In the rapidly growing world of retail trading, proprietary trading firms (prop firms) have carved a niche by offering funded trading accounts to aspiring traders. They promise access to large capital and a share of profits—but a rising question is: Are prop firms making more than the traders themselves?
This article dives deep into how prop firms earn, how traders get paid, and who truly benefits the most.
What Is a Prop Firm?
A proprietary trading firm provides traders with access to its own capital. Traders must pass a challenge or evaluation phase before gaining access to a funded account. Once funded, they receive a profit split, often between 70% and 90%, depending on the firm.
Popular prop firms include:
- FTMO
- MyForexFunds (MFF)
- The Funded Trader
- Topstep
These firms have surged in popularity due to the low risk, high reward opportunity they offer to retail traders.

How Prop Firms Make Money
Prop firms typically earn revenue from three key sources:
1. Challenge Fees
The most consistent income stream for prop firms. Traders pay a fee (usually $100 to $1000) to attempt a challenge. Given high failure rates (estimated at 80–90%), many traders pay but never get funded.
Example: If 10,000 traders each pay $500 for a challenge, that’s $5 million in revenue—before any trades are even placed.
2. Profit Splits
For those who pass and earn, prop firms take a portion—commonly 10% to 30% of the trader’s profits.
While this is lucrative, it’s less predictable and generally less substantial than challenge fees.
3. Broker Rebates & Partnerships
Some prop firms work with specific brokers and earn a cut through spread markups, commissions, or introducing broker (IB) arrangements.
Trader Perspective: How Much Do They Make?
While many traders dream of making 5- or 6-figure withdrawals, only a fraction ever reach that point.
Key stats:
- Over 85% of traders fail the evaluation.
- Only a small portion of funded traders remain profitable over time.
- Most payouts range between $1,000 to $10,000, depending on skill and capital.
Important: Traders assume no capital risk, but also must follow strict rules, including drawdown limits and time constraints, which can hinder consistent performance.
Are Prop Firms Making More Than the Traders?
Short answer: Yes—for the majority of cases.
Let’s break it down:
- If 1,000 traders pay $500 each, that’s $500,000 in challenge fees.
- If only 50 pass and make an average of $4,000 each, and firms keep 20%, they make another $40,000 from profit splits.
- Net earnings for the firm: $540,000
- Net payout to traders: $160,000 (after firm’s cut)
Clearly, firms profit even if traders do not—especially due to high failure rates and upfront fees.
Ethical Considerations
While prop firms are legal, the ethics of their business model are debated.
Concerns include:
- High failure rates may resemble a “pay-to-play” model.
- Traders might be misled by marketing showcasing rare, high-earning individuals.
- Some firms may prioritize evaluation revenue over trader success.
However, not all firms are predatory. Reputable firms invest in trader education, offer fair rules, and genuinely share in profits.
Tips for Choosing a Reliable Prop Firm
- Check Reviews and Payout Proofs
- Use sites like Trustpilot, Reddit, or ForexPeaceArmy.
- Understand the Rules
- Be wary of unrealistic targets or harsh drawdown rules.
- Consider the Fee Structure
- Compare challenge fees vs. potential account size and rules.
- Verify Regulation and Transparency
- Some firms are more transparent than others; look for public financials or audits.
Prop firms undeniably profit more consistently than individual traders, largely due to challenge fees and high turnover. However, they also offer a valuable service—giving skilled traders access to large capital without risking their own funds.
If approached wisely, both sides can benefit. Traders must focus on skill development, discipline, and choosing reputable firms, while understanding that not all that glitters is gold in the prop trading world.
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