What is a prop firm? Three firms' own words on 'funded'
What a prop firm is, how the fee, evaluation and funded stages work, and what FTMO, The5ers and Topstep say in their own wording about 'funded'.
A prop firm, short for proprietary trading firm, is a company that lets traders trade its capital, or a simulation of it, in exchange for a share of profit. In the retail version, the trader pays a fee for an evaluation, trades a simulated account under rules, and if they pass may be offered a funded account and payouts.
That is the short answer to what is a prop firm, in the shape most searchers meet it. The rest of this page is about one word in that funnel, “funded”, and what three of the best-known firms say it means in their own text. This desk read FTMO’s FAQ page, The5ers’ terms and conditions and Topstep’s beginner’s guide on 8 October 2026. The question is evergreen; the quotes are a dated reading, and any firm can rewrite its page.
What is a prop firm, and how does it work?
The retail model generally runs in four stages.
- The fee. The buyer pays a one-off price, set by account size and programme.
- The evaluation. A profit target to hit, loss limits not to breach, sometimes a minimum number of trading days. Breaking a rule ends the attempt.
- Verification and the funded stage. A pass leads to identity checks and a new account with its own rules.
- Payouts. Profit on the funded account can be withdrawn once the firm’s gates are met, at a stated split.
The gates in stage four are covered in our payout eligibility comparison, and whether the stage-one fee ever comes back is in our challenge-fee refund comparison.
What does “funded” mean? Three firms in their own words
Each cell is the firm’s own wording on the page named, as read on 8 October 2026.
| Firm and page | The evaluation | The “funded” stage | Where real money is named |
|---|---|---|---|
| FTMO, FAQ page notice and footer | Simulated, like every account | “All accounts we provide to our clients are demo accounts with fictitious funds and any trading is in a simulated environment only” | Not on the page read; the footer says FTMO companies “do not act as a broker and do not accept any deposits” |
| The5ers, terms and conditions | “A simulated training environment”; trading uses “Hub-designated fictitious funds” | A passed trader who clears the User Verification Process may be offered the chance to become a Professional User and “trade with Our trading capital” | The terms’ definitions read do not say whether that capital is live or simulated |
| Topstep, beginner’s guide (March 23, 2026) | The Trading Combine, “a real-time, simulated evaluation”; “no real money is at risk” except the fee | The Express Funded Account, which the guide calls a “Funded Evaluation”: “simulated trading, with real profits” | The Live Funded Account, where the guide says Topstep backs traders “with up to $150,000 in real money” |
Is prop firm money real?
On these three pages, the money in the evaluation is not. FTMO goes furthest: its notice covers every account it provides, and its footer describes the business as “simulated trading and educational tools for traders”. The5ers defines all Hub trading as simulated with fictitious funds, then promises its trading capital to Professional Users without saying, in the definitions read, what that capital is.
Topstep’s guide is the only one of the three that names a live stage, and it puts two funded stages in a row. The first, the Express Funded Account, is still simulated by the guide’s own description; real money appears at the Live Funded Account, which the guide says follows a call-up from its risk team or five payouts. The guide is a marketing post, not Topstep’s terms of use, so it is quoted here as Topstep’s description and nothing firmer.
A fourth firm, FundedNext, was planned for the table. Two terms-page addresses tried on 8 October 2026 returned 404, so its row is left out rather than filled from memory.
What does the fee buy?
An attempt. At Topstep, the guide says, a broken rule means “you can reset and try again”, and the only money at risk during the Combine is the evaluation fee. The5ers’ terms make the Professional User stage conditional on the User Verification Process, which can include identity documents and a video interview, so passing the trading rules is not the last gate. Profit splits apply only at the funded stage; Topstep’s guide gives up to 90%.
The marketing departments call this “getting funded”. The firms’ own small print mostly calls it a simulation, which is the more useful word to hold on to.
Frequently asked questions
How does a prop firm work?
A retail prop firm sells an evaluation for a one-off fee. The buyer trades an account under a profit target and loss limits; breaking a rule ends the attempt, and Topstep’s guide says a trader can then reset and try again. Passing leads to identity checks and a funded stage, where profit can be paid out at a stated split once the firm’s conditions are met.
Why do prop firms exist?
Traditional prop desks exist to trade the firm’s own money with in-house traders. The retail version answers a different demand: people who want to trade without risking a large sum of their own. Topstep’s guide pitches it in those terms, saying the buyer’s downside is limited to the initial fees. The fee is the one figure every buyer pays.
What is prop trading and how does it work?
Proprietary trading means a firm trading its own capital for its own profit, rather than executing orders for clients. Retail prop firms borrow the name: they let outside traders trade accounts the firm provides and share any profit. By the wording of FTMO and The5ers, those accounts are simulated during the evaluation, and FTMO says all of its accounts are.
An evaluation, not a job
Whether a firm’s model is an education product or a financial service is a question regulators are still asking, as our report on that line sets out; this post makes no claim that any of the three firms is regulated. The firms’ own sources are FTMO’s FAQ, The5ers’ terms and Topstep’s guide. A challenge fee buys an evaluation, not employment, and a buyer should price it as money they may not see again. Trading involves substantial risk of loss, and nothing here is financial advice.