Prop firms (short for proprietary trading firms) are one of the hottest ways for day traders to scale up without risking large amounts of their own capital. If you’ve heard names like Apex Trader Funding, Take Profit Trader, or Lucid Trading, you’re already seeing how these firms have exploded in popularity.
But how do prop firms really work? What happens if you blow the account? And where does the money actually come from? Let’s break it down step-by-step with Apex as the prime example.
What Is a Prop Firm?
A prop firm gives traders access to a funded account after they prove they can trade consistently. Instead of depositing $50,000 of your own money, you pay a small fee for an evaluation account.
If you pass the firm’s rules and hit the profit target, you get access to a funded account where you can request real cash payouts.
👉 See our full list of futures prop firms here.
Example: How Apex Trader Funding Works
Let’s use a $50,000 Apex evaluation account as an example:
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Evaluation Cost: ~$55 (with discount codes like “DGT”)
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Profit Target: $3,000 → you must grow $50,000 to $53,000
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Max Drawdown: $2,500 → if your account drops to $47,500, you fail
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Trailing Drawdown: Apex uses unrealized trailing drawdown, meaning your max loss limit trails your account’s highest equity.
📌 Example: If your trade runs +$500 in profit but you close it at +$250, your trailing drawdown only adjusts by $250, not $500. That’s why traders often scalp in evaluations and leave bigger runners later.
If you hit $53,000 before breaking any rules, you pass the evaluation. From there, you pay a one-time activation fee and the account resets to $50,000 as a funded account.
At $52,600 (profit of $2,600), you can usually request your first payout.
👉 Check the Apex Trader Funding page for more details.
Do You Owe the Prop Firm Money If You Blow the Account?
No. You’re never on the hook for the full account size.
If you buy a $50,000 evaluation for $55 and fail, your maximum risk is just the fee you paid. You’re not accountable for the “$50K” because it’s simulated buying power with strict risk limits.
What Happens After You Pass?
Once you pass the evaluation:
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Pay a one-time fee to convert into a funded account.
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Trade under the same rules (drawdown, contract limits, daily loss limits).
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Hit the payout threshold → withdraw profits.
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Repeat the cycle until you break rules or blow the account.
Many traders scale by running multiple accounts and using a trade copier (like TradeSyncer) to mirror trades across 5, 10, or even 20 accounts at once.
Key Prop Firm Rules to Understand
Not all prop firms use the same rules. Here are the most common ones you’ll see:
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Drawdown Types:
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Unrealized Trailing (Apex, Take Profit Trader): Follows your highest equity point.
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End of Day: Only updates after closed trades.
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Static: Fixed drawdown that never moves.
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Scaling Plans: Some firms (like Topstep) limit how many contracts you can trade until you scale up profits.
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Trading Restrictions: Most prop firms only allow futures or forex, not stocks. Positions must usually be closed before market close.
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Payout Rules: Many firms pay every 2 weeks, with first payouts capped until you show consistency.
👉 See Lucid Trading’s instant funding rules here.
Why Do Prop Firms Exist?
Prop firms make money from:
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Evaluation Fees: The majority of traders fail challenges, which funds the firm.
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Subscription Costs: Some firms charge monthly fees for active accounts.
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Profit Splits: Firms take a small % (usually 10–20%) of trader payouts.
The model works like an insurance pool—many traders fail, but the few consistent ones get payouts.
Common Questions About Prop Firms
Do you trade real money?
In most cases, you trade a simulated account. Once you prove consistency, some firms offset trades with real liquidity or copy your trades.
Can I blow unlimited accounts?
Yes, but every failure requires buying a new evaluation. This is where most of the firm’s revenue comes from.
Can I run multiple accounts?
Yes. Apex allows up to 20 accounts per trader, which can be copy-traded for scale. Other examples include Tradeify and Take Profit Trader that allow up to 5 funded accounts for copy trading.
Are payouts real?
Yes. Funded accounts allow you to request cash withdrawals every 2 weeks. The firm wires or ACHs you the funds.
Do I pay taxes?
Yes. In the U.S., payouts are typically reported on a 1099-NEC as self-employment income; however, we are not financial advisors. It is recommended to talk to a tax professional.
Final Thoughts: Should You Use a Prop Firm?
Prop firms like Apex give traders access to big buying power with small upfront risk. Instead of depositing $25,000+ of your own money, you can risk under $100 to prove your strategy.
For disciplined traders, this is one of the fastest ways to scale and protect personal capital. But for undisciplined traders, it can become a cycle of paying for new evaluations over and over.
If you’re consistent, a prop firm account can be the bridge between practicing in SIM and trading live capital at scale.
👉 Start with our breakdown of the Best Futures Prop Firms.
How does a futures prop firm work?
Do I owe the firm money if I blow the account?
What types of drawdowns do prop firms use?
- Unrealized Trailing – updates with every tick in open profit (Apex uses this).
- End-of-Day – only adjusts based on closed trades.
- Static – fixed amount that never moves.
How do payouts work with prop firms?
Can I trade multiple accounts at once?
What happens if I pass an evaluation?
Are prop firms legit or scams?
Why would I trade with a prop firm instead of my own money?
Prop Firm Comparison: Apex vs Topstep vs FundedNext vs Lucid
| Prop Firm | Max Funding | Accounts Allowed | Drawdown Type | Payout Split | Unique Advantage |
|---|---|---|---|---|---|
| Apex Trader Funding | $6,000,000 | 20 | Unrealized Trailing | 90%-100% | Biggest scaling potential, huge 80% OFF discounts |
| Topstep | $750,000 | 5 | End-of-Day | 90%-100% | Strong education focus, contract scaling plan |
| FundedNext | $300,000 | 12 | End-of-Day | 90-100% | 15% evaluation profit bonus, forex + futures funding |
| Lucid Trading | $750,000 | 5 | End-of-Day | 90-100% | Instant funding available, no activation fees |
