A proprietary (prop) trading firm gives traders access to the firm's capital, usually after they pass a paid evaluation or challenge. The trader keeps a share of the profits but must follow strict rules — especially daily loss limits and a maximum drawdown — or the account is failed. Prop accounts reward disciplined, risk-first trading far more than aggressive bets.
A challenge might allow a 5% daily loss and 10% maximum drawdown on a $50,000 account. Risking just 0.5–1% per trade keeps you safely inside those limits.
This definition is for educational purposes only and is not financial advice. Trading involves risk.