Prop firm glossary
Every prop firm glossary term covers three areas: your payment, the loss you may take, and when your payouts arrive.
- Prop firm glossary: basics defined
- Desk shorthand is how the rulebook of a prop firm gets written. No investment advice appears here. Most traders taking simulated tests never get to a payout.
- Evaluation
- This paid test runs inside a simulated account. It lets traders show they can stick to risk rules.
- Challenge
- Firms use this name for a prop firm evaluation that sets a profit goal and loss limits.
- One-step and two-step
- A multi-phase test breaks the goal into steps, while a single-phase test has just one target.
- A funded account
- Passing the test gets you this seat. Trading under the firm's rules pays you a share of what you gain.
- The simulated funded account
- Although your orders are executed in a simulated market, your payouts still reach you as real cash.
- Live funded account
- The firm's actual capital puts your orders directly on a real exchange.
- Express funded account
- Right after you pass, some futures firms call the simulated stage you enter by this name.
- Instant funding
- Pay a larger upfront fee to avoid the test, then enter a funded trading account without delay.
- The target profit amount
- You need to reach this dollar gain to pass a test or request a withdrawal.
- Trailing drawdown
- Your loss floor rises as your balance grows. It never drops again.
- Trailing drawdown within the day
- While the session runs, your highest open gain raises the loss floor, and that happens before you close the position.
- End-of-day drawdown
- Open gains from the day don't count, and your loss limit rises only once the market closes.
- The fixed drawdown
- Your loss floor stays locked at a fixed dollar level and never rises as your balance grows.
- The loss limit for each day
- A loss this large in one session leads to a stop for the day or failure of the test.
- Breaches that are soft or hard
- After a minor slip, your trading stops until tomorrow. A major violation closes your account permanently.
- Consistency rule
- No single day's gain can be too large a part of what you earn in total. Check yours with a payout math tool.
- Minimum trading days required
- To pass, you must first trade in this many separate sessions.
- The split of profits
- Traders keep this share of gains, and the firm takes the rest.
- Activation fee
- You pay Topstep's one $149 charge before funded trading starts, after passing its 50K Standard Path.
- Reset fee
- Break a rule on the $172 LucidPro 50K test and clearing it costs $120 at Lucid Trading.
- The monthly charge
- At Take Profit Trader's, a 50K test costs $170 each month, and those charges end once you pass or cancel.
- The buffer for payouts
- Firms require that this cushion stays in a funded account before your trader withdrawals.
- A profitable day
- Your net gain must clear the firm's daily threshold for a session to count toward your goal.
- The cap on payouts
- Often, a ceiling limits the cash you can take out from early withdrawals.
- A plan for scaling
- As your balance grows, the size of trades you're allowed rises in steps.
- Max position limit
- The risk desk caps how many contracts you can hold open at any one time.
- Mini and micro contracts
- Futures contracts in the standard size move fast. Smaller contracts put less money at risk on every price tick.
- The rule about news
- Some firms ban holding or opening trades around major economic reports.
- Copy trading
- Software can mirror your orders across several accounts. Outside signal services are banned by some firms, though.