# How do proprietary trading firms make money? Understand the operating logic in one article.

What is the biggest difference between proprietary trading firms and regular brokers? **They trade with their own money, bear the losses themselves, and keep the profits.** This is why these companies can thrive - their interests are completely aligned.

# # Core Operating Model

Self-operated companies usually play like this:

**Step 1: Recruit Traders**
New traders need to prove their ability to consistently make profits through evaluations (usually simulated account tests). An example of such an examination is FunderTrading's "TrueEdge Challenge."

**Step 2: Fund the Account**
After passing the test, the company gives you real money to operate, with account sizes starting from $5,000, and excellent performers can earn over $500,000.

**Step 3: Distribute Money**
This is key - profits are distributed proportionally. Beginners usually start at 50/50, and if they perform well, they can rise to 80/20 or even 90/10 (with traders taking the larger share). Many companies let traders keep the first $6000 in profits, and only then do they split the account.

# # Why should traders join?

1. **Leverage + Capital**: If you don't have hundreds of thousands, the company provides it for you, which is equivalent to directly skipping the original accumulation.
2. **Technical Support**: Full support for MT4, real-time data, and algorithmic trading tools.
3. **Banding Together for Warmth**: Training, mentorship, trading room discussions, reducing learning costs

# # Why can the company make a profit?

The profit sources for proprietary trading firms are actually quite simple — **market liquidity + arbitrage + high-frequency trading**. They capture price differences between stocks, futures, Forex, and crypto assets through algorithms, or participate in market making, earning small but frequent profits. As the scale increases, these small profits can be converted into real money.

What to pay attention to when choosing a company # #

- Trading varieties (futures/stocks/forex are all different)
- Profit distribution ratio (the difference between 50/50 and 80/20 is significant)
- Withdrawal frequency (the experience difference between weekly and monthly withdrawals is significant)
- Initial costs (some require a registration fee)

**In simple terms**: A proprietary trading firm outsources the capital cost issues of professional traders, sharing risks in exchange for sharing profits. For traders lacking funds, this is an opportunity, while for the firm, it is about finding profitable individuals to help it make money.