How do prop firms make money?
Guide · 12 min read · Last checked 5 November 2026
If you have seen an ad for a "$100,000 funded account" for around $500, you have probably wondered how that can work. Who gives a stranger $100,000 for $500? The honest answer is that most prop firms don't. They make money in one of two very different ways, and once you see which one a firm uses, almost everything else about it starts to make sense.
Simulated-funding firms make money from the fees traders pay for evaluations. After you pass, you trade a simulated account, and your payouts are paid out of those fees. Real-capital firms make money from a share of the profit their traders earn on live capital, plus trading commissions. This guide follows the money step by step, with the numbers, so you can tell the two apart before you pay.
Last checked: 5 November 2026 · By the founder of TradingIsAJob, a former prop firm trader, risk manager and head of office (About). Disclosure: I previously worked at a real-capital prop firm. We earn an affiliate commission from some real-capital firms in our rating — see How we make money.
Two business models
First, a few words you will see everywhere.
- Evaluation (or challenge): a test you pay for. You trade under strict rules, usually with a profit target and a loss limit. Pass, and you get a "funded" account. Fail, and the fee is gone.
- Funded account: the account you trade after you pass. The key question is whether it holds real money.
- Payout: the money the firm sends you from your profits.
- Split: how the profit is divided. An 80% split means you keep 80% and the firm keeps 20%.
What a "$100,000 account" really means
Nobody gives you $100,000 for $500. Look at the rules of a typical Forex challenge and you will find two numbers that matter far more than the account size:
- a maximum loss, for example 4% of the account;
- a daily loss limit, for example 2% of the account.
If your losses reach the maximum, the account is closed. So on a "$100,000 account" with a 4% maximum loss, the account closes when the balance falls to $96,000. The most you can ever lose is $4,000. That is the real amount at risk. The $100,000 is only the size of the positions you are allowed to open, thanks to leverage, not money you could actually lose.
Now look at the daily limit again. 2% of $100,000 is $2,000. Out of $4,000 of real risk, that is 50% in a single day. A rule that sounds careful ("only 2% a day") lets you burn half of everything in one bad session. On a real risk desk, the daily limit is a few percent of the total, not half of it.
Real prop firms usually describe the same things differently, and more honestly. They give you a buying power, for example $35,000: how much stock you can hold at once. Separately, they give you a total loss limit, for example $1,000: what you can actually lose. Nobody calls the $35,000 "your capital". The daily stop is then a small part of the $1,000.
What this means for you: ignore the account size in the ad. Find the maximum loss in dollars, then divide the daily limit by it. That one number tells you how much real risk you are given and how fast you can lose it. Firms differ on the exact percentages; the trap is the same.
Both kinds of firm may charge you for an evaluation. The difference is what happens after you pass.
Simulated-funding firms. Most Forex prop firms work this way. The "funded" account you get after the challenge is, by the firms' own terms, simulated: a copy of the market where your trades never reach a real exchange or bank. No real money is traded for you. The firm earns when traders pay, not when they win. That makes the business work more like a casino than an employer.
Real-capital firms. After you pass, you trade the firm's real money on a live market, and the firm keeps part of your profit. Some are regulated US broker-dealers that hire traders directly, such as T3 Trading, SMB Capital, Kershner Trading or Bright Trading. Others charge for an evaluation first and then put the traders who pass on live capital, such as Fondexx or hi2morrow.
What this means for you: the word "funded" tells you nothing. The only thing that matters is whether the account after you pass holds real money.
Where does the money come from?
Simulated-funding firms: the fees
The main income is evaluation fees. On top of that come resets (paying again to restart a failed challenge), retries, and paid add-ons such as a higher split or fewer rules. The model works because most traders fail.
The best public data comes from the firms themselves. FPFX Tech, a company that provides the technology for prop firms, looked at more than 100,000 traders across 10 firms. About 14% reached a funded account, and about 7% ever received a payout. In another dataset of over 10,000 traders, each one bought 1.6 challenges on average (Fortunly, summary of firm data).
Here is what those numbers look like for one firm. The figures are rounded and simplified.
The firm does not need anyone to trade well. It needs a steady flow of new traders buying challenges, and most of the money comes from people who never get paid.
Real-capital firms: the profits
A real-capital firm earns when its traders earn. Its income is its share of their profit, plus commissions on every trade, because the firm or its partner broker charges for executing orders. If these firms charge for an evaluation, the fee works as a filter: it keeps out people who are not serious. It is not where the money is. At the real prop firm where I worked, by far the largest share of income came from traders' profits and commissions.
What this means for you: in the first model the firm's best customer is a trader who fails and buys again. In the second, it is a trader who wins.
Who pays your payout?
This is the question most beginners never ask, and it explains almost everything.
Simulated-funding firms: the firm, from its own pocket. On a simulated funded account your trades never reach the market. When you "make" $5,000, nobody on the other side of the market lost $5,000. There is no market profit to share. So when the firm pays you, the money comes from its own bank account, and that account is filled mostly with the fees of traders who failed. Every payout is a cost.
Real-capital firms: the market. Your trades are real, so your profit is real money taken from the market. The firm does not pay you out of its pocket; it splits with you what you have already earned, and its share comes from the same trades. Nobody had to lose a fee for you to get paid.
What this means for you: at a simulated-funding firm, your payout and the firm's profit pull in opposite directions. At a real-capital firm, they are the same money.
Do prop firms use real money?
Real-capital firms do. Most Forex prop firms don't, at least not for your account.
To see why, it helps to know how brokers handle orders. An A-book broker passes your order to the real market. A B-book broker keeps it in-house and takes the other side itself, so when you win, the broker loses. A simulated account is even simpler than a B-book: there is no market at all, only the firm's own record of your trades.
Simulated-funding firms. Their terms describe the funded account as simulated. Some firms say they copy the trades of their most consistent traders to a live account of their own (NexusFi). Read that carefully: it is the firm trading real money to manage its own risk. Your account stays simulated, and the rules of the simulated account still decide your payout.
Real-capital firms. You get a live funded account. Your orders go through a broker to a real exchange, and the firm's own money is at risk with every trade. That is exactly why these firms start you with a small loss limit and watch your risk every day: if you lose, they lose.
What this means for you: a real account is the only setup in which the firm needs you to win.
Why is the split so different?
Simulated-funding firms often offer 80%, 90%, even 100% of the profit. Real-capital firms usually start at 50% and raise it as you grow, often to around 65%. At first glance the first deal looks better. It isn't, and the math shows why.
Why a real-capital firm can't pay 90%
Passing an evaluation does not mean you will make money on live capital. In my experience, about 1 in 5 traders who pass is profitable in the first year. Here is a simplified year for a real-capital firm that takes on 100 new traders, each with a $1,000 loss limit:
The illustration is mine, not published data. But the logic holds for every real-capital firm: the profits of the best traders pay for the losses of everyone else. At 90%, there is nothing left to pay with. That is why some real props start beginners at 25–30% and raise the split only as a trader proves himself.
Why a simulated-funding firm can offer 90%
Because the split hardly matters to it. If only about 7 traders in 100 ever reach a payout, a generous split costs little, and a big number sells challenges. Whatever the split, the payout still comes from the firm's pocket.
What this means for you: a 90% split on a paid challenge is not generosity. It tells you where the firm's money comes from: fees, not trading.
What happens when you start making money?
This is where the two models stop being different and become opposites.
At a real-capital firm, it is good news
When you make money, the firm makes money, so it wants more of it. Real props grow profitable traders step by step: a bigger loss limit, more buying power and, at higher levels, a better split. A typical path is a ladder of levels, and you move up by making money over time, not by passing another test.
That does not mean anything goes. A real risk desk watches how you made the money, not only how much. If you broke your daily stop several times over, there will be consequences even in a profitable month. A profit made by breaking the risk rules is luck, and luck runs out. The firm is protecting its capital and your career at the same time.
At a simulated-funding firm, it is a risk
For this model, the danger is not traders losing. It is traders winning, and winning big. Every payout is a cost, so a trader who keeps making money is the firm's biggest expense. That is why funded accounts at these firms come with long lists of rules. In plain words, the terms commonly include:
- Payout caps: a limit on how much you can withdraw in one cycle, however much you made (example).
- Consistency rules: if one day makes too large a share of your profit, the payout can be reduced or delayed.
- Trade reviews: the firm checks your trades before each payout.
- "Prohibited strategies": profits can be cancelled if the firm decides you used a forbidden method, often described in broad terms.
- Discretion clauses: the firm keeps the right to refuse a payout or close an account at its own discretion.
Traders regularly report payouts delayed, cut or denied, and accounts closed after a profitable run. We can't verify every case, and many firms do pay. But the incentive is plain: on a simulated account, the firm loses what you win.
The model is also fragile. It depends on a steady flow of new fees, and it has no real market profits to fall back on. In 2024 alone, at least 50 prop firms shut down, for reasons ranging from regulators and lost trading platforms to liquidity problems (Finance Magnates, November 2024).
What this means for you: before you pay, ask one question. If I win big, does this firm grow my account, or reach for the rulebook?
Both models at a glance
How to tell which model your prop firm uses
You can check most of this in ten minutes, before you pay.
- Search the Terms for "simulated", "demo" or "virtual". Open the firm's Terms and Conditions and use Ctrl+F. If the account after you pass is described with one of these words, it is a simulated-funding firm, whatever the ads say.
- Look at the split. 80–100% on a paid challenge means the money comes from fees. A real-capital firm cannot afford it.
- Look for payout caps and "discretion" clauses. A firm whose income is your profit has no reason to cap it.
- Ask who the broker is. A real-capital firm can name the broker or exchange member that holds the live account. "Our liquidity provider" is not an answer.
- Ask what happens after you make money. A real-capital firm will describe a path to more capital. A simulated-funding firm will describe payout rules.
Or answer seven questions on our Check your prop firm page and get a verdict in a minute.
The bottom line
Both kinds of firm sell you the same picture: a funded account and a share of the profit. Behind it are two opposite businesses. One earns when traders pay, so it needs most of them to fail. The other earns when traders win, so it needs them to grow. Neither model guarantees you will make money. But only one of them is on your side when you do.
Firms mentioned
- Real prop firms: T3 Trading, SMB Capital, Kershner Trading, Bright Trading.
- Real prop firms with a paid evaluation first: hi2morrow, Fondexx.
- See every firm by zone in our rating.
Sources
- Prop firm pass-rate and payout data, compiled by Fortunly from firm disclosures
- NexusFi — simulated vs live funded accounts
- Prop Trading Vibes — an example of payout caps
- Finance Magnates — at least 50 prop firms closed in 2024
- TradingIsAJob methodology
- The author's experience as a trader, risk manager and head of office at a real-capital prop firm since 2019.