Glossary of prop firm terminology
Prop trading employs its own terminology. The terms most frequently encountered are defined below.
Challenge terminology
Challenge / evaluation: the paid assessment required for funding.Phase / step: a stage of the challenge, each carrying its own target.Profit target: the percentage gain required to complete a phase.Minimum trading days: the minimum number of days traded before passing.Risk terminology
Daily loss limit: the maximum loss permitted in a single day.Maximum loss / drawdown: the maximum overall decline permitted.Static drawdown: a threshold fixed relative to the opening balance.Trailing drawdown: a threshold that advances with the highest balance.Consistency rule: a ceiling on any single day's share of total profit.Payout terminology
Profit share: the proportion of profit retained by the trader.Scaling plan: a route to a larger account or higher share.Refundable fee: a fee returned with a payout.KYC: identity verification prior to funding or payout.Pay after pass: a modest initial fee with the balance payable upon passing.Questions and answers
What does funded signify?
That the challenge has been passed and the trader now operates the firm's account in exchange for a share of profits.
What constitutes a hard breach?
A rule violation that closes the account immediately, such as reaching the maximum loss.