Prop firm or personal account? When each one pays off

It depends on two things: whether your edge is proven and how much capital you can afford to lose. In our simulation, a trader with a clear edge and $10,000 makes on average twice as much in a personal account as in a prop firm account: $16,600 a year versus $8,300. Without an edge it's the other way round: the prop firm account loses the fees; the personal one, up to half the capital.

The comparison

The same trader in both accounts: makes $300 and loses $200 on average, takes at most three trades a day and stops after two losses. We only change the win rate, from 45% (+$25 per trade) to 38% (−$10). Each simulated year is traded at the same time in a prop firm account and in a personal one: the same trades, the same days and the same size.

Average result in a year (for the prop firm, payouts received minus evaluation fees):

One year in ten, the result is this or worse:

3,000 simulated years of 250 sessions per win rate. Prop firm at $100 per attempt. The personal account stops trading if it loses half its capital.

What the numbers say

• Without an edge, the prop firm loses less. With a 38% win rate, a year at the prop firm costs $700 on average (fees minus payouts); in a $10,000 personal account, $3,700. At 40%, with no edge either way, the prop firm's average is around zero, but it's a lottery: 69% of years end in a loss, buying 8.3 evaluations on average.
• With a clear edge and capital, the personal account pays twice as much. At the prop firm the trader leaves behind the firm's 10% share, the $3,000 made in each evaluation (it isn't theirs), the buffer that must stay in the account to get paid and whatever had built up each time the account blows.
• With little capital, the personal account is the worst of both. With $4,000, the same $2,000 buffer as the prop firm, even the trader with a clear edge is ruined in 19% of years. Same risk as the prop firm, but with their own money.
• With a small edge, the prop firm is the prudent choice. The $10,000 personal account pays more on average ($6,000 versus $2,300), but one year in ten it loses $5,100 or more, and it's ruined 15% of the time.

So when does a personal account pay off?

Under these assumptions, when all three are true at once:

1. Your edge is proven over hundreds of real trades, not one good month (how many you need).
2. The capital can take it. With $200 risked per trade, $10,000 is 50 typical losses: ruin for the trader with a clear edge drops to 1.5%, and with $20,000, to almost zero.
3. It's money you can lose without it changing your life.

If one is missing, the prop firm account limits the damage, but only if you set a cap on attempts. Without an edge, buying evaluation after evaluation is buying tickets: that's how prop firms make money.

What the simulation leaves out

• Payout rules vary a lot: minimum days, consistency, caps and splits from 80 to 100%. We used generic ones: a payout every 10 sessions if the balance is above the starting balance plus $2,100, capped at $2,000, with 90% to the trader.
• Price. At $200 per attempt plus a $150 activation fee, the prop firm drops to $7,500 a year at a 45% win rate and −$900 at 40%.
• The firm can change its rules, deny a payout or shut down. In a personal account, that risk is the broker's.
• Commissions and taxes aren't included: with them, every result goes down.
• The mind. Your own money weighs differently: some people trade better with it, some worse. We'll cover it in our upcoming trading psychology book.

To see your odds of passing with your own numbers, try the evaluation simulator. And if you're thinking of buying one, first read what to check before buying a prop firm account.

How it was calculated

Monte Carlo simulation with common random numbers: in each simulated year both accounts see exactly the same trades. Prop firm: a $50,000 evaluation with a $3,000 target and a $2,000 end-of-day trailing drawdown, monitored in real time, that stops rising at $50,100; the funded account has the same drawdown. If the trader blows the evaluation or the account, they buy another the next day, and anything not paid out by year end doesn't count. Personal account: $4,000, $10,000 or $20,000 of capital, no commissions. It's the same simulation we use in our upcoming trading psychology book.

Simulated and hypothetical results, with the limitations that implies. Not investment advice. Firm rules change: check them on each firm's website. This article contains no affiliate links.