Prop firm glossary

Common terms decoded. If you've ever wondered what "trailing DD" or "consistency rule" actually mean — start here.

Maximum drawdown (max DD): The largest loss your account can take from peak equity (or starting balance) before the firm closes it. Usually 6-15%. Lower = stricter.
Daily drawdown: The maximum loss allowed in a single trading day. Typically 3-5%. Hit it and the account is breached even if your overall DD is fine.
Static vs trailing drawdown: Static = breach line stays fixed from starting balance. Trailing = breach line moves up as your equity grows, so giving back unrealized profit can blow you up.
Profit target: The percentage gain you need to hit to pass a phase. Usually 8-10% on Phase 1 of a 2-step, 5% on Phase 2, or 10% on a 1-step.
Consistency rule: Caps your single best day at X% of total profit (typically 30-50%). Stops one outsized winner from carrying the account. Some firms have none — friendlier for big-winner strategies.
Payout split: Your share of the trading profits. Industry ranges from 75-100%. Higher splits often come with stricter rules or scaling requirements.
EA / Expert Advisor: Automated trading bot, typically on MT4/MT5/cTrader. Most firms allow self-developed EAs but ban third-party / commercial ones.
Minimum hold time: The shortest a position can be open and still count toward profits. Designed to stop tick-scalping. Usually 60s-2min.
News rule / news buffer: Restricts trading around high-impact news (NFP, CPI, FOMC). Typically 2-5 minutes before/after. Can void profits if violated.
Scaling plan: How your account size grows with consistent payouts. Some firms double the account every 6% gain; others require 2-3 successful months.
1-step vs 2-step vs Instant: Number of evaluation phases before funding. 1-step = single eval. 2-step = Phase 1 + Phase 2 (looser per-phase rules but more time). Instant = skip eval entirely (pay more upfront, strictest rules).
Refund / fee return: Some firms refund your evaluation fee on first payout (FundedNext is famous for this). Effectively makes the eval cost zero if you pass.
End-of-day (EOD) drawdown: A trailing drawdown that only updates at the daily close, based on your end-of-day balance. Open-trade swings during the session don't move the breach line, which makes EOD trailing much friendlier than intraday trailing for traders who let winners run.
Intraday trailing drawdown: A drawdown line that follows your highest unrealized equity in real time — common at futures firms. If a trade runs +$1,500 and returns to breakeven, your breach line has already moved up by $1,500. The strictest drawdown type; it punishes letting profits retrace.
Drawdown floor / lock: The point where a trailing drawdown stops trailing — usually once it reaches the starting balance, at some firms after your first payout. Past the floor the account behaves like static drawdown, so building an early profit buffer effectively locks in your survival line.
Breach (hard vs soft): A rule violation that ends or restricts the account. A hard breach (max drawdown, daily loss limit) closes the account immediately and forfeits the fee. A soft breach (news window, weekend hold at some firms) may only close the offending trade or void its profit — check which type each rule carries.
Sim-funded account: A "funded" account running on simulated capital: fills are demo, but payouts are real, paid from the firm's revenue. Most modern prop accounts — especially futures — are sim-funded. It changes nothing about rules or payouts, but explains how firms can offer $150k accounts for a $99 fee.
Payout cycle: The window between allowed withdrawals — weekly, every 14 days, monthly, or on-demand. Some rules (consistency caps, minimum profitable days) are measured per cycle, so cycle length changes how binding they are. Shorter cycles also mean less accumulated profit at risk to a breach.
Reset fee: A discounted price to restart a failed evaluation without buying a new challenge — typically $50-$100 or 20-40% below list. Futures firms often bundle free or cheap monthly resets into the subscription. If you expect multiple attempts, the reset price matters more than the headline price.
Activation fee: A one-time fee some futures firms charge after you pass the evaluation, before the funded account is issued — from under $100 to several hundred dollars, depending on the firm and the account size. It's part of the true cost of funding: a cheap evaluation with a high activation fee can cost more than a pricier rival with none.
Profit buffer: Profit deliberately left in the account above the drawdown line instead of withdrawn. A buffer absorbs losing streaks after a payout — stripping the account bare leaves you one bad day from a breach. Several scaling plans also require a maintained buffer to qualify.
Minimum withdrawal / first-payout threshold: The smallest amount (or minimum profit percentage) you can withdraw, plus any minimum number of funded trading days before the first payout. A firm can advertise on-demand payouts and still gate the first one behind 10+ trading days — always check both numbers.
Copy trading rule: Whether you may mirror trades between accounts. Copying between your own accounts at one firm is often fine; copying another person's trades, a signal service, or across firms frequently breaches both accounts. Distinct from the EA rule — a firm can allow bots but ban copying.
Inactivity rule: Most firms close accounts that place no trade for a set period — commonly 30 days, sometimes as few as 14. It applies to funded accounts too, so a long break can silently kill a live account. One small trade inside the window resets the clock.
Mandatory stop-loss: A rule requiring every position to carry a stop-loss, sometimes within seconds of entry. Consequences range from a warning to a hard breach depending on the firm. It exists to cap tail risk — and it disqualifies strategies that manage exits mentally rather than with resting orders.
Max lot / contract limit: A cap on position size, quoted in lots (forex) or contracts (futures), usually scaling with account size. It limits how fast you can pass — and how fast you can blow up. Some firms halve the cap during news windows or on funded accounts; exceeding it is typically a soft breach.

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