Prop firm documentation is dense with jargon that can obscure exactly what you're signing up for. This glossary defines every major term you'll encounter — from challenge mechanics to payout structures to platform terminology.
A–D: Account Mechanics
- Account Balance: The total value of your trading account including open trade P&L
- Account Equity: Balance + floating P&L from open positions. Drawdown is often measured on equity.
- Challenge: The evaluation phase traders must pass before receiving funded capital
- Consistency Rule: A rule limiting how much of total profit can come from a single trading day
- Daily Drawdown Limit: Maximum amount (in dollars or %) you can lose in a single trading day
- Drawdown: The decline from peak balance/equity to current level
E–G: Evaluation and Funding Terms
- EOD Trailing: End-of-day trailing drawdown — floor moves based on close-of-day balance, not intraday peaks
- Evaluation Phase: Another term for the challenge phase
- Fee Refund: Return of the challenge entry fee upon first successful payout
- Funded Account: A live account backed by the prop firm's capital after passing the challenge
- Funded Capital: The dollar amount of capital the firm provides access to
H–M: Key Mechanics
- Hard Stop: The maximum drawdown level that immediately closes your account
- High-Water Mark: The highest account balance achieved — used to calculate trailing drawdown floor
- Intraday Trailing: Trailing drawdown that updates in real-time based on intraday equity peaks
- KYC: Know Your Customer — ID verification required before payouts
- Lot Size: The volume of a trade. 1 standard lot in forex = 100,000 units of base currency
- Max Drawdown: The total maximum loss allowed from starting balance before account termination
N–P: Payout and Profit Terms
- News Trading: Trading during high-impact economic news releases (NFP, FOMC, CPI)
- One-Step Challenge: A challenge requiring only one evaluation phase before funding
- Overnight Hold: Keeping positions open past the daily trading session close
- Profit Split: The percentage of trading profits the trader keeps vs. what the firm retains
- Profit Target: The % gain required to pass the challenge phase
R–S: Rules and Scaling
- Scaling Plan: A structured program for increasing funded capital based on performance milestones
- Simulated Account: An account that mimics real market conditions but isn't connected to real liquidity
- Slippage: Difference between expected trade price and actual execution price
- Soft Breach: A rule violation that triggers a warning rather than immediate account closure
- Static Drawdown: Drawdown limit calculated from starting balance and never adjusted upward
T–Z: Technical Terms
- Trailing Drawdown: Drawdown limit that rises with account equity highs, creating a moving floor
- Two-Step Challenge: The standard evaluation format with Phase 1 and Phase 2 before funding
- Verification Phase: Phase 2 of a two-step challenge — confirms Phase 1 wasn't luck
- Weekend Hold: Holding positions open over Saturday/Sunday — not permitted at many firms
- Withdrawal Threshold: Minimum profit required before a payout request can be submitted
Rule of thumb: if a term in a firm's T&C isn't in this glossary, ask support for clarification before you trade. Ambiguous rules cost challenge fees.
Knowing the language is the first step to knowing the rules. Know the rules before you pay the entry fee.
- FundCoupon Team
Explore more on FundCoupon. Browse forex firms, futures firms, and crypto. Top picks: FTMO (ftmo.com), Apex Trader Funding (apextraderfunding.com), FundedNext (fundednext.com), Topstep (topstep.com).
FundCoupon Verification Note
Promotions, rules, and checkout terms can change. Verify the current offer and evaluation rules on the official firm website before paying for any challenge.