.
- Forex-Focused Prop Firms – Specialise in FX markets and may offer unique leverage and trading hours for forex traders.
- Futures-Focused Prop Firms – Some firms also offer access to other high-potential markets like futures, giving traders exposure to indices, commodities, and more.
Hola Prime is a hybrid proprietary trading firm that offers both challenge-based and instant funding models, with a strong focus on forex and other asset classes.
Benefits of Prop Trading Firms
Prop trading offers several key benefits to traders:
Access to Capital and Leverage
Traders can trade with the firm’s capital, often much larger than what they could manage independently.
This allows traders to scale their positions, take advantage of more market opportunities, and potentially generate larger profits.
In addition to funding, many firms offer leverage, enabling traders to control large positions with a smaller margin requirement. This can boost profit potential, but it also means traders need strong risk management skills to avoid excessive losses.
Profit-Sharing Opportunities
Rather than receiving a fixed salary, prop traders earn a share of the profits they generate. Most firms offer competitive profit splits, often starting at 65–80%, with top-performing traders earning up to 95%.
Transparent firms like Hola Prime provide instant payouts, no hidden fees, and straightforward rules, ensuring traders are fairly rewarded for their success.
Advanced Tools and Technology
Prop trading firms provide traders with cutting-edge prop trading platforms and tools that help with market analysis, risk management, and fast trade execution. Some tools include:
- Real-time market data and charts
- Fast order execution systems
- Risk management dashboards
- Trade journaling and performance tracking tools
Drawbacks of Prop Trading
Although there are many positives to prop trading, there are some negatives to consider:
Rules and Restrictions
As a trader, you must follow strict risk and trade management rules or risk having your account closed. Certain strategies – such as holding trades overnight or over the weekend – may be restricted, depending on the firm.
Although trading conditions are outlined clearly in advance, account closure can be distressing. Some prop firms may also freeze your account if you lose several trades in a row, even if your overall performance has been solid.
Costs and Fees
You’ll usually need to pass an evaluation or challenge to access a firm’s capital. These tasks prove your trading skills but often require upfront fees. If you don’t pass, you may not be refunded, which can be frustrating if you’re close to meeting the criteria. Some firms also charge monthly subscriptions or platform fees.
Profit Split
When working with a prop trading firm, you don’t keep 100% of your earnings. The profit split depends on the company and in many cases, your skill level. At Hola Prime, we offer a profit split of up to 95% in favor of the trader.
Lack of Long-Term Security
Unlike traditional employment, prop trading does not offer long-term job security, benefits, or a salary. Your income is entirely performance-based, and one poor streak can lead to account suspension or loss of funding.
How to Choose a Prop Trading Firm
Here are some factors to consider when choosing the right prop trading firm:
Reputation and Track Record
Research the firm’s reputation and success history. Look for positive feedback and fair profit-sharing structures.
Capital and Leverage Offered
Ensure the firm provides adequate trading capital and leverage that suits your strategy and risk tolerance.
Technology and Platforms
A reliable trading platform is critical. Ensure the firm offers tools for fast execution and real-time data.
Support and Resources
Look for firms that offer educational support, mentorship, and customized lessons, especially after challenges.
Instant Payouts
Transparent firms, like Hola Prime, provide instant payouts, ensuring traders are compensated without delays.
Red Flags to Avoid
As well as positives to look out for, there are some red flags to avoid with prop firms:
Lack of Transparency
Be aware of ambiguous terms and hidden fees. Everything must be well-defined in light of rules and conditions.
Unconscientious Profit-Sharing Terms
Watch for standard profit splits in the industry. Stay away from firms taking more than their fair share.
Delayed Payments
Firms that stall or delay payment are a no-go zone. You must be sure that the firm you will opt for is well-reputed when it comes to payouts on time.
Negative Feedback
Always make sure to read reviews left by other traders so you can avoid firms with terrible reputations.
How to Join a Prop Firm: Step-by-Step
- Choose a firm – Research reviews, profit splits, funding models, and transparency
- Take a challenge or evaluation – Prove your skills under specific trading rules
- Get funded – Pass the challenge and receive access to a funded account
- Trade and earn – Start trading and receive payouts based on the firm’s terms
- Scale up – Some firms offer higher capital as your consistency improves
Final Note
Proprietary trading offers you the unique opportunity to execute trades without risking your own capital. With access to funding, advanced tools, and a supportive environment, joining a prop trading firm can be a smart move… if you choose the right one.
This is where we come in. At Hola Prime, we offer instant payouts, competitive profit splits, and real support, giving you the best chance at long-term success in the markets.
Join Hola Prime today and take your trading to the next level.
➤Check out our Pro Challenge
➤Check out our Prime Challenge
Prop Trading Firm FAQs
Check out these FAQs about prop trading and prop trading firms – or explore these for more.
1. What is a prop firm account?
A prop firm account is a trading account funded by a proprietary firm, used by a trader to place trades, earn profits, and share a portion of the profits with the firm.
2. Can beginners join a prop firm?
Yes, some firms accept beginners, especially those that offer mentorship and training resources.
3. Is prop trading legal?
Yes, prop trading is a legitimate practice in most countries.
4. What is a prop firm in forex?
It’s a proprietary trading firm that focuses specifically on foreign exchange markets, often offering high leverage and 24/5 market access.
Disclaimer: All information provided on this site is for educational purposes only, related to trading in financial markets. It is not intended as financial advice, business or investment recommendation, or as an opportunity or recommendation to trade any investment instruments. Hola Prime only provides an educational environment to traders, including tools, materials and simulated trading platforms which have data feed provided by Liquidity Providers. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local laws or regulations.