What Is Prop Trading and How Does It Work?

For futures traders looking to scale their strategies without committing large amounts of personal capital, proprietary (prop) trading can be an attractive path forward. In this model, traders access capital from a firm, trade on the firm’s behalf, and share in the profits based on performance. 

In this guide, we’ll walk through the basics of how prop trading works, what to expect when working with a prop firm, and how a specialized trading platform like Tradovate Prop can help support every stage of your prop trading journey. 

What is prop trading?

Prop trading refers to a structure where traders use a firm’s money—not their own—to place trades in the market. Proprietary trading firms evaluate candidates through performance-based challenges in real-time simulated accounts. Once a trader meets the firm’s criteria, they receive access to a funded account and may be able to earn a share of the profits generated. 

Because traders aren’t trading with their own capital, risk is more controlled—and the focus shifts to performance, consistency, and discipline. 

How prop trading works

While each prop trading firm may operate slightly differently, most models follow a similar framework: 

1. Evaluation phase: Traders begin with an assessment or simulated trading challenge. Firms typically look to evaluate a trader’s profitability, risk management, and adherence to specific trading rules. 
2. Sim funded trading: Many firms offer a simulated funded phase where traders can earn payouts based on performance. Accounts operate in real time, and consistent profitability during this stage may lead to access to a live funded account. 
3. Funded trading: After passing the evaluation, traders receive a live funded account backed by the firm’s capital. From here, they can trade in live markets, often with daily or monthly risk controls in place. 
4. Profit sharing: Profitable trades result in a split between the trader and the firm. Exact ratios vary, but many models offer a majority share to the trader. 
5. Ongoing compliance: To remain funded, traders must continue to follow the firm’s risk parameters. Consistent performance often leads to access to more capital and greater profit potential. 

Why futures traders choose prop trading

Prop trading is especially well-suited for the futures market. With its high liquidity and capital efficiency, futures trading rewards traders who bring strong discipline and strategy. Some of the key benefits of prop trading for futures traders include: 

• Access to capital: You can scale up your strategies without needing to front large amounts of personal capital. 
• Limited personal risk: Unlike trading personal accounts, the downside is typically limited to the cost of the evaluation or platform fees. 
• Risk management structure: Built-in rules can help you develop disciplined habits and protect against overexposure. 
• Merit-based progression: You can grow your trading opportunities based on your performance, not your account size. 

A dedicated platform for the prop trading journey

To trade at a high level within prop firm environments, having the right trading platform is essential. Designed to meet the requirements of multiple prop firms and support traders throughout their journey, Tradovate Prop is the #1 platform for prop trading, providing powerful tools to help you perform, pass, and get funded: 

• Integrated TradingView charts for fast, intuitive trade execution 
• Bracket orders with stop loss/take profit at entry, helping you manage trades within firm rules 
• Advanced risk management tools to help you avoid violations and protect your funded status 
• Powerful order flow insights, including Footprint and TPO charts 
• Market Replay and Pulse indicators to help improve your strategy development 
• Flexible access across mobile, web, and desktop for multi-firm and multi-account trading 
• Built-in group trading features to help you manage multiple prop firm accounts seamlessly 

Whether you're in the evaluation stage or managing multiple funded trading accounts, Tradovate Prop moves with you—helping you stay compliant, efficient, and focused. Keep the tools and performance you love, no matter which firm(s) you trade with or how your journey shifts. 

What to look for in a prop trading setup

Succeeding in prop trading isn’t just about selecting the right firm—it also depends on the tools you use every day. When evaluating your setup, consider: 

• Does your platform support firm-specific rules and risk parameters? 
• Can you manage multiple accounts or firms from a single interface? 
• Are the tools designed for fast execution and deep market insight? 
• Is the platform adaptable as your trading strategy evolves? 

With Tradovate Prop, you get a purpose-built platform engineered for exactly these needs, enabling smoother execution, more informed decision-making, and tighter alignment with prop firm expectations. 

Explore a smarter way to trade prop capital with Tradovate

Proprietary (prop) trading can open the door to opportunities for futures traders who want to trade with greater capital, structure, and support. With the right platform in place, you can better position yourself to pass evaluations, stay funded, and sharpen your strategy over time. 

Tradovate Prop brings together everything you need to trade prop firm capital with control and confidence. Explore the platform today and see how it can help power your prop trading performance.