Prop firm glossary

Prop firm (proprietary trading firm)

A company that lets traders trade its capital or a simulated funded account after passing an evaluation, in exchange for a profit split.

Evaluation / challenge

The paid test phase in which a trader must hit a profit target while respecting loss limits and other rules.

Funded account

The account a trader receives after passing; payouts are a share of the profits made there. At many firms it is still a simulated account.

Profit target

The profit required to pass an evaluation phase, usually expressed in dollars or as a percentage of the starting balance.

Maximum loss limit (MLL)

The total drawdown that fails the account. It can be static or trailing.

Static drawdown

A max-loss floor fixed at the starting balance minus the max loss; it never moves.

Trailing drawdown

A max-loss floor that rises as the account makes new highs, keeping the same distance below the peak.

End-of-day (EOD) trailing

A trailing drawdown that updates only from the daily closing balance.

Intraday trailing

A trailing drawdown that follows peak equity during the session, including open profit.

Daily loss limit (DLL)

The maximum loss allowed in one trading day. A hard DLL fails the account; a soft DLL stops trading for the rest of the day.

Consistency rule

A cap on the share of total profit that a single day may represent, applied in the evaluation or at payout.

Minimum trading days

The number of days a trader must trade before passing or requesting a payout.

Profit split

The percentage of funded-account profits paid to the trader.

Payout buffer / safety net

Profit that must stay in the funded account above the start balance before withdrawals are allowed.

Scaling plan

Rules that raise the allowed position size or account size as profits grow.

Account stacking

Running many accounts with the same trades; often limited by a maximum number of active accounts.

Trade copier

Software that mirrors orders from a leader account to follower accounts.

News restriction

A rule limiting trading around high-impact economic releases.

Risk per trade

The amount you lose if a trade hits its stop, usually set as a fraction of the max loss or account size.

Tick value

The dollar value of the minimum price move of a futures contract (for example $12.50 per tick on E-mini S&P 500).

Trading journal

A record of each trade with entries, exits, size, setup and notes, used to review performance and behaviour.

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