If you’re new to trading, you may have heard the term prop firm floating around online communities, Discord groups, or YouTube. Many beginner traders ask: what is a prop firm in trading, and why are so many people using them?
In this guide, we’ll break it down in simple terms—what prop firms are, how they work, and why they’ve become a popular gateway for aspiring traders. Plus, we’ll show you how automation tools like PickMyTrade can give you a big edge in working with prop firms.
What Is a Prop Firm in Trading?
A prop trading firm (short for “proprietary trading firm”) is a company that lets traders use the firm’s capital to trade financial markets. Instead of risking their own money, traders get access to large funded accounts provided by the firm.
Here’s how it works:
- Step 1 – Evaluation: Traders usually go through a challenge or evaluation phase, proving they can trade profitably while following strict rules (e.g., daily loss limits, max drawdown, profit targets).
- Step 2 – Funded Account: Once they pass the evaluation, traders are given access to a funded account.
- Step 3 – Profit Split: Profits are split between the trader and the firm—common splits range from 70/30 to 90/10, depending on the prop firm.
This structure benefits both sides: the firm earns from skilled traders without trading themselves, while traders gain access to bigger capital than they personally own.
Why Do Traders Use Prop Firms?
- Low Personal Risk: You don’t need to risk thousands of dollars of your own money.
- Access to Larger Capital: A $100,000 funded account lets you scale strategies more effectively than a $5,000 personal account.
- Learning & Discipline: Prop firms enforce strict rules that help traders build discipline.
- Profit Opportunities: Even a 70/30 split on a large account can mean significant earnings.
For beginners asking what is a prop firm in trading, the key takeaway is that this firms give you resources and structure to trade professionally.
Challenges of Trading With a Prop Firm
Trading with a prop firm isn’t free money. There are strict risk management rules:
- Maximum daily losses
- Maximum overall drawdown
- Profit targets you must hit
- Time limits for evaluation phases
The pressure to pass challenges often causes traders to overtrade or make emotional decisions. This is where automation can help.
Automating Prop Firm Trading With PickMyTrade
Passing a prop firm challenge is as much about discipline as it is about strategy. Tools like PickMyTrade allow traders to:
- Automate Execution: Connect TradingView strategies or alerts to execute trades directly in prop firm accounts without delay.
- Stay Within Risk Rules: Automatically enforce stop-losses, max daily loss limits, and position sizing rules set by the prop firm.
- Trade 24/7: Futures and forex markets run nearly nonstop—automation ensures you don’t miss setups during off hours.
- Consistency: Eliminate emotional trading by letting rules, not feelings, control entries and exits.
If you’re working with prop firms, PickMyTrade can be the difference between failing a challenge due to human error and passing with consistent execution.
Click Here To Automate Prop Firm On Tradovate
Example: Automating a Prop Firm Challenge
Imagine you’re in a $50,000 evaluation with a 5% profit target and 4% max drawdown. You could:
- Use a tested strategy on TradingView (e.g., RSI + trendline breakouts).
- Connect it to PickMyTrade.
- Automate risk rules: 1% per trade, max 2 trades a day, stop trading after $1,000 in daily profit.
Instead of manually stressing over every trade, your system handles execution and risk automatically—keeping you inside prop firm limits.
Conclusion
So, what is a prop firm in trading? It’s a company that gives traders access to capital, lets them keep a share of profits, and enforces strict rules to encourage discipline. For beginners, it’s a way to scale faster without risking personal savings.
But trading manually in high-pressure trading firm challenges can lead to costly mistakes. That’s why more traders are using automation with PickMyTrade—to pass challenges, stay compliant with risk rules, and maximize profits once funded.
Ready to level up your prop firm journey? Start automating your strategies with PickMyTrade and trade smarter, not harder.
Disclaimer:
This content is for informational purposes only and does not constitute financial, investment, or trading advice. Trading and investing in financial markets involve risk, and it is possible to lose some or all of your capital. Always perform your own research and consult with a licensed financial advisor before making any trading decisions. The mention of any proprietary trading firms, brokers, does not constitute an endorsement or partnership. Ensure you understand all terms, conditions, and compliance requirements of the firms and platforms you use.
Also Checkout: Instant Funding or Evaluation Challenge
