Prop trading, or proprietary trading, is when a firm trades financial instruments – such as stocks, forex, or commodities – using its own capital rather than client money. Instead of earning commissions, the firm and the trader split the profits.
How Prop Trading Works
In retail prop trading, individuals use the firm’s capital rather than their personal funds. The typical process includes:
- The Evaluation (The Challenge): Traders pay a fee to enter an evaluation or challenge account. They must hit specific profit targets within a time frame while strictly avoiding maximum daily or total drawdown limits.
- The Funded Account: Upon successfully passing the evaluation, the trader receives a “funded account”.
- Profit Sharing: The trader actively trades the market according to the firm’s risk rules, keeping a large majority of the profits (usually between 70% and 90%).
Traditional vs. Modern Prop Trading
- Traditional Prop Firms: Historically operated by banks and hedge funds. These firms hire traders directly, provide thorough training, pay a base salary, and grant them a smaller percentage of generated profits (often 10%-30%).
- Modern Retail Prop Firms: Often virtual or independent companies that operate on an evaluation model. Traders pay entry fees, trade via demo/simulated accounts to prove their competence, and are then granted larger simulated capital pools to trade for a generous payout split.
IC Funded is a proprietary trading (prop) firm backed by the major CFD broker IC Markets. It allows traders to manage large virtual capital pools (up to $500,000) and keep up to 80% of their generated profits by successfully completing 1-step or 2-step trading evaluations.
How It Works
- Evaluation Process: Traders pay a one-time fee to attempt a challenge. You must meet specific profit targets (e.g., 5% to 10%) while avoiding predefined daily and overall drawdown limits.
- Funded Accounts: Upon passing, you gain access to a live simulated trading account and can start earning profit splits.
- Trading Conditions: Because of its affiliation with IC Markets, IC Funded gives users access to tight, competitive spreads and popular platforms like cTrader and MetaTrader.
For further details on account rules or to view the evaluation structures, check out the IC Funded Evaluations page.
Interested in getting started with IC Funded – CLICK HERE
1 Step or 2 Step
In prop trading, “1-step” and “2-step” refer to the evaluation phases required to qualify for a funded account. A 1-step challenge features a single phase with one profit target but often stricter trailing drawdowns. A 2-step challenge splits the evaluation into two distinct phases with more forgiving static drawdowns.
Key Differences
- Evaluation Structure:
- 1-Step: You complete a single evaluation phase. While it is faster, it usually comes with a tighter trailing drawdown (meaning the max loss limit moves up with your account’s open profits) and lower leverage.
- 2-Step: Requires passing two phases (an initial evaluation and a verification stage). Though it takes longer, these accounts typically feature static drawdowns (the max loss limit is fixed from your starting balance) and standard leverage, giving you more breathing room to trade.
- Profit Targets & Time Limits:
- 1-Step: The entire profit target is compressed into a single phase.
- 2-Step: Often requires higher total profit targets across both phases (e.g., 10% in phase one and 5% in phase two), but offers relaxed day limits to hit them.
How to Choose
Choosing the right structure depends entirely on your trading style and risk tolerance:
- Choose a 1-step model if you rely on rapid scalability, employ highly consistent scalping strategies, and your risk management can handle the pressure of trailing drawdowns.
- Choose a 2-step model if you are a longer-term trader, prefer the safety of a fixed/static drawdown, and need a gradual, structured evaluation period to prove your consistency.