How to Start a Prop Firm: A Step-by-Step Guide

To start a prop firm, work through eight steps: define your evaluation model and rules, set up your company and legal structure, plan your capital and risk, choose a trading platform, set up the evaluation and funding engine, set up payments, put trader verification in place, then launch affiliates and marketing and go live.

A modern prop firm is two businesses in one: a challenge business that sells evaluations, and a funding business that backs the traders who pass. Both run on the same operational spine — selling challenges, enforcing the rules, funding and scaling the winners, and paying them out. TradeCore is prop firm software for new prop firms and firms switching platforms: the trader who buys a challenge is verified, charged, given a trading account, shown their progress and paid on one client record.

The 8 steps to start a prop firm

• 1. Define your evaluation model and rules — challenge types, targets and loss limits
• 2. Set up your company and legal structure — how funded trading is executed
• 3. Plan your capital and risk management — pass rates, payouts and the funded book
• 4. Choose your trading platform — the platform your traders already know
• 5. Set up the evaluation and funding engine — sell, evaluate, fund, scale
• 6. Set up payments: fees in, payouts out — two money flows, one record
• 7. Put trader verification in place — KYC before the first payout
• 8. Launch affiliates and marketing, then go live — partners, campaigns and the first traders

1. Define your evaluation model and rules

Your model is your product. Decide whether traders earn funding through a one-, two- or three-step challenge or an instant-funding route, then set the parameters: profit targets, daily loss limits, maximum drawdown, minimum trading days and a consistency rule. These numbers decide both how attractive your challenge is and how much risk you carry.

Example: a common industry structure is a two-step evaluation with an 8% then 5% profit target, a 5% daily loss limit and a 10% maximum drawdown. An instant-funding model skips the evaluation and typically charges a higher fee with tighter rules. Many firms sell several templates side by side, one per account size.

2. Set up your company and legal structure

Register your operating entity and get early legal advice on how prop firms are treated in your target markets. Some firms operate as education or simulated-trading businesses; others route funded activity to a live broker. How you describe and structure the offer matters to payment providers, platform vendors and traders alike.

Example: payment processors and platform providers increasingly ask prop firms how funded trading is executed (simulated or live) before onboarding them, so settle your model and terms before you approach them.

3. Plan your capital and risk management

This is what separates firms that last from firms that blow up. Model expected pass rates, payout ratios and the cost of funding winners, and decide how you manage the aggregate risk of the funded book: hedge profitable traders to a live broker, run them internally, or a mix. Your rules from step 1 and your risk model have to agree.

Example: a firm that under-prices challenges relative to its pass rate and payout obligations can be popular and still lose money. Stress-test the economics before you launch, not after.

4. Choose your trading platform

Traders expect to be evaluated on a platform they already know, with reliable market data. The platform also decides how cleanly rules can be enforced and progress tracked per account.

On TradeCore, prop evaluations run on all 8 integrated trading platforms: MT4, MT5, cTrader, DXtrade, MatchTrader, TradeLocker, ScaleTrade and TraderEvolution. On MT5, TradeCore's own prop plugin enforces the profit target, drawdown, daily loss and time limits on the trading server itself — on TradeCore's free plan and on Core.

5. Set up the evaluation and funding engine

This is the heart of the business and the step firms most underestimate. You need to sell challenges, check every trader's activity against the rules, catch breaches, move passing traders to funded accounts, manage scaling and handle payout requests. Done by hand it does not scale and invites disputes.

Example: a firm checking daily-loss and drawdown breaches by hand across hundreds of accounts will miss some and over-enforce others. Rule-based evaluation applies the same logic to every account, every time.

TradeCore's Prop Trading module builds one-, two- and three-step and instant-funding challenges in a six-step builder, catches rule violations in real time and stores every breach as a violation record against the limit it broke — disqualified automatically or held for review, as the template sets. Traders who pass move to a funded account with scaling tiers, and payouts run every 7, 14 or 30 days or on demand. Traders follow it all in the broker's branded portal: the Challenge Store, My Challenges, their funded account and payouts.

6. Set up payments: fees in, payouts out

Prop firms have two money flows: challenge fees coming in and trader payouts going out. Cover the cards, bank transfers and local methods your traders use, and run payouts through a controlled, auditable process. Fast, reliable payouts are one of the strongest trust signals in this market.

TradeCore connects to 100+ PSPs and 300+ payment methods, and challenge fees are taken through the firm's own payment providers. On TradeCore's free plan, fees come in through one payment provider and the firm's team sends each approved funded-trader payout; on Core, payouts are sent automatically through the connected provider.

7. Put trader verification in place

Verify traders before they are funded. Even where a prop firm is lighter on regulation than a broker, KYC protects you from fraud, chargebacks and payout abuse, and payment and banking partners increasingly expect it. Make verification fast for genuine traders and a hard stop for the rest.

TradeCore connects 5 KYC providers: SumSub, Onfido, Cellbunq, GBG and ComplyAdvantage. On TradeCore's free plan, the firm's team reviews documents and questionnaires on the trader's client record; Core includes one eKYC provider integration.

8. Launch affiliates and marketing, then go live

Prop firms grow through affiliates, influencers and introducing brokers, so set up your partner programme and commission structure before you scale spend. Pair it with campaigns that convert and keep challenge buyers. Then test the full journey, from challenge purchase to funded payout, before you open the doors.

In TradeCore's IB Suite, partners can earn on the challenges their referred traders buy (the Prop Challenge commission category, on Core), and campaign tracking links can point straight at the Challenge Store.

Why steps 5 and 6 make or break a prop firm

The challenge engine, evaluation rules, funded accounts, scaling and payouts all have to share the same data. When they are stitched together from separate tools, breaches slip through and payouts become a manual, dispute-prone chore. The alternative is one platform where selling, evaluating, funding and paying out run on the same core as the CRM, payments and compliance.

Run your prop firm on TradeCore's free plan

TradeCore's free plan runs Prop Trading's basic edition: one challenge template on sale at a time, with the full rulebook, TradeCore's MT5 prop plugin, violation review, funding, scaling and payouts working as normal. It has unlimited clients and no time limit, and your environment is ready as soon as you finish signup. No card to sign up — a card the first time you buy an add-on.

Start free. Add only what you need. When you want every challenge template on sale at once, the full Prop Trading module is €1,500 a month on Core (€2,500 a month, flat), with no per-trader, per-trade or setup fees.