A prop firm sells a paid evaluation on a simulated account and funds those who pass, paying a published share of gains. The quickest way to understand it precisely is by contrast, because the phrase gets used interchangeably with three other things it is not: a broker, an institutional trading desk, and the various services that sell trading signals or tuition.
Not a broker
A broker executes your orders in real markets using your own money, earns from commissions and spreads, and has no view on whether you make money. A prop firm owns the account, sets rules that can end it, uses simulated capital, and earns from evaluation fees as well as from the funded side. If you want market access with your own capital, a prop firm is the wrong product; if you want to trade a larger notional than you can fund, it is the product being sold to you.
Not an institutional desk
The institutional version of proprietary trading puts the firm's own capital at risk, employs the trader, negotiates the share privately and charges nothing to be considered. The retail version charges to be evaluated, simulates the account and publishes the share. The name is shared and almost nothing else is. This matters when reading marketing that borrows the prestige of the institutional model for a product with different economics.
Not a signal service or a course
A prop firm does not tell you what to trade and does not teach you to trade. The firms in this index publish rules and prices and nothing resembling advice, and this site carries no signal, strategy, indicator or copy-trading offer at all. If a service offers to pass an evaluation on your behalf, note that this breaches the published terms of every firm in this index, and it is not something this site lists or links to.
Questions people ask about what's a prop firm
What's the catch with prop firms?
There is no catch so much as an economic structure worth understanding: fees are certain revenue and payouts are not, which is why the loss limit is the term to read first rather than the split.
Can you lose money with a prop firm?
You can lose the fees you pay, and the reset fees if you restart. Because the accounts are simulated, you are not exposed to trading losses beyond what you have paid the firm.
Are prop firms regulated?
The firms in this index are not offering a regulated investment product on the basis that the evaluation is simulated and the firm is not a counterparty to a retail derivative. This site covers US futures and simulated evaluations only. Nothing here is legal advice.