Prop trading glossary
Every term you'll hit in prop firm rulebooks, in plain English.
A-BookA model where the firm passes your orders through to the real market — its revenue comes from fees and commissions, not from your losses.Activation FeeA one-time or monthly charge to switch on your funded account after passing — budget for it and it's a non-issue.B-BookA model where the firm takes the other side of your trade internally rather than routing it to market — common in simulated environments, and a reason to judge firms by their payout record.Buffer ZoneThe cushion of profit sitting between your current balance and your drawdown floor — the number that decides how freely you can trade, and the one to grow first.CFD (Contract for Difference)A derivative that pays the difference between your entry and exit price without you owning the underlying — common at forex/CFD prop firms, and not available to US retail traders.Consistency RuleA cap on how much of your total profit can come from a single day — the firm's way of confirming you have a repeatable edge, not a lucky trade.Copy TradingMirroring the same trades across multiple funded accounts at once — a legitimate scaling strategy at many futures firms, provided you follow each firm's rules to the letter.Daily Loss LimitThe most you're allowed to lose in a single trading day — the guardrail that stops one bad session from costing you the account.Data FeesThe monthly cost of live exchange market data — a small, predictable business expense, and one you may be able to deduct.DrawdownThe maximum total loss your account can take before it's closed — the single most important number in your prop firm's rulebook.EOD DrawdownA trailing drawdown that only updates at the daily close — the trader-friendly variant, because intraday swings can't move your floor.EvaluationThe audition where you prove your trading skill on a simulated account — pass it and the firm funds you, usually for the price of a nice dinner out.Expert Advisor (EA)An automated trading program that places orders for you — powerful, permitted by many firms with conditions, and worth checking the rules on before you switch it on.Flip RuleA firm's policy on reversing your position from long to short (or back) — increasingly permitted, but always worth reading before you build a reversal strategy.Forex Prop FirmA firm that funds traders on currency pairs (and often CFDs) through an evaluation — a global model with big account sizes, and a few extra questions US traders should ask.Funded AccountThe account you earn by passing an evaluation — where your profits stop being points on a screen and start becoming payouts in your bank.Futures Prop FirmA firm that funds traders on US futures markets (ES, NQ, CL, GC) after they pass an evaluation — the most accessible route to trading serious capital in the US.Hedging RuleA firm's policy on holding opposing positions at the same time — sometimes allowed, sometimes not, and always worth confirming before you build a strategy around it.HFT RuleA firm restriction on ultra-fast, ultra-frequent trading — designed to keep evaluations reflecting real trading skill, and easy to stay clear of once you know where the line is.High-Water MarkThe highest balance your account has ever reached — the anchor point a trailing drawdown measures your loss limit from.Instant FundingSkip the evaluation and start on a funded account from day one — you pay more upfront and trade tighter rules, but you can be earning immediately.Intraday DrawdownA trailing drawdown that follows your peak unrealized equity tick by tick — the strictest variant, and the one that most rewards disciplined profit-taking.Live AccountAn account whose orders are routed to the real exchange — the tier some firms promote proven traders into, where your fills are the market's fills.MartingaleDoubling position size after a loss to recover it in one trade — a sizing pattern most firms restrict, and one that the math itself argues against.Max Position SizeThe most contracts a firm lets you hold at once — a built-in guardrail that keeps a single trade from ever deciding your account's fate.Micro ContractsOne-tenth-size futures contracts that let you trade the same markets as the pros with a fraction of the risk per tick — the smartest starting size for most funded traders.Mini ContractsThe standard E-mini futures contracts (ES, NQ) — the full-size instruments most prop firm profit targets are built around, and the size you graduate into as your buffer grows.Minimum Trading DaysThe least number of days you must trade before passing or withdrawing — the firm's request that you show a process, not a lucky session.News Trading RuleA firm restriction on holding or opening positions around high-impact economic releases — a small piece of discipline that protects your account and your payouts.One-Step EvaluationA single-phase challenge: hit one profit target without breaking the rules, and you're funded — the fastest common route to a funded account.Overnight HoldingCarrying a position past the daily close — allowed at some futures firms and not others, and one of the first rules to check when choosing where to trade.Payout CapA limit on how much you can withdraw per request or per cycle — worth knowing early, because it shapes how fast a big month reaches your bank.Payout CycleHow often you can withdraw your profits — the rhythm that turns a funded account into an actual paycheck.Profit SplitThe share of your trading profits you keep — commonly 80–90% in futures prop, and the number that turns skill into income.Profit TargetThe amount of profit you need to make to pass an evaluation — the finish line, and usually the easiest part of the challenge to plan for.Prop FirmA company that gives skilled traders access to its own capital to trade, splitting the profits with them — no personal savings required.Proprietary TradingTrading a firm's own capital rather than client money — the model that lets skilled traders earn from size they'd never be able to fund themselves.PT:DD RatioProfit target divided by drawdown — the one number that tells you how hard an evaluation actually is, and the fastest way to compare firms honestly.Reset FeeThe cost to restart a failed evaluation from scratch — usually cheaper than buying a fresh one, and sometimes the smartest money you'll spend.Rise (RiseWorks)A global contractor-payments platform some prop firms use to pay funded traders — supporting local currencies and crypto, with onboarding and tax paperwork handled up front.RithmicThe futures market-data and order-routing infrastructure behind many prop firm accounts — the plumbing that carries prices to your screen and your orders to the exchange.Scaling PlanThe path from your starting account to a much larger one — the mechanism that turns a consistent edge into a compounding income.Sim-Funded AccountA funded account traded in a simulated environment — your orders don't hit the exchange, but your payouts are real money.Static DrawdownA loss floor that's fixed at the start and never moves — the friendliest drawdown type, because every dollar you earn becomes extra room.Tick ValueThe dollar amount one minimum price move is worth in a futures contract — the number that turns chart points into real money and makes your risk plan exact.Trade CopierSoftware that replicates orders from one trading account to others in real time — the engine behind multi-account scaling, and a tool worth configuring carefully.TradovateA cloud-based futures trading platform and brokerage under the NinjaTrader Group — browser-and-mobile friendly, and a common front-end for prop firm accounts.Trailing DrawdownA maximum-loss limit that rises with your account's peak balance instead of staying fixed — the loss rule behind most evaluation failures, and the one most worth mastering.Two-Step EvaluationA challenge with two phases — a profit target, then a verification phase — that usually rewards you with cheaper fees and gentler rules.Weekend HoldingCarrying a position through the Friday close into Sunday's reopen — restricted at many futures firms, and the single biggest gap risk a funded account can take.