A prop trader is someone who trades for a proprietary trading firm.
If you’ve seen the famous TV show Billions, then as an example, all the traders working for Axe Capital such as Dollar Bill, Mafee, Taylor, and so on, are all prop traders. Prop traders might be provided a flat salary, but in most often the case, their real compensation comes from commissions or profit sharing on the gains they make on their trades. If a trader uses a prop firm’s capital of $2,000,000 to make $500,000, then that prop trader might be receiving $250,000, which is 50% of the gains as compensation for his performance.
A prop trader’s capital is not at risk, as he is using the prop firm’s capital. However, it is likely that if he loses a large amount of the capital, like 20-40%, the prop firm will fire him or stop them from trading.