What is a prop firm, and how does it make money?

What this video covers

The retail prop-firm model step by step, from evaluation fee to funded account, and where the firm’s revenue mainly comes from. Why many funded accounts are simulated.

Sources and the longer explanation: What Is a Prop Firm and How Do Prop Firms Make Money?.

Numbers shown on screen

• Fees: evaluation challenges
• Resets: after a broken rule
• Add-ons: extras sold with accounts
• $100,000: A nominal account size

How the visuals were made

In 0:46 the video moves through 7 scenes, including a checklist, “The retail prop model”; a side-by-side comparison of Fees and Trading results. All graphics were rendered frame by frame by UXS; no stock footage, logos or faces are used.

Chapters

• 0:00 How do prop firms make money?
• 0:03 The retail prop model
• 0:11 "Funded" often means simulated
• 0:14 Main revenue
• 0:18 A nominal account size
• 0:28 Two other revenue facts
• 0:40 Risk note

Transcript

What is a prop firm, and how does it make money?

You pay a fee for an evaluation, hit a profit target within loss limits, and if you pass, get a funded account and a profit split.

Many of those funded accounts are simulated, not live capital.

The firm earns mainly from challenge fees, resets and add-ons.

A "$100,000 account" usually does not mean $100,000 of real capital at risk for the firm. Payouts come from the firm's own money.

Evaluation fees are paid upfront by every participant, pass or fail. Some firms copy or hedge consistent traders in live markets; others keep every account simulated.

Treat the fee as money you expect to lose. Educational only, not financial advice.