Prop Trading Glossary

When a trader violates risk rules such as drawdown or daily loss limits, resulting in immediate account termination. Most prop firms distinguish between hard and soft breaches.

Restarting an evaluation or funded account after failing, usually for a reduced fee compared to the original challenge fee. Some firms offer free resets under certain conditions.

Also known as: Reset

The dollar value of the trading account provided by the prop firm (e.g., $25,000, $50,000, $150,000). Larger account sizes have higher challenge fees but allow greater position sizing.

A one-time fee charged when you pass the evaluation and receive your funded account. This fee is separate from the challenge fee.

The maximum amount of capital a trader can manage across all accounts with a single prop firm.

Using Expert Advisors (EAs) or algorithmic trading systems to execute trades automatically based on predefined rules.

Also known as: Algo Trading, EA Trading

A higher profit goal withdrawal option that allows a larger maximum payout amount. Some firms offer bonus payouts to reward traders who exceed standard targets.

The price point where a trade neither gains nor loses money. Often used to describe moving a stop loss to the entry price to eliminate risk on a position.

Also known as: Break Even, BE

Whether a trader can withdraw into or deplete their payout buffer. When not allowed, the buffer amount must remain in the account at all times after a withdrawal.

The upfront cost to participate in a prop firm's evaluation process. This fee varies based on the account size you choose.

A requirement that no single trading day's profit can exceed a certain percentage of your total profit target.

Progressive increases in the number of contracts allowed as the trader's account balance grows. Firms define specific profit milestones that unlock higher contract limits.

Specific profit milestones that unlock higher contract limits. For example, a firm may allow 2 contracts at $50K balance, 5 at $52K, and 10 at $55K.

The practice of copying trades from one account to another, either manually or using automated systems.

The maximum amount you can lose in a single trading day before your account is suspended or terminated.

Also known as: Daily Drawdown, Daily Max Loss

Opening and closing all positions within the same trading session, with no positions held overnight. Most prop firm rules are designed around day trading strategies.

Dollar Cost Averaging policy - rules regarding averaging into positions by adding to losing trades.

Also known as: Dollar Cost Averaging

A feature where your drawdown limit becomes fixed at its lowest point, preventing recovery of available risk.

When trailing drawdown ceases to trail upward once the account balance reaches the initial starting balance. This effectively converts the trailing drawdown into a static drawdown at the original level.

The method used to calculate the maximum drawdown, typically either static (fixed from starting balance), trailing (follows peak equity), or end-of-day (calculated at market close only).

End of Day drawdown calculation that only counts losses at market close, not intraday fluctuations.

Also known as: End of Day Drawdown

The current total value of a trading account including unrealized profits and losses from open positions. Equity fluctuates in real-time as market prices move.

The testing period where traders must meet specific targets to qualify for a funded account.

Also known as: Challenge Phase, Qualification Phase

Maximum calendar time allowed to pass the evaluation phase. Some firms offer unlimited time while others impose 30, 60, or 90-day deadlines.

Automated trading software that can execute trades on your behalf based on programmed strategies.

Also known as: EA, Trading Bot

The minimum profit required before the first withdrawal can be requested. This is often higher than subsequent payout thresholds to ensure the trader is consistently profitable.

A complimentary restart of the evaluation offered by some prop firms when certain conditions are met, such as being in profit at the time of breach or reaching a minimum trading day threshold.

A real trading account provided by the prop firm after successfully passing their evaluation process.

The maximum amount of capital a prop firm will provide to a single trader across all accounts.

A rule violation that immediately terminates the account with no recovery possible. Exceeding the maximum drawdown or daily loss limit typically results in a hard breach.

Opening opposite positions (long and short) on the same instrument simultaneously to reduce risk. Some prop firms prohibit hedging within the same account.

Number of consecutive days without trading before an account is automatically closed. Most prop firms require at least one trade every 30 days to keep accounts active.

Also known as: Inactivity Rule

Varying position sizes significantly between trades, which some firms prohibit to ensure consistent risk management.

The requirement that only the registered trader can access and trade the account, prohibiting account sharing.

Using borrowed capital to increase position size beyond account balance. In futures prop firms, leverage is built into the contract specifications rather than being a separate setting.

Single payment granting unlimited time to complete the evaluation with no recurring fees. Contrasted with subscription-based evaluations that charge monthly.

A drawdown that trails your account balance in real-time, including unrealized profits and losses.

Also known as: Real-Time Trailing Drawdown, Intraday Trailing Drawdown

The unit of measurement for trading positions in forex and other markets.

The capital required to open and maintain a leveraged position. In futures trading, margin requirements are set by the exchange and determine maximum position sizing.

The maximum number of funded accounts one trader can hold simultaneously with a single prop firm. This limits total capital allocation per trader.

Also known as: Max Accounts

The largest position size allowed per trade, often measured in lots or contracts.

Upper limit on calendar days to complete the evaluation. After this limit, the evaluation expires and the trader must reset or purchase a new challenge.

Also known as: Max Trading Days, Time Limit

The smallest futures contract unit, typically worth $1.25 per point (e.g., MES, MNQ). Ideal for precise position sizing and smaller account sizes.

Also known as: Micro

Minimum trade hold time and profit percentage requirements to prevent ultra-short scalping. For example, trades must be held at least 10 seconds and 50% of profit must come from trades held longer than the minimum.

The minimum number of days you must trade during the evaluation or to qualify for payouts.

A futures contract worth typically $12.50 per point (e.g., ES, NQ), smaller than a full-size contract but larger than a micro contract. The standard unit for most prop firm position limits.

Also known as: Mini

The smallest amount you can withdraw from your profit share with the prop firm.

The minimum dollar amount a day must earn to count as a "profitable day" toward payout eligibility. For example, a firm may require $200 minimum profit for a day to qualify.

Number of trading days with positive P&L required before a payout can be requested or an evaluation phase can be passed. Each day must meet the minimum profitable day amount if specified.

Also known as: Min Profitable Days, Winning Days

Simultaneously holding both mini and micro contracts in the same account. Some prop firms restrict this, requiring traders to use only one contract type at a time.

An evaluation with multiple phases (e.g., 2-step, 3-step) each with different profit targets and rules. Later phases typically have lower targets than the first.

Also known as: 2-Step Challenge, 3-Step Challenge

A rule preventing payouts if your account shows a net loss for the payout period.

Also known as: Negative Profit Rule

Trading around major economic news releases, which some prop firms restrict or prohibit.

Single upfront fee with no recurring charges for the evaluation. The trader pays once and has access to the challenge until they pass or fail, with no monthly subscription.

Holding positions past market close into the next trading session. Some prop firms prohibit this to limit overnight gap risk.

Also known as: Overnight Positions

The process for graduating from a simulated funded account to trading real capital on the firm's books. Typically requires a set number of consistent payouts or reaching a profit target.

Also known as: PTL, Live Account Path

Minimum account balance that must be maintained above the drawdown level while withdrawing profits. This safety margin prevents withdrawals from putting the account at immediate risk of breach.

How often a trader can request profit withdrawals. Common frequencies include daily, weekly, bi-weekly, monthly, and on-demand.

Progressive tier structure where the maximum payout amount increases with each consecutive successful withdrawal. For example, first payout may cap at $2,000 while the fifth allows up to $10,000.

The largest single withdrawal amount allowed per payout request. Some firms use tiered maximums that increase with each consecutive payout.

Also known as: Max Payout, Payout Cap

The available options for receiving profit withdrawals, such as bank wire, cryptocurrency, PayPal, or Wise. Processing times and fees vary by method.

Also known as: Withdrawal Method

The smallest withdrawal amount allowed per payout request. Traders must accumulate at least this amount in profit before requesting a withdrawal.

Also known as: Min Payout

How long it takes for withdrawal funds to reach the trader's account after a payout is approved. Typically ranges from 1 to 10 business days depending on the firm and payment method.

Determining the appropriate number of contracts or lot size for each trade based on account size and risk management rules. Proper position sizing is critical to staying within drawdown limits.

Restrictions on trading during extreme market volatility or when price limits are reached.

The percentage of profits you keep versus what the prop firm takes, typically ranging from 70% to 90% for the trader.

Tiers where the trader's profit percentage increases with consecutive successful payouts. For example, starting at 80% and increasing to 90% after five payouts.

Also known as: Progressive Profit Split

When the trader's share of profits increases based on performance milestones or total payout count. Rewards consistent, long-term traders with better profit retention.

The minimum profit percentage required to pass an evaluation phase or qualify for account scaling.

A fee charged to restart your evaluation after failing to meet the requirements.

Countries whose residents are not eligible to trade with a particular prop firm due to regulatory restrictions.

The relationship between potential loss and potential gain on a trade. A 1:2 ratio means risking $1 to potentially make $2. Crucial for maintaining profitability within prop firm drawdown limits.

Also known as: R:R, RRR

A program where account size increases based on consistent profitable performance over multiple payouts. Traders who demonstrate discipline are rewarded with larger allocations and higher earning potential.

Also known as: Account Scaling

The process of increasing your funded account size based on consistent profitable performance.

A trading strategy focused on making many small profits from brief price movements, typically holding positions for seconds to minutes. Some prop firms impose microscalping rules that restrict extremely short hold times.

A demo/simulated trading account that mirrors live market conditions but uses virtual capital. Most prop firm funded accounts begin as simulated accounts before traders qualify for live capital.

Also known as: Sim Account, Demo Account

The difference between the expected price and the actual execution price of a trade. Common during high-volatility events and can affect profitability, especially for scalping strategies.

A rule violation that stops trading for the day but allows the trader to resume the next trading session. Typically triggered by hitting the daily loss limit rather than the maximum drawdown.

A fixed drawdown limit that doesn't change regardless of account growth or profits.

An order to automatically close a position at a predetermined loss level. Essential for prop firm trading to manage risk and protect against exceeding drawdown limits.

Also known as: SL

Programs that provide immediate access to a funded account without an evaluation phase.

Also known as: S2F, Instant Funding

Monthly recurring charge that continues until the evaluation is passed or the trader cancels. Common with some firms as an alternative to one-time payment models.

Also known as: Monthly Fee

Holding positions for days to weeks to capture larger price moves. Requires the prop firm to allow overnight and potentially weekend holding.

An order to automatically close a position at a predetermined profit level. Helps lock in gains and is commonly used alongside stop losses for disciplined trade management.

Also known as: TP

Specified times during which you're allowed to trade, often excluding major news events or low-liquidity periods.

The software used to execute trades, such as NinjaTrader, Tradovate, TradingView, or Rithmic. Each prop firm supports specific platforms and data feeds.

A drawdown limit that moves up with your account balance but never moves down.

The total cost of getting funded, including the challenge fee, activation fee, and any recurring subscription fees. Comparing true cost across firms gives a more accurate picture than looking at challenge fees alone.

The profit or loss on open positions that has not yet been locked in. Unrealized P&L affects equity and may count toward drawdown calculations depending on the firm's drawdown type.

Also known as: Open P&L, Floating P&L

Keeping positions open over the weekend (Saturday-Sunday). Many prop firms restrict weekend holding due to gap risk when markets reopen.

Also known as: Weekend Positions

Number of profitable trading days needed before a payout request is eligible. Similar to minimum profitable days but specifically tied to payout eligibility rather than evaluation passing.