Prop Trading: The Complete Guide to Funded Trading

What is a proprietary trading firm?

A proprietary trading firm — a "prop firm" — is a company that funds traders with its own capital and shares the resulting profit. Instead of risking a large amount of your own money, you trade the firm's money and keep the bigger share of what you make. It solves the biggest problem most skilled traders have: not enough capital to make their edge meaningful.

The modern retail version works through an evaluation: you pay a fee to take a challenge that proves you can trade responsibly, and passing it earns you a funded account.

How does a prop firm work?

The path is the same at almost every firm, and it has four stages:

• Buy a challenge — choose an account size and pay a one-time fee.
• Pass the evaluation — reach a profit target without breaching the drawdown rules.
• Get funded — you're given a funded account to trade the firm's capital.
• Get paid — you withdraw your share of the profit on a regular basis.

At LEVAFX, for example, the evaluation is two steps, there's no time limit and no minimum trading days, and funded traders keep up to 90% of profit, paid in crypto.

The challenge (evaluation) explained

A prop firm challenge is a test with a profit target and risk limits. Reach the target without breaking the limits and you pass. Many firms use two phases: a first phase with a higher target, and a shorter second phase that confirms the result wasn't luck.

LEVAFX uses an 8% target in Phase 1 and a 5% target in Phase 2. You can work out the exact dollar figures for any account size with the free calculator below.

Prop firm rules: drawdown & targets

Two rules matter more than any other, because breaking them ends the account:

• Maximum overall drawdown — the lowest your balance can fall before the account fails (commonly 10%).
• Maximum daily drawdown — the most you can lose in a single day (commonly 5%).

Here's how the typical LEVAFX rules look on a $25,000 account:

Good firms keep the rulebook short and fixed. Watch out for firms with long lists of extra restrictions, or rules that can change after you've made the money. At LEVAFX the rules are locked at the moment you buy, and there's no minimum-days or time-limit rule.

Profit split & payouts

The profit split is the percentage of your profit you keep. Modern firms offer 80–90% to the trader. Just as important is how you get paid: bank transfers can be slow or blocked in many countries, which is why crypto payouts have become a major advantage. LEVAFX pays in USDC/USDT, worldwide, and every withdrawal comes with its blockchain transaction hash so you can verify it yourself.

How to choose a prop firm

Judge any firm on these five things — they decide your actual experience:

• Payouts — how, how fast, and can you verify them?
• Rules — time limits, minimum days, and which strategies are allowed?
• Profit split — how much do you keep?
• Transparency — is it a registered company with a named team?
• Proof — is there evidence of real traders being paid?

Comparing against a specific firm? See our honest FTMO alternative guide.

How to pass a prop firm challenge

Passing is less about big wins and more about survival. Three habits do most of the work:

• Risk small — most consistent traders risk 1–2% per trade, so a losing streak never ends the account.
• Be patient — take only your planned setups; overtrading is what breaks challenges.
• Protect the drawdown — treat your loss limit as the one line you never cross.

Because LEVAFX has no time limit, you're never forced to overtrade to beat a clock — which makes disciplined trading far easier.

Are prop firms legit, and how do they make money?

Reputable prop firms are legitimate businesses. They earn from two sources: challenge fees, and their share of funded-trader profits. Because most people don't pass the evaluation, fee revenue is a big part of the model — which is exactly why it matters to pick a firm that genuinely pays the traders who do succeed. The strongest signals of a real firm are a registered legal entity, clear written rules, a named founder, and verifiable payouts. LEVAFX is operated by LEVAFX LTD (registered in England & Wales, No. 17355265) and publishes on-chain-verifiable payouts for exactly this reason. You can read the full story on the founder's page or get straight answers on the FAQ.

Frequently asked questions