Prop firm terminology can be confusing when you're starting out. This glossary covers every key term you'll encounter — from drawdown types to payout mechanics — with clear definitions and links to the relevant calculators where applicable.
Drawdown
The maximum amount an account can lose before being terminated. Measured from a peak (trailing) or starting point (static). Two types: trailing drawdown (floor moves up with profits) and static drawdown (floor is fixed from day one).
→Drawdown CalculatorTrailing Drawdown
A drawdown floor that rises as the account grows but never falls. The floor is always X% below the account's highest point. Can be EOD (updates daily at close) or intraday (updates in real-time with unrealised P&L).
→Drawdown TrackerStatic Drawdown
A fixed drawdown floor calculated once from the starting balance. The floor never moves regardless of how much profit is made. Generally more trader-friendly than trailing drawdown.
Daily Loss Limit
The maximum loss permitted in a single trading day. Once hit, the trader is locked out for the rest of the day. Usually 3–5% of account size. Can be based on starting balance or previous day's closing balance.
→Max Daily Loss CalculatorProfit Target
The minimum profit required to pass an evaluation or qualify for a payout. Usually 8–10% of account size for evaluation accounts, and often 5–10% per payout cycle for funded accounts.
Profit Split
The percentage of trading profits the trader keeps. An 80/20 split means the trader keeps 80% and the firm takes 20%. Only applies to profits above the starting balance.
→Profit Split CalculatorConsistency Rule
A rule requiring that no single trading day represents more than a set percentage (typically 30%) of total net profit. Designed to filter out traders who got lucky on one day rather than showing repeatable performance.
→Consistency Rule CalculatorEvaluation / Challenge
The test phase where a trader proves they can hit a profit target while staying within drawdown and daily loss rules. Successful completion leads to a funded account. Fees typically range from $50–$600.
Funded Account
A real or simulated live account provided by a prop firm after passing the evaluation. The trader earns a share of profits generated on this account.
Lot Size
The number of units (or contracts) traded in a position. In forex, a standard lot = 100,000 units. In futures, a lot = one contract. Correct lot sizing is essential for risk management.
→Position Size CalculatorR-Multiple
A way to express trade outcome as a multiple of the risk taken. A trade that makes twice what it risked is +2R. A trade that loses its full stop is −1R. R-multiples allow fair comparison across trades of different sizes.
Expectancy
The average profit per trade expected over many trades, accounting for both win rate and risk/reward ratio. Positive expectancy means a strategy is profitable over time. Formula: (Win rate × Average win) − (Loss rate × Average loss).
→Win Rate CalculatorScaling Plan
A firm's programme for increasing a trader's funded account size after demonstrating consistent profitability over a set period. Typically increases account by 25–50% after hitting certain milestones.
Qualifying Day
A trading day that meets a minimum profit threshold set by the firm. Some firms require a minimum number of qualifying days before a payout is processed.
→Payout Qualification CalculatorEOD (End of Day)
Refers to the end-of-day balance used as the reference point for trailing drawdown calculation. With EOD trailing, the floor only updates once per day at the closing balance — unrealised intraday gains don't move it.
Intraday Trailing
A trailing drawdown variant where the floor updates in real-time with open unrealised profits. More aggressive than EOD trailing. Common on Apex funded accounts.
Payout Cycle
The schedule on which payouts are processed. Most firms pay bi-weekly. The first payout often has additional requirements compared to subsequent ones.
Risk/Reward Ratio (R:R)
The ratio of potential reward to potential risk on a trade. A 1:2 ratio means risking $1 to make $2. Higher R:R ratios require lower win rates to be profitable.
→Risk/Reward CalculatorAll Tools in One Place
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