So you want to know how to start a prop firm? Well, it’s not that complicated. A prop firm basically lets traders use company money instead of their own. Trader trades, firm provides capital, profits go to both.
If you’re planning to start one yourself, the process can feel confusing at first, but this guide will walk you through it step by step.
Step 1: Understand What a Prop Firm Is
A prop trading firm gives traders company funds to trade forex, stocks or futures. The goal is simple: make money. The firm benefits by taking a percentage of that money.
For example, if a trader makes $10,000 and the firm has a 70/30 split, the trader gets $7,000 and the firm gets $3,000.
This model works well because:
- Traders don’t need large personal capital.
- Firms grow by giving more traders opportunities.
- It creates a win-win for both.
Step 2: Choose the Business Model
There are different types of prop firm models. Before you start, decide how your firm will work:
- Evaluation Model (Challenge-Based):
Traders first complete a challenge by hitting profit targets under certain rules. If they pass, they get funded.
Example: Many firms require 8-10% profit in Phase 1 and 5% in Phase 2. - Direct Funding Model:
Traders pay a higher fee but skip the challenge. They start trading live accounts right away. - Hybrid Model:
Combines both — offering challenges and direct funding options.
Most new prop firms start with the challenge-based model, as it is more popular and helps the firm filter skilled traders.
Step 3: Legal and Regulatory Requirements
Running a prop firm involves handling money, so making sure everything is legal is key.
- Register your business in a country that recognizes and supports trading firms.
- Talk to a lawyer about compliance, tax laws, and any other regulations you need to follow.
- Set up clear terms and conditions for traders to avoid confusion later.
- Be transparent with payouts so traders know exactly what to expect.
Doing these things not only keeps your business protected but also helps build long-term trust with traders.
Step 4: Build the Technology Setup
Technology is the backbone of any prop firm. You will need:
- Trading Platforms (MT4, MT5, cTrader)
- Risk Management System (to monitor trades and prevent large losses)
- Payment Gateways (for deposits and withdrawals)
- CRM & Dashboard (so traders can track their progress)
Partnering with a good liquidity provider and server hosting company is also essential for fast execution.
Step 5: Set Rules and Risk Management
To protect company capital, you need clear trading rules. Examples include:
- Daily drawdown limit (e.g., 5%)
- Overall drawdown limit (e.g., 10%)
- No over-leveraging
- No news trading or copy trading (depends on your policy)
These rules keep traders disciplined and ensure your firm doesn’t lose money due to reckless strategies.
Step 6: Marketing and Attracting Traders
A prop firm is nothing without traders. You need a strong marketing plan:
- Build a professional website.
- Run social media ads (Facebook, Instagram, YouTube).
- Offer attractive profit splits (e.g., 80/20 or 90/10).
- Show proof of payouts to gain trust.
The more traders you attract, the faster your firm will grow.
Step 7: Provide Support and Payouts
Customer support is crucial. Traders need quick help regarding rules, platforms, and withdrawals. Always pay traders on time. A single bad review about delayed payouts can damage your firm’s reputation.
Make the payout process simple, reliable, and transparent.
Bonus Tip: Passing Funded Accounts with Finrisen
Starting a prop firm is a big project, but what if you are a trader who simply wants to pass a funded account challenge instead? This is where Finrisen comes in.
👉 Finrisen is one of the best services for prop firm challenge passing and funded account management. Their team of professional traders has years of experience, and they provide a 90% success rate in passing challenges.
Why Finrisen?
- Experts handle your challenge account.
- Proven strategies with risk management.
- Fast completion (most challenges passed in 5–20 days).
- Options for account recovery if you are in loss.
If your goal is not to start a prop firm but to become a funded trader quickly, then Finrisen is the best solution. You can check their services here:
👉 Visit Finrisen Service Page
Conclusion
Starting a prop firm requires planning, legal setup, technology, and strong marketing. It is a competitive business, but with the right model and trustworthy reputation, you can succeed.
And if you’re on the trader’s side, wanting to pass a funded account challenge, don’t waste time — Finrisen is the best and most reliable option. They help traders get funded accounts and grow consistently.
