What is a prop trading firm

A prop trading firm (short for proprietary trading firm) gives skilled traders access to a firm's own capital after passing an evaluation, in exchange for a share of the profits. Traders risk only the small cost of the evaluation, with no risk of losing their own capital when trading with their funded account.

Crypto prop firms apply the same model to crypto markets. Kraken Funded is a crypto-native option built into an exchange you already use, rather than a standalone product you have to learn from scratch.

That's the short and simplified answer, but the rest of this page explains how the model works, why almost every well-known prop firm trades forex or futures rather than crypto, and why so many people searching this term are really shopping for a brand they already have in mind.

Most prop trading firms operate based on a two-phased model: an evaluation phase, then a funded account phase. You pay to attempt the evaluation, and the funded account is what you are paying for a shot at.

Not every trader passes the evaluation on their first attempt. But for traders who do pass the evaluation, they are able to access capital owned by the firm and trade with it on the firm's behalf.

In order to enter the evaluation phase, you pay an entry fee and attempt to hit a profit target without breaching a drawdown limit, all inside a structure the firm defines in advance. The drawdown limit is the floor your account cannot fall below. Cross it, and the evaluation attempt ends.

Hit the profit target while staying above the drawdown limit, and you pass the prop firm's evaluation phase, which allows you to gain access to the funded account.

If you are still building intuition for how these challenges are scored and where most attempts fail, our dedicated guide walks through the mechanics in full.

Pass the evaluation, and you move to a funded account, where you trade the firm's capital and keep a majority share of the profits your ideas produce.

An 80/20 share in the trader's favor is common across the category, but can vary significantly from one platform to the next. Regardless of how profits are divided between the firm and the trader, the mechanics stay the same, as the trader keeps a majority of the profits they generated, while the firm keeps a small fraction of these profits in return for supplying the initial capital and trading infrastructure.

For a fuller breakdown of how the funded side operates once you are past the evaluation, see our explainer on the topic.

The core distinction between a prop trading firm and trading with your own funds is the difference between capital access and capital ownership.

Trading your own account means every position is limited to your own balance. To place larger positions, you need a larger balance, which means committing more of your own money and taking on the downside risk yourself.

A prop firm inverts that dynamic. After you demonstrate your trading skill during an evaluation phase, the firm then supplies the trading capital for you to trade how you see fit.

With a funded account in a prop trading firm, you do not need a large personal balance to trade larger positions, and your financial exposure is capped at the evaluation fee you already paid.

However, what you give up in return is an exclusive claim to the upside, as the firm keeps its share of any profits you generated using their capital.

Here is the pattern almost nobody states plainly: the prop firm category has historically been built around foreign exchange (forex) and futures trading. The best-known firms in the space evaluate traders on currency pairs or futures contracts, and the entire vocabulary of the industry grew up around those markets.

Crypto-native prop firms are a reimagination of this established model. They apply the same evaluate-then-fund structure to crypto markets, which changes some of the core mechanics. Crypto trades 24/7 rather than standard market hours, and the products a crypto-native firm offers can be simpler than the leverage-heavy structures common in futures.

Here's the practical upshot: if you already trade crypto and have been reading about prop firms framed entirely in forex terms, the model transfers, but the market it runs on does not have to.

Most prop firms are standalone platforms. You sign up, fund an evaluation on an unfamiliar interface, and manage yet another login. But Kraken Funded takes a different route by building the funded-trader model into the Kraken app itself.

That means the evaluation challenge and the funded account live inside the same environment you already use. With Kraken Funded, there is no separate platform to learn and no new custody arrangement to vet.

To see how Kraken's funded-trader options compare, start with the overview page rather than any single product.

Four things set Kraken Funded apart from the typical prop firm setup. It runs natively on your mobile app, rather than a standard desktop terminal. It also charges zero trading fees in both the challenge and the funded stages, meaning the initial evaluation phase fee is the only cost you face.

Kraken Funded also uses 1x exposure, so there is no leverage math to manage and no amplified drawdown to blow through an account on a single bad candle. Finally, Kraken Funded is buy and sell only, which keeps the mechanics straightforward as you don't need to factor in options chains, perpetual funding rates or structured payoffs.

Simpler is not the same as risk-free. But fewer moving parts means fewer ways to be surprised by a rule you did not realize you had agreed to.

You now understand what a prop firm is, how the evaluation-then-funding model works, and why a crypto-native version behaves differently from the forex and futures firms that dominate the category. The next step is seeing how the specific options compare.

Kraken Funded brings the model into the same app you already use to hold and trade crypto, with zero trading fees across both the challenge and funded stages, 1x exposure, and a straightforward buy-and-sell structure.

No separate platform, no new custody setup, no leverage math. Take your evaluation now.