A firm that provides traders with capital to trade financial instruments, such as futures. Traders retain a percentage of the profits they generate, while the firm assumes the risk.
Prop firms allow traders to access more capital than they would on their own, increasing their potential profits. However, traders must follow strict risk management rules to avoid account termination.
A trader joins a prop firm that offers a $50,000 evaluation account. They pass the evaluation by demonstrating consistent risk management and then trade a funded account, keeping 80% of the profits while the firm retains 20%.
A financial instrument is the entity being bought and sold while trading.
The specific account or evaluation package offered by the prop firm. Plans vary in account size, evaluation difficulty, profit targets, and rules.
A smaller-sized futures contract (e.g., 1/10th the size of a standard contract), which allows for more flexible risk management.
The standard-sized futures contract traded in the market.
A set milestone where a trader can increase their contract size or risk, typically based on achieving profits.