Part of our prop firm guide series. Start with What is a Prop Firm? (2026 complete guide), then explore: trading evaluation, simulated funds, performance fees, are prop firms legit.
Quick answer: A broker executes trades using client money and earns commissions or spreads. A prop firm (proprietary trading firm) gives skilled traders access to simulated funds after an evaluation and shares profits through a performance split. Many traders call the evaluation a prop firm challenge and the qualified stage a funded account, even though Alpha Capital uses evaluation and performance fee language.
If you are new to online trading, the words broker and prop firm get used interchangeably in forums. They are not the same business model. This guide explains the difference in plain language, when each fits, and how Alpha Capital Group fits the prop firm side.
For the full prop firm model (evaluations, drawdown, scaling), read our complete prop firm guide (2026).
Prop Firm vs Broker at a Glance
| Topic | Broker (retail) | Prop firm (evaluation model) |
|---|---|---|
| Who provides capital? | You deposit your own money into a live or demo account. | The firm assigns simulated funds after you pass an evaluation (others call this a challenge). |
| How the firm earns | Commissions, spreads, swap, platform fees. | Evaluation fees, optional resets, and firm share of simulated profits. |
| Your upside | 100% of your own account gains (minus costs). | A performance split on simulated profits, often 70% to 90%. Traders often say payout; we say performance fee. |
| Your downside | You can lose everything you deposited. | Usually limited to the evaluation fee and rule breaches on simulated capital, not your full savings. |
| Regulatory role | Executes orders for clients; holds or routes client funds. | Assesses skill on simulated accounts; pays qualified traders from firm programmes. |
| Typical path | Open account, deposit, trade. | Pay evaluation fee, hit targets inside drawdown rules, qualify, then request performance fees. |
Prop Firm vs Broker Terminology
Alpha Capital uses precise programme language. Forums and other firms often use different words for the same idea. Use this map when you read Reddit threads, YouTube reviews, or competitor sites:
- Trading evaluation = prop firm challenge, funded trader challenge, assessment
- Qualified Analyst = funded trader, funded account holder, analyst account
- Simulated funds = demo capital, virtual balance, firm capital (still not your live deposit)
- Performance fee = payout, profit split, withdrawal
- Performance split = profit share, payout ratio (e.g. 80/20)
- Broker = retail broker, CFD broker, execution venue (always with your money)
When a post says "I got funded," they usually mean they passed an evaluation and trade on simulated size with real performance fees available. That is the prop firm path, not opening a bigger live broker account.
What Is a Broker?
A broker is a regulated intermediary that connects you to markets. You open an account, deposit personal capital (or use a small demo for practice), and every gain or loss hits your balance.
Retail traders know brokers as MT5, cTrader, or app-based CFD platforms. The broker makes money when you trade: spreads, commissions, overnight fees. Your relationship is client and execution venue, not profit sharing on firm capital.
What Is a Prop Firm?
A prop firm (short for proprietary trading firm) tests whether you can trade consistently under rules before giving you access to larger simulated funds. At Alpha Capital Group, that test is a trading evaluation. Other communities call the same step a prop firm challenge or funded trader challenge.
Pass the evaluation and you may become a Qualified Analyst. Many firms and influencers say funded trader or funded account. The trading still runs on simulated capital in a demo-style environment, but performance fees paid out are real money when you meet programme rules.
Learn the vocabulary in our cluster: trading evaluation, simulated funds, performance fees.
When to Use a Broker
- You want full control of your own deposit size and risk.
- You are learning basics: platform, order types, position sizing.
- You prefer a direct client relationship with a regulated broker for live capital.
- You are not ready for evaluation rules, profit targets, or drawdown limits.
Brokers and prop firms can coexist in a career. Plenty of qualified traders still use a small personal account for experiments while running a prop evaluation on the side.
When to Use a Prop Firm
- You have a strategy but not enough personal capital for meaningful returns.
- You want access to larger simulated balances ($10K to $200K at Alpha Capital) after proving discipline.
- You accept evaluation fees as the cost of entry instead of risking a large live deposit.
- You can follow strict drawdown and daily loss rules. See trailing vs static drawdown.
Compare Alpha Capital programmes on our evaluation plans page. Have a promo code? See active discount codes or the $10K for $40 offer when it is live.
Where Alpha Capital Fits
Alpha Capital Group is a prop firm, not a retail broker. We do not hold your savings or execute live client deposits like a traditional brokerage. We run structured evaluations on simulated funds, with programmes including Alpha One, Alpha Pro, Alpha Swing, and Alpha Three-Step.
Qualified Analysts can earn up to an 80% performance split on simulated profits, with performance fees available on published schedules. Over 1.2 million traders have used Alpha Capital programmes across 140+ countries.
Ready to start? View evaluation plans or read how prop firms work step by step.
Frequently Asked Questions
What is the difference between a prop firm and a broker?
A broker executes trades with your money and earns from trading costs. A prop firm tests your skill on simulated funds, then shares a portion of simulated profits if you qualify. The capital source and fee model are completely different.
Do prop firms replace brokers?
No. Prop firms do not replace the role of a regulated broker for your personal live account. They offer a separate path: prove skill under rules, trade larger simulated size, earn performance fees. Many traders use both over time.
Is a funded account the same as a prop firm account?
In trader slang, funded account usually means you passed a challenge and trade firm capital (often simulated). At Alpha Capital we say Qualified Analyst on a qualified simulated account. Same idea, different brand language.
Can you lose more than the evaluation fee?
On standard retail prop programmes, your financial risk is typically the evaluation fee and any reset fees, not the full notional account size. Losses on the simulated account do not create a personal debt, but breaking rules closes the account.
How do I choose between prop firm programmes?
Match drawdown type (trailing vs static), evaluation steps (one-step vs two-step), and holding rules to your strategy. Alpha One suits fast intraday paths; Alpha Swing suits overnight holds. Compare details on evaluation plans and our prop firm guide.
Save on your evaluation. See active Alpha Capital promo codes before checkout.
Author: Alpha Capital Research Team · Updated: May 29, 2026 · Related: Prop firm guide · Trading evaluation
