A prop firm, short for proprietary trading firm, is a company that pays traders for the profits they generate without asking them to fund a trading account of their own. You bring the trading; the firm brings the account, the rules and the payout process.
That one definition covers two very different businesses. The original prop firms were trading desks that hired traders to trade the firm's own money. The prop firms you'll find online today mostly work on an evaluation model: you pay a fee, prove you can hit a profit target without breaking the risk rules, and then earn payouts from a funded account. Many of these firms, Vanquish included, run every account in a simulated environment using live market data, which is why the model is often called sim-to-fund trading.
This guide walks through how prop firms work from the first evaluation trade to the first payout, the rules that decide who gets funded, what it costs, and how to tell a well-run firm from one that's set up to keep your fees.
How prop firms work
At an evaluation-based prop firm, you never deposit a trading balance. You pay for access to an account of a set size, trade it under published rules, and get paid from the profits once you've shown you can manage risk. The process almost always follows the same five steps.
- Choose a plan and account size. Firms offer several account sizes, often from $10,000 to $150,000 or more. The fee rises with the account size, and plans differ in their rules.
- Trade the evaluation. You need to reach a profit target without letting your equity fall to the loss limit. Futures firms often call this stage a trading combine, while others call it a challenge or simply an eval.
- Get a funded account. Pass, and the firm gives you a new account to trade under similar rules. At Vanquish it's called a Performance Account, and it starts fresh at the plan's starting balance.
- Request payouts. Profits on the funded account can be withdrawn once you meet the firm's payout conditions, such as a minimum amount or a set number of trading days.
- Breach, reset, or keep going. If your equity touches the loss limit, the account closes. You can reset or buy a new evaluation and start again.
The funded account is where the money is made, so it's worth understanding how a funded trading account works before you pick a firm. The evaluation is the gate in front of it.
How do prop firms make money?
Evaluation-based firms are funded mainly by the fees traders pay for evaluations, subscriptions and resets. Payouts go to the traders who stay within the rules. That's why a firm's rules matter so much: they're how the firm controls risk on the accounts it pays out from, and they're where a badly designed firm can quietly tilt the odds against you.
Traditional prop firms vs evaluation-based prop firms
"Prop trading" started on Wall Street. Banks and independent trading houses kept desks that traded the firm's own money for the firm's own profit, rather than executing orders for clients. Banks largely stepped back after the Volcker Rule restricted proprietary trading at banking entities, but independent prop shops still exist. They recruit traders, train them, and pay a salary or draw plus a share of the profits.
The firms that show up when you search "prop firm" today are a different model. Anyone can sign up online, there's no interview, and you prove yourself through an evaluation rather than a résumé.
Traditional prop firm | Evaluation-based prop firm | |
|---|---|---|
How you get in | Application, interviews, often a licensing exam | Buy an evaluation online |
What you put in | Your time; some shops ask traders to contribute capital | A monthly or one-time fee |
Where trades happen | In the markets, with the firm's money | Usually a simulated account using live market data |
How you're paid | Salary or draw plus a profit share | Payouts from funded-account profits |
What you can lose | Your job, and any capital you contributed | The fee you paid |
Who sets the rules | Your risk manager, case by case | Published rules that apply to every account |
The evaluation model's biggest advantage is access. A trader with a sharp read on QQQ but a small personal account can trade a $100,000 account for the price of a monthly fee. The trade-off is that the rules are fixed and enforced automatically; there's no risk manager to talk you out of a breach.
The rules that decide who gets funded
Every evaluation is a test of two things at once: can you make money, and can you avoid losing too much on the way. The details differ from firm to firm, but almost every evaluation is built from the same handful of rules. Here's how each one works, using a $50,000 account on the Vanquish Basic Options plan as the example.
Profit target
The profit target is the gain you need to pass, set as a percentage of the starting balance. On a $50,000 Basic Options account the target is 10%, so you need $5,000 in profit. At Vanquish only closed trades count. If your NVDA calls are up $5,400 but still open, you haven't passed until you sell them.
Maximum drawdown and the loss limit
The maximum drawdown is how far your equity can fall before the account is breached. On that $50,000 account it's 5%, which puts the starting loss limit at $47,500.
Most prop firms use a trailing drawdown, which means the loss limit follows your highest equity upward and never moves back down. Say your open NVDA calls lift equity to $51,200 mid-morning. The limit rises to $48,700. If the trade fades and you close at $50,400, the limit stays at $48,700, so you now have $1,700 of room instead of $2,500. Whether open profit counts depends on the plan, and the difference between intraday and end-of-day trailing drawdown can make the same trade safe on one plan and a breach on another.
This is the rule to respect above all others. Touch the loss limit once and the account is breached, no matter how close you were to the target.
Consistency rule
A consistency rule stops one lucky trade or day from doing all the work. On Basic Options your best trade must be below 30% of your total profit. Hit the $5,000 target with a single $1,800 TSLA put trade in the mix and that trade is 36% of your profit. You aren't breached; you simply keep trading until total profit is above $6,000 and the share drops below 30%. Other plans apply the consistency rule to your best day instead of your best trade.
Minimum trading days or trades
Some plans require a minimum amount of activity before you pass, so a single good afternoon can't carry an evaluation. Basic Options asks for 10 trades during the Evaluation; Advanced Options asks for 4 trading days. Like consistency, falling short just means you keep going.
The rules that differ most between firms
This is where prop firms separate. Some add a daily loss limit on top of the maximum drawdown, a deadline to pass, restrictions on trading around news, or caps on position size. Others change rules or apply unpublished ones at payout time. Vanquish has no daily loss limit and no time limit on any plan; the main daily rule is that every position closes by 3:59 p.m. ET. Before you buy anywhere, read the full rulebook and check that it's all published up front, which is the whole point of a prop firm with no hidden rules.
Passing is mostly a matter of sizing positions so that one bad trade can't reach the loss limit. That habit does more for passing a prop firm evaluation than any entry signal.
How prop firm payouts work
Once you're funded, the question shifts from "can I pass?" to "how and when do I get paid?" Payout terms vary more between firms than almost anything else, and they're worth comparing before you buy an evaluation, not after you pass one. Look at five things:
- Profit split: the share of profits you keep. Many firms keep a cut; Vanquish pays a 100% split.
- Minimum and cap: the smallest payout you can request and any ceiling on how much you can take out.
- Frequency: how often you can request a payout, from daily to every few weeks.
- Speed and method: how long requests take to process and how the money reaches you.
- Conditions: any trading days, consistency checks or balance thresholds you must meet first.
At Vanquish, payouts are requested on the Vanquish dashboard during market hours, with a $250 minimum and no cap. They take about 15 minutes on average, or up to two business days if a request is reviewed, and they're paid through Rise. Frequency is where the plans differ: Basic Options and Rapid Express pay out daily, Rapid Elite every 3 trading days in practice, and Advanced Options every 4, so check the Vanquish payout rules for the plan you're considering.
Why the Buffer matters for payouts
A payout lowers your balance, but the trailing loss limit doesn't move down with it. Take money out too early and you can leave yourself very little room. That's what the Buffer is for. On a Vanquish Performance Account, once equity reaches 5.75% above the starting balance, the loss limit locks for good.
On a $50,000 Basic Options account, the Buffer is $52,875 and the limit locks at $50,375. Withdraw $2,000 at that point and your balance is $50,875, still $500 above a limit that will never rise again. Reaching the Buffer isn't required before a payout, but waiting for it is the safer path, since the Buffer rule is what turns a moving loss limit into a fixed one.
It also helps to know which rules belong to which stage. The Buffer applies only to the funded account, and your profit doesn't carry over when you move from an Evaluation to a Performance Account.
What a prop firm costs
The headline fee is only part of the price. Before comparing firms, add up everything you'd pay to get from your first trade to your first payout:
- The evaluation fee. Some firms charge once; others bill monthly until you pass, and some keep billing on the funded account. The fee scales with account size.
- Resets. If you breach, a reset puts you back at the starting balance for less than a new evaluation. Check whether resets are unlimited and whether you have to wait for a billing date to use one.
- Activation or funded-account fees. Some firms charge a separate fee once you pass.
- Platform and data fees. A few firms bill these separately.
Vanquish bills monthly, and the fee continues on the Performance Account while it's active. Resets cost roughly half the monthly fee, are unlimited, and can be used right away on a breached Evaluation without changing your billing date.
The real cost of a prop firm is the fee multiplied by the number of attempts it takes you to pass and stay funded. A cheaper evaluation with a tight daily loss limit can cost more over time than a pricier one with rules that suit how you trade.
Futures, forex and options prop firms
Prop firms usually specialize in one market, and the market shapes the rules.
Futures prop firms are the most common in the US. Traders work contracts such as the E-mini S&P 500 and Nasdaq-100, and the evaluation is often called a combine. Rules are usually written in dollars and contracts: a set drawdown in dollars and a cap on how many contracts you can hold.
Forex and CFD prop firms grew up mostly outside the US and often use a two-phase challenge with separate targets for each phase. If you've traded with one, comparing FTMO and Vanquish Trader shows how differently a forex firm and an options firm set their rules.
Options prop firms are rarer. Only a handful of prop firms support options trading, because options don't behave like a straight price bet. A position's value depends on time to expiration and implied volatility as well as direction, so a firm has to decide which strategies to allow. Buying calls or puts has defined risk: the most you can lose is the premium you paid. Selling options and running multi-leg trades bring different risk profiles, so firms that allow them usually do so on a separate plan.
That's how Vanquish is set up. On Basic Options, Rapid Express and Rapid Elite you buy calls and puts on any ticker, whether that's a long call on PLTR ahead of earnings or same-day puts on SPX. Advanced Options adds Level 4 strategies such as vertical spreads, straddles and the iron condor, with SPX, XSP and VIX limited to buying single-leg calls and puts.
Is a prop firm worth it?
It depends less on the firm than on whether you already trade with a plan. A prop firm won't teach you an edge, but it can give a trader who has one a much larger account to apply it to.
What works in your favor
- Capped downside. The most you can lose is the fee or reset, never a trading balance of your own.
- A bigger account. A strategy that makes $300 on a $5,000 personal account can make far more on a $100,000 one at the same percentage.
- Built-in discipline. A hard loss limit forces the position sizing many traders know they should use and don't.
- Fast feedback. You find out in weeks, not years, whether your approach holds up under fixed rules.
What works against you
- Fees add up. Monthly billing and repeated resets can cost more than you planned if you keep breaching.
- The rules are strict. One oversized AMD trade on a volatile morning can end an account that was almost through.
- It isn't a salary. Payouts come only from profits, so income is irregular by design.
- Firms vary in quality. Some change rules, delay payouts or hide conditions in the fine print.
How to choose a prop firm
Run any firm, including us, through these checks before you pay:
- Are all the rules published in one place, including the payout conditions?
- Does the drawdown type suit your style? Intraday trailing punishes trades that run up and then fade; end-of-day trailing gives open positions more room.
- Is there a daily loss limit or a deadline that would force you to trade differently?
- What's the profit split, payout minimum and payout frequency, and how fast are payouts processed?
- What do traders say about getting paid? Independent reviews tell you more than a firm's own claims, and that goes for Vanquish Trader reviews too.
- Can you trade the instruments and strategies you actually use?
How Vanquish Trader works
Vanquish is an options-only, sim-to-fund prop firm. Every plan has two stages, an Evaluation and then a funded Performance Account, and all trading is simulated using live market data on DxTrade, which runs on web, iOS and Android. There are four plans, each with its own set of rules, and they differ mainly in how much room you get and how strictly consistency is measured.
Rule | Basic Options | Advanced Options | Rapid Express | Rapid Elite |
|---|---|---|---|---|
Profit target | 10% | 10% | 9% | 9% |
Maximum drawdown | 5% | 5% | 3% | 3% |
Drawdown type | Intraday trailing | End-of-day trailing | Intraday trailing | End-of-day trailing |
Consistency rule | Best trade below 30% of total profit | Best day below 30% of total profit | None | Best day below 50% of total profit |
Payout frequency | Daily | Every 4 trading days | Daily | Every 3 trading days (in practice) |
What you can trade | Long calls and puts | Level 4 options | Long calls and puts | Long calls and puts |
A few rules hold across every plan. There's no daily loss limit and no time limit. Every position closes by 3:59 p.m. ET, there's no margin, and nothing is held overnight. Payouts carry a 100% profit split, a $250 minimum and no cap.
If you want the fastest route with no consistency rule, Rapid Express pairs a 9% target with a 3% intraday trailing drawdown. If you trade spreads or iron condors, Advanced Options is the only plan that allows them. For everyone in between, picking a Vanquish plan comes down to how often you trade and how much room you need.
Prop firm FAQs
Are prop firms legit?
The model is legitimate, but quality varies widely. A trustworthy firm publishes every rule up front, processes payouts on the schedule it advertises, and has a public track record you can check. Be wary of firms with vague payout conditions or rules that only appear when you request a payout.
Do you need a license to trade at a prop firm?
Not at an evaluation-based firm. You're trading an account the firm provides, not handling client money, so no exam is required. Traditional prop firms that are registered broker-dealers generally do require traders to pass a FINRA licensing exam such as the Series 57.
Can you lose more than the evaluation fee?
No. You never deposit a trading balance, so a breach costs you the account and whatever you paid for it, nothing more. On a monthly plan, keep in mind that billing continues until you cancel.
How long does it take to get funded?
As long as it takes you to hit the target within the rules. Some firms set a deadline; Vanquish doesn't, and minimum activity is light, so a trader who reaches the target on a Rapid Express plan with a few well-sized trades on META or the crypto-linked COIN could pass in days. Without a clock running, there's no reason to force trades to get there sooner.
How much can you make with a prop firm?
There's no fixed income. Payouts depend entirely on your profits, the account size and the firm's split. With a 100% split, a 2% month on a $100,000 Vanquish Performance Account is $2,000 you can request as a payout, while a losing month pays nothing.
What happens if you fail a prop firm evaluation?
The account closes, and you can reset it or buy a new one. At Vanquish, a breached Evaluation can be reset immediately on the same plan and size. A breached Performance Account also closes, and resetting it starts a new Evaluation. Plans can't be switched, so trading a different plan means buying a new account.
Getting started with a prop firm
A prop firm gives you a bigger account and a clear set of rules; what you do with them is up to you. If you trade options and want rules you can read in full before your first trade, compare the four Vanquish plans and pick the one that fits how you already trade.
