Prop Trading vs. Funded Trading Accounts: Which One is Better?

For traders looking to build a professional career in financial markets, two major pathways dominate the industry: proprietary trading and funded trading accounts. Both provide traders access to capital, allowing them to trade larger positions without putting significant personal funds at risk. However, these models operate under different structures, impose distinct rules, and offer varying levels of support and long-term opportunities. Understanding these differences is essential for traders looking to determine which option best aligns with their trading goals, risk tolerance, and experience level.

This article provides a detailed comparison of proprietary trading and funded trading accounts, covering how each works, their advantages and disadvantages, and the key factors traders should consider when choosing between them.

What is Proprietary Trading?

Proprietary trading, often referred to as prop trading, is a model where a trading firm allocates its own capital to traders. Instead of trading client funds, prop firms invest directly in the markets, and traders share a percentage of the profits they generate. This setup allows skilled traders to leverage firm capital without needing a large personal investment.

How Proprietary Trading Works:

• The trader is provided with firm capital to execute trades on behalf of the firm.
• Profits are split between the trader and the firm, typically in the range of 70-90% for the trader.
• Many firms require traders to undergo a training program or an assessment period before granting access to full capital allocation.
• The firm enforces strict risk management guidelines to protect its capital.
• Some proprietary trading firms require a capital contribution or training fee, while others provide full funding without requiring upfront costs.
• Some firms operate remotely, allowing traders to work from anywhere, while others require traders to work from an office.

Examples of Proprietary Trading Firms:

• Maverick Trading – Specializes in forex and options trading, providing structured training and risk management strategies.
• T3 Trading Group – Focuses on equities trading with both remote and in-office opportunities.
• SMB Capital – Well-known for its emphasis on trader development through education and structured programs.

What is a Funded Trading Account?

Funded trading accounts, often provided by third-party companies, allow traders to access capital after passing an evaluation process. These programs test a trader’s ability to meet specific profit targets while adhering to strict risk management criteria. Once a trader successfully completes the challenge, they gain access to a funded account and can keep a portion of their profits.

How Funded Trading Accounts Work:

• Traders must pass a challenge or evaluation process that includes specific profit targets and drawdown limits.
• There is an upfront fee to take the evaluation, and failure means paying again to retry.
• If successful, traders receive a funded account with profit-sharing agreements.
• Most programs have strict trading rules, including daily and maximum drawdown limits, profit targets, and restrictions on holding trades overnight or over the weekend.
• Some firms prohibit traders from holding positions during high-impact news events.
• Funded accounts do not offer long-term career growth; traders must consistently meet performance criteria to retain access to funding.

Examples of Funded Trading Programs:

• FTMO – A well-established firm in the forex and CFD space with a structured evaluation model.
• TopStep – Specializes in futures trading with multiple scaling plans

Key Differences Between Proprietary Trading and Funded Trading Accounts

Feature	Proprietary Trading	Funded Trading Accounts
Capital Allocation	Firm provides capital based on trader performance	Traders must pass an evaluation challenge
Profit Split	Trader typically keeps 70-90% of profits	Trader often keeps 75-90%, but some firms take more
Risk Management	Firm-imposed risk parameters with structured oversight	Strict evaluation limits and daily drawdowns
Upfront Cost	Some firms require training fees or capital deposits	Traders pay for an evaluation challenge and must pay again if they fail
Career Growth	Traders can scale up capital allocation with consistent performance	No long-term career path, just access to capital
Coaching & Support	Many firms provide mentorship and professional development	Little or no coaching support
Flexibility	Some firms operate remotely, while others require in-office trading	Most funded programs allow remote trading
Best For	Traders looking for structured growth and professional mentorship	Traders seeking short-term capital without firm commitment

Pros & Cons of Each Model

Pros of Proprietary Trading

✅ Advantages of Prop Trading

No upfront evaluation fee for some firms.

Ability to scale up capital allocation based on performance.

Professional trading environment with mentorship.

Structured risk management to protect traders.

Long-term career growth potential.

Some firms operate 100% remotely and do not require work in-office.

Cons of Proprietary Trading

❌ Disadvantages of Prop Trading

Some firms require an initial capital contribution or training fee.

Traders must follow firm-imposed strategies and risk limits.

Some firms require traders to work in-office instead of remotely.

Pros of Funded Trading Accounts

✅ Advantages of Funded Trading Accounts

Low initial commitment—traders only pay for an evaluation.

No need to deposit or risk personal funds.

High profit splits for successful traders.

Flexibility to trade multiple programs at once.

Cons of Funded Trading Accounts

❌ Disadvantages of Funded Trading Accounts

Challenge fees can add up if a trader fails multiple times.

Strict risk management rules that can be difficult to follow.

Some firms have payout restrictions and hidden fees.

No long-term career path—funded accounts are short-term opportunities.

Final Thoughts: Which Model is Better?

Both proprietary trading and funded trading accounts provide traders with opportunities to access capital, but they cater to different types of traders.

Proprietary trading is best for those looking to develop a structured career in trading with access to firm support, risk management tools, and professional education. It offers a pathway for traders to scale up their capital allocation and build a long-term career in financial markets.

Funded trading accounts, on the other hand, are more suited to traders who prefer short-term opportunities without committing to a firm structure. They allow independent traders to access capital after proving their skills through a challenge but come with strict risk management constraints and no clear career path.

Ultimately, choosing between proprietary trading and funded trading accounts depends on your goals, experience level, and preferred work style. If you value professional growth, mentorship, and structured risk management, proprietary trading is the ideal choice. If you prefer flexibility, short-term funding, and independent trading, a funded trading account may be a better fit.

Take time to assess your trading strengths and financial goals before committing to either model. By understanding the advantages and challenges of both options, you can make an informed decision that aligns with your career aspirations in trading.