Glossary
Prop firm terms, in plain words.
The rules and terms traders meet in prop firm challenges and funded accounts, each defined simply, with a worked example where the numbers help.
Terms from A to Z
B
C
- ChallengeA challenge is the paid evaluation a trader takes to earn a funded account at a prop firm.
- ChargebackA chargeback is a card payment reversed by the buyer's bank after the buyer disputes the charge.
- CommissionCommission is a fee charged per trade, usually per lot or per contract, on top of the spread.
- Consistency ruleA consistency rule limits how much of an account's total profit may come from a single day or a single trade.
- Copy tradingCopy trading is copying trades from one account to another, either automatically with a copier or by following another trader's signals.
D
E
- EA (expert advisor)An EA, or expert advisor, is an automated program that runs inside a trading platform such as MetaTrader and places or manages trades by set rules.
- End of day drawdownEnd of day drawdown is a trailing loss limit that moves up only at the close of each trading day, based on the account's closing value.
- EquityEquity is an account's balance plus or minus the profit or loss on trades that are still open.
- EvaluationAn evaluation is the test period in which a trader must meet a prop firm's rules before receiving a funded account.
F
H
I
K
L
- LeverageLeverage lets a trader open a position larger than the margin set aside for it, expressed as a ratio such as 1:100.
- LiquidityLiquidity is how easily an asset can be bought or sold near its current price without moving that price.
- Lot sizeLot size is the size of a trade, measured in standard units called lots.
M
N
P
- PayoutA payout is the money a funded trader receives as their share of the profit. Many firms call it a reward.
- PhaseA phase is one stage of a prop firm evaluation, with its own profit target and usually the same loss limits.
- PipA pip is the standard unit for price changes in forex: 0.0001 for most pairs and 0.01 for pairs quoted in Japanese yen.
- Profit splitThe profit split is the share of a funded account's profit that the trader keeps. The firm keeps the rest.
- Profit targetThe profit target is the amount of profit a trader must make to pass a phase of a challenge.
R
- Refund policyA refund policy sets out when a prop firm returns a trader's fee, most often with the first reward on a funded account.
- ResetA reset restarts a challenge account at its original balance, usually for less than the price of a new challenge.
- Restricted countriesRestricted countries are the places a prop firm will not accept traders from, because of law, sanctions, payment rules or platform limits.
- Reward cycleThe reward cycle is how often a funded trader can request their share of the profit, also called a payout cycle.
- Rolling reserveA rolling reserve is a share of each day's card sales that a payment processor holds for a set period before releasing it.
S
- Scaling planA scaling plan increases a funded trader's account size after they meet set conditions, such as a profit level over a period of time.
- Simulated tradingSimulated trading is trading on an account that tracks results against real market prices without placing orders in the market.
- SlippageSlippage is the difference between the price a trader expected and the price the order actually filled at.
- SpreadThe spread is the difference between the price at which a market can be sold, the bid, and the price at which it can be bought, the ask.
- Stop lossA stop loss is an order that closes a trade automatically if price reaches a set level, to cap the loss.
T
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