If you’re new to trading, you’ve probably heard people talk about brokers and prop firms. They both give traders access to the markets, but they work very differently. Understanding the difference is important before you decide which path to take.
What Is a Broker?
A broker is a company that connects traders to the financial markets.
- When you open an account with a broker, you deposit your own money.
- You can then use that money to buy and sell forex, stocks, crypto, or other assets.
- The broker charges fees, such as spreads or commissions, to execute your trades.
Think of a broker like a doorway into the market. You bring your own capital, and the broker lets you place trades.
Examples of brokers: OANDA, FOREX.com, IC Markets, IG, and Pepperstone.
What Is a Prop Firm?
A prop firm (short for proprietary trading firm) is very different.
- Instead of trading your own money, you trade the firm’s capital.
- To access the money, you usually have to pass a challenge or evaluation that proves you can trade profitably while following risk rules.
- Once you pass, you get a funded account and share profits with the firm.
Think of a prop firm like a sponsor for traders. If you can show you’re disciplined and skilled, they’ll back you with more money than you might have on your own.
Examples of prop firms: FTMO, The 5%ers, and My Forex Funds (though always check if the firm is still active and trustworthy).
Key Differences Between Brokers and Prop Firms
| Feature | Broker | Prop Firm |
|---|---|---|
| Whose money? | You trade with your own money | You trade with the firm’s capital |
| Risk | You risk losing your deposit | Firm takes the risk, but you must follow rules |
| Profits | You keep 100% of what you earn (minus fees) | You share profits (often 70–90% to trader) |
| Access | Open an account and fund it yourself | Pass a challenge or evaluation |
| Rules | Flexible, but limited by broker’s leverage and regulations | Strict rules (max daily loss, max drawdown, etc.) |
| Good for | Traders with their own capital | Traders with skill but limited funds |
Which One Should You Choose?
- Go with a broker if you want full control, flexibility, and already have money you’re willing to risk.
- Go with a prop firm if you don’t have much capital but believe you can trade consistently. Just remember, prop firms have strict rules, and breaking them means losing your funded account.
The Bottom Line
A broker gives you access to the market with your own money, while a prop firm gives you the chance to trade with their money after proving yourself.
If you’re just starting out, many traders begin with a small broker account to practice risk management. Later, once they have discipline and consistency, they may try a prop firm challenge to access larger trading capital.
Both options can work, but the choice depends on your goals, your risk tolerance, and how much capital you have to start with.
