A proprietary trading firm that provides traders with capital to trade in exchange for a share of profits. Traders typically must pass an evaluation (challenge) first.
Prop firms emerged as a major industry in the 2010s, offering retail traders access to large capital bases ($10K-$300K+) without requiring personal investment beyond a challenge fee. The trader passes an evaluation demonstrating consistent profitability within drawdown limits, then receives a funded account and keeps 50-95% of profits. Major firms include FTMO (est. 2015), Topstep (est. 2012), FundedNext (est. 2022), and The 5%ers (est. 2016).