💼 How Prop Firms Make Money
Modern prop trading firms are built around one simple truth: most traders fail.
And that failure is profitable.
Here’s how the business model works:
💰Main revenue streams
🔥Challenge fees – One-time or recurring payments to access evaluation accounts. Primary income source, since most traders fail.
🔥Monthly subscriptions – Alternative model to charge traders for access over time.
🔥 Profit splits – Typically 10–30% of a funded trader’s earnings.
🔥 Spreads & commissions – Some firms markup trades like brokers.
🔥 Hidden costs – Includes data feeds, platform fees, and account resets.
🔥 Educational upsells – Courses, mentorships, or membership programs.
🧪The challenge model
Traders pay to prove they can follow risk rules and hit profit targets in a demo account.
Pass, and you get funded — often in another demo account.
Fail, and you pay to try again.
⚠️Not all prop firms place real trades
Some never send orders to real markets. Funded traders are still on simulation — and if they lose, the firm keeps the loss as profit.
📉Why it works
Most traders break rules or fail to manage risk. That means steady revenue from resets, subscriptions, and failed challenges — no capital at risk for the firm.
✅Legit prop firms vs simulators
The best firms offer:
• Real market execution
• Transparent fees
• Verified payouts
• Clear rules and support
Others just sell the dream.
Bottom line:
Prop firms are built to make money whether you win or lose.
Success is rare — but failure is always monetized.