Prop Trading Glossary
Over 41 key terms from the world of prop trading and funded trading — clearly and practically explained.
A
Account Size
The size of the virtual trading capital a prop firm provides after passing the challenge. Typical sizes range from $10,000 to $500,000. Larger accounts have higher challenge fees but offer more profit potential.
Activation Fee
A one-time fee some prop firms charge when transitioning from the challenge to a funded account. Not all firms require an activation fee — an important comparison criterion.
Affiliate Link
A tracking link that identifies the source of a customer referral. The operator receives a commission upon successful sign-up.
→ More in our Affiliate DisclosureC
Challenge
An evaluation phase you must pass before receiving a funded account. Usually includes a profit target and strict drawdown limits. There are 1-phase and 2-phase challenges.
→ Compare ChallengesConsistency Rule
A rule requiring that no single trading day accounts for too large a share of total profit (e.g., max 30–50%). Prevents traders from passing a challenge through a single lucky trade.
Copy Trading
Trading where another trader's trades are automatically copied. Most prop firms prohibit copy trading from external signals but allow mirroring between your own accounts.
cTrader
A modern trading platform with an intuitive interface and advanced order types. Offered by many forex prop firms as an alternative to MetaTrader.
D
Daily Drawdown (DLL)
Maximum allowed loss within a single trading day. Usually 3–5% of starting capital. If exceeded, the challenge or account is lost. Also known as Daily Loss Limit (DLL).
Drawdown
The difference between the highest point and current account balance. In the prop world, there are static (fixed) and trailing (moving) drawdown limits. Maximum drawdown is one of the most important comparison criteria.
DXtrade
A modern retail trading platform increasingly used as an alternative to MetaTrader. Offered by FTMO among others.
E
EA (Expert Advisor)
An automated trading program, usually for MetaTrader 4/5. Some prop firms prohibit EAs, others allow them without restriction. Check your firm's rules before using an EA.
EOD (End of Day)
Refers to drawdown calculations that are only updated once at the end of the day — as opposed to real-time or intraday trailing. EOD drawdown gives you more room during the day.
Evaluation
Another term for challenge. The assessment phase where you prove your trading skills before receiving funded capital.
F
Funded Account
The account you receive after passing the challenge. Usually a simulated environment (sim-funded) where you receive real profit payouts. Account sizes typically range from $10,000 to $500,000.
→ Funded Account GuideFutures
Contracts for the purchase or sale of an underlying asset at a set price and date. CME futures (ES, NQ, CL, GC) are the most popular instruments at futures prop firms.
→ Compare Futures Prop FirmsH
High Water Mark
The highest point your account capital has reached. Important for trailing drawdown calculations: the drawdown limit moves with the high water mark. Once your account hits a new high, the loss threshold also moves up.
Hedging
Simultaneously holding long and short positions in the same instrument to limit risk. Many prop firms prohibit hedging or have specific rules about it.
I
Instant Funding
A model where you receive a funded account immediately without a prior challenge. Usually comes with a lower profit split and stricter rules than challenge models.
→ Instant Funding ProvidersIntraday Trailing
Drawdown calculation that moves in real-time with every tick. Stricter than EOD trailing since you cannot have any temporary pullback during the day.
L
Leverage
The ratio between margin used and actual position size. Typical prop leverage: 1:30 to 1:100 for forex, 1:20 to 1:50 for indices. For futures, maximum contract count is specified instead of leverage.
Lot
A standardized position size. 1 standard lot forex = 100,000 units of the base currency. Mini lots (0.1), micro lots (0.01) and nano lots allow smaller position sizes.
M
Max Drawdown
The total maximum allowed account decline over the entire period. Usually 4–12% of starting capital depending on the firm. If exceeded, the account is irreversibly lost.
Micro Futures
Smaller versions of E-Mini futures (1/10 of contract size). Ideal for futures prop traders with smaller accounts — less margin and lower tick risk while maintaining real market exposure.
MetaTrader (MT4/MT5)
The world's most widely used trading platform. MetaTrader 4 for forex, MetaTrader 5 additionally supports stocks and futures. Almost all forex prop firms support at least one MT version.
N
News Trading
Trading during or immediately after major economic news releases (NFP, CPI, interest rate decisions). Some prop firms ban news trading entirely, others only restrict it in certain time windows (e.g., 2 min before/after Tier 1 news).
NinjaTrader
A popular futures trading platform with advanced charting and strategy development capabilities. Supported by most futures prop firms.
P
Payout
Distribution of your profit share from the funded account. Payout frequencies vary: weekly, bi-monthly, monthly or on-demand. Methods are usually bank transfer, crypto or Wise.
Profit Split
The share of profits you keep as a trader. Industry standard is 70–100%. The remainder goes to the prop firm. A higher split is better for the trader but often comes with stricter rules.
Profit Target
The profit goal you must reach during a challenge phase, usually 5–10%. In 2-phase challenges, Phase 2 typically has a lower target (e.g., 5% instead of 8%).
Prop Trading (Proprietary Trading)
Trading with an external firm's capital. As a prop trader, you use someone else's money, share profits with the firm and only risk the challenge fee — not your own capital.
→ What is Prop Trading?R
Refund
Reimbursement of the challenge fee. Many firms refund it with the first payout — only upon passing and under certain conditions.
Reset
Restart of a failed challenge, often at a reduced fee (e.g., 30–50% of the original price). Some firms also offer free resets.
Rithmic
Professional trading infrastructure for futures traders with low latency. Used as a broker backend by many futures prop firms (Apex, Lucid Trading, Earn2Trade, etc.).
S
Scaling Plan
A framework under which your account size is gradually increased with consistent profitable trading. Typical: +25% every 3 months with min. 10% profit. Not all prop firms offer scaling.
Sim-Funded
A business model where the funded account remains a simulated environment. The firm mirrors successful traders in real markets. For you as a trader, this is irrelevant as long as payouts arrive.
Slippage
The difference between expected and actual execution price of an order. Occurs especially during news events and volatile phases. In sim-funded environments, usually less than in live trading.
Static Drawdown
A fixed drawdown limit that doesn't move. Example: With a $100K account and 10% static drawdown, you lose the account if capital falls below $90K — regardless of how high it was before.
T
Trailing Drawdown
A dynamically moving drawdown limit that follows the high water mark. The more you earn, the higher the loss threshold sits. Common with many futures firms. Stricter than static drawdown.
TradingView
A browser-based charting platform with social trading features. Increasingly offered as an order platform by prop firms — especially futures firms via Tradovate integration.
Tradovate
A cloud-based futures trading platform with a commission-free model. Offered as a broker and platform by many futures prop firms.
V
Verification / Phase 2
The second phase of a 2-step challenge. Usually with a lower profit target than Phase 1 (e.g., 5% instead of 8%). The same drawdown limits continue to apply.
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