Prop Firm Trading For Beginners 2025 Guide

Going from trading personal accounts to prop firm trading can be a big challenge since prop firms have many rules you must follow. I have been trading prop firms for over 1 and a half years and managed to get funded from Alpha Capital and FTMO two of the most popular firms.

In this prop firm trading beginners guide, I will give you everything you need to know to become a successful prop firm trader.

Prop firm trading also known as proprietary firm trading, is when a trader is given money from a company to trade for them and generate profits. A trader can either be paid a monthly salary or get paid a certain percentage of the profits made.

Unlike traditional trading with a broker, you deposit your own money and start trading as you like. There are 2 ways to get into prop firm trading:

1. Buy a challenge then prove you are profitable based on set rules
2. Already have a verified track record that proves you are profitable

The most common way to get into prop firm trading is through buying a prop firm challenge and then proving you are profitable or capable of managing funds.

Most retail prop firms make money by selling prop firm challenges, if you fail a prop firm challenge they are happy because they don’t have to pay you. However, traditional prop firms make money when their experienced traders make a profit by trading company funds.

Here are two types of prop firms

• Retail Prop Firm: They make money through traders who fail the prop firm challenges.
• Traditional Prop Firm: They make money when their traders make a profit trading the company funds.

Retail prop firm will give you a demo account to trade (not real money), but if you make profits in the demo-funded account they will pay you a percentage of the demo profits.

Retail Prop Firm

• Trade a Demo
• Pay To Get Funded
• Easy To Get Funding
• Trade Online Anywhere

Traditional Prop Firm

• Trade Real Money
• Require Trading Track Record To Get Funding
• Hard To Get Funding
• Usually Trade In Office

Having a proven working strategy is the first step to getting funded. If you are a beginner who wants to try a prop firm challenge you need to backtest your strategy and then forward-test it on a live market with a small account thereafter if you are consistently profitable on a live market move to a prop firm.

A newbie who is a beginner to forex trading will find it difficult to jump straight to prop firm trading. You need to first build a profitable system trading personal funds before going into firms.

FTMO and The5%ers are the two most trusted prop firms. Not all prop firms have the same rules and structure, so it’s important to research and select a reputable prop firm. Look for firms with transparent rules, fair profit-sharing percentages, and positive reviews from other traders.

What to Consider When Choosing a Prop Firm:

• Offer MT5/4 Platform
• 80% to 100% Profit Split
• No Maximum Trading Days
• They Have Their Own Tech
• They Are The Liquidity Provider / Own Broker
• It Has Been Around For More Than 4 Years
• Have A Huge Community

The easiest way to do research on prop firms is by using Prop Firm Match, this tool will give you most of the info to look for in a prop firm. Then join the prop firm Discord channel to see if there are any complaints about the firm.

To get funded, you must pass the prop firm’s evaluation process. This usually involves demonstrating that you are a consistently profitable trader through a 1-step, 2-step, or 3-step challenge while following specific trading rules.

Tips to Pass a Prop Firm Challenge:

1. Understand the Rules: Know the firm’s profit targets, maximum drawdowns, and daily loss limits.
2. Stick to Your Strategy: Avoid changing your approach mid-challenge; trust your backtested methods.
3. Risk Management: Keep your risk per trade low (1% of account size) to stay within the limits.
4. Stay Calm Under Pressure: Challenges can be stressful, so maintain a clear and disciplined mindset

Once you have passed all the phases you will get a contract with the firm’s terms or service read it carefully then sign it. Once you are on the funded phase you will be paid an agreed-upon percentage of the profits you make.

Once funded, the next goal is to grow your account and get as many payouts as possible. Many firms offer scaling opportunities where traders who perform well receive additional capital.

How to Scale Up Effectively:

• Stay Consistent
• Avoid Overtrading
• Leverage Firm Resources

While prop trading can be highly rewarding, it also comes with significant risks. Being aware of these risks is important to long-term success.

Most retail firms require you to pay huge amounts to attempt their challenges. If you fail, you lose this money. First, compare the challenge fee with just using the money for a personal trading account to see if it’s worth it.

Prop firms impose strict risk management rules, such as maximum drawdowns and daily loss limits even risk exposure of not more than 1%. Breaking these rules can lead to losing funding.

A Prop Firm launches aggressive sales campaigns to attract traders, offering 50%–90% off evaluation fees. Within weeks of these campaigns, the firm shut down operations, blaming financial or regulatory challenges, leaving traders unpaid

That is why the first step is the most important so you won’t fall victim to scammy prop firms that will do rug pull.