Prop firms are those mysterious firms that are prepared to give traders who can demonstrate their abilities large sums of money. Avoid the pain of risking your own funds by trading someone else's money and keeping a sizable portion of the gains. However, it's not an easy journey from your first demo account to being a fully financed prop trader.
You can definitely succeed if you have the correct attitude, a good strategy, and a healthy dose of perseverance. From the modest beginnings of demo trading to locking in your funded status and ultimately living the trader lifestyle on someone else's pay, let's talk about what that process really looks like.
Why Prop Firms Even Exist
Prop (short for proprietary) trading firms give skilled traders access to significant trading capital. In return, they take a share of the profits you make—often leaving you with 70-90% of the winnings, depending on the firm.
But they’re not just handing over money to anyone with a MetaTrader account and a dream. Nope. First, you’ve got to prove yourself. That’s where your journey begins.
Step 1: The Demo Account Phase – Learning Without the Burn
Your sandbox is a demo account. No actual money, no risk, and no feelings either—which can be both a blessing and a curse.
The majority of traders either pass through this stage too quickly or stay here for far too long. Instead of being on demo indefinitely, the objective is to use this time to determine three important factors:
- Your trading strategy. Are you a scalper? Swing trader? Do you thrive on fundamentals or do you obsess over technical setups?
- Your discipline. Can you follow a plan without second-guessing yourself or chasing revenge trades?
- Your consistency. Can you go weeks—maybe even months—without blowing up your (fake) account?
Treat your demo account like real money. Act like the drawdown does matter. The more seriously you take it, the easier the transition to live and challenge phases will be.
Step 2: Choosing the Right Prop Firm
Once you feel ready to test your skills for real, it’s time to shop around. There’s no shortage of prop firms. Each has its own set of rules so pay attention.
Here’s what to look for:
- Profit targets. Some require 8-10% gains in a month. Others are more forgiving.
- Drawdown limits. Usually 5-10%, but how they calculate it (daily vs. overall) can make or break you.
- Trading rules. News trading allowed? Weekend positions okay? Hedging permitted?
- Payout structure. What percentage do you keep, and how often can you withdraw?
- Scaling plans. Do they offer increased capital if you perform well consistently?
Take your time here. Don’t just jump into the firm with the flashiest Instagram ads. Look under the hood and make sure their rules match your trading style.
Step 3: The Evaluation or Challenge Phase – Where the Heat Kicks In
You are currently using a live evaluation account for trading. It's not a game but there isn't any actual money at risk (yet). You're out after one mistake, such as exceeding the maximum loss or blowing the drawdown limit.
Most traders fail here, as you have likely already observed. And it has nothing to do with their poor trading skills. Usually, it's because they:
- Panic under pressure
- Overtrade trying to hit the profit target too fast
- Break the rules without realizing it
The secret is to remain relaxed. Keep in mind that the goal of the task is to assess your consistency rather than your capacity for winning via gambling. Your best tools are emotional control, appropriate risk management, and slow, steady progress.
You will learn a lot about yourself during this era as well. You'll discover if you're exchanging to gain approval or because you've actually gained an advantage.
Step 4: The Verification – One More Lap Around the Track
Have you finished the first phase? Fantastic victory. For now, though, don't celebrate since most companies will urge you to do it again. Verification is comparable to your second interview. They want to confirm that you weren't merely lucky.
The goals are often a little simpler this time. Perhaps 5% is all you need, rather than 10%. But don't be careless—one poor day may ruin everything, and laws still apply.
Follow your strategy, resist the temptation to make transactions in order to finish sooner, and keep in mind that the objective is funding, not prestige.
Step 5: You’re Funded – Now the Real Game Begins
Alright. You did it. You beat the odds, passed the challenge and verification, and now you’ve got access to a funded account. Whether it’s $10K, $100K, or even $400K, the pressure just got real.
Being funded doesn’t automatically make you profitable. You’ll still face the same temptations, the same losing streaks, and the same mental battles. Only now, it matters more because you’re trading real money and your payout depends on not blowing the account. You need to prefer the best trading platform like MetaTrader 5 that helps you to keep your funded account.
Here are a few golden rules once you’re funded:
- Stick to your original plan. Don’t suddenly start experimenting just because it’s “someone else’s money.”
- Keep risk low. Just because you can trade a 2-lot doesn’t mean you should.
- Withdraw profits. Take money out regularly. Don’t fall into the trap of trying to compound forever and end up losing it all in a bad week.
Also, take advantage of scaling plans if your firm offers them. Some will double your capital every few months if you stay profitable and follow the rules.
Step 6: Treat It Like a Business, Not a Hobby
Prop trading isn’t just a skill. It’s a business. You’re essentially a contractor working for a firm that’s fronting the cash.
So treat it that way.
- Track your trades. Know your win rate, average RR, and best-performing setups.
- Set goals. Monthly targets, max loss rules, improvement checkpoints.
- Stay sharp. Continue studying, journaling, and evolving your edge.
- Avoid burnout. Step away when needed. No one’s paying you to trade seven days a week.
You don’t need to be a trading robot but you do need structure. It’s the only way to survive long-term.