📚 Lessons
1. What is a prop firm?
A proprietary trading firm provides traders with access to the firm's capital to trade financial markets in exchange for a share of profits. Traders pay for an evaluation, and upon passing, manage a funded account while adhering to strict risk management rules. This eliminates the need for traders to risk their own money while still participating in real market opportunities.
2. The four types of prop firms
Four types — Institutional Prop Firms (large financial institutions with in-house trading desks), Retail Prop Trading Firms (online firms offering funded accounts through evaluation challenges), In-house Prop Firms (companies trading their own proprietary capital), Remote Prop Trading Firms (firms where traders work entirely remotely after passing evaluations — most common model today).
3. The evaluation process
1-step evaluation (one profit target phase — fastest path to funding), 2-step evaluation (Challenge phase + Verification phase for consistency testing), Instant funding (skip evaluation for a fee — higher monthly cost). Typical targets: 8-10% profit gain. Typical drawdown limits: 4-10% daily/overall. Minimum trading days typically required: 5. Breaching drawdown rules or going inactive resets the account.
4. Profit splits explained
Starting splits typically 70-80% to the trader. Scales to 90-95% with performance milestones. Some firms offer 15% profit during the evaluation phase. Applies only to gains — losses do not trigger a split back to the firm.
5. Drawdown rules — static vs. trailing
Static drawdown — fixed threshold from starting balance, does not move as account grows. Trailing drawdown — moves up as account equity grows, locking in a floor. Once you hit a high watermark, your floor rises with it. More restrictive than static. Daily loss limit — separate from overall drawdown. Breach either one and the account is reset.
6. Payout speed & buffers
Ranges from same-day (rare, usually crypto) to bi-weekly (most common, 1-2 day processing via ACH or wire). Buffers prevent early withdrawals — common requirements: 5 winning days minimum, minimum profit threshold met. Faster payout speeds come with stricter account requirements.
7. How to evaluate a prop firm
Rule Clarity — look for unambiguous conditions on account termination, worked examples of drawdown failure, clear calculation methodology. Reliability — focus on payout mechanics not headline percentages. Operational Transparency — whether challenges are live or simulated, what happens during disputes. Red flags: retroactively changing termination rules, inconsistent answers about operational details, buried fine print.
8. AIPropFirm — your virtual firm
AIPropFirm is TradeFib's built-in virtual prop firm experience. You can simulate evaluation challenges, practice within drawdown rules, get coached by Peter, and validate strategies with Atlas — all without risking real capital. It is a simulated educational environment. All accounts and results are virtual.