Glossary

The working language of prop trading.

Authoritative definitions for the rules, funding models, payout mechanics, and risk concepts you'll encounter in every prop firm rulebook and trader contract.

Buying Power Funding Models: Buying power is the total notional value a trader can hold in open positions, typically a multiple of account balance via leverage. Read full →
Challenge Fee Fees: Challenge fee is the upfront cost a trader pays to enter a prop-firm evaluation. Often refunded after the first payout. Read full →
Consistency Rule Rules: A consistency rule caps the share of total profits that can come from any single trading day, forcing steadier P&L. Read full →
Daily Loss Limit Risk: Daily loss limit is the maximum amount a trader can lose in one trading day before the account is paused or breached. Read full →
Drawdown Risk: Drawdown is the decline from a peak account balance to a subsequent low. Prop firms cap it to protect their capital. Read full →
Evaluation Funding Models: An evaluation is a paid challenge where a trader must hit a profit target while staying within risk rules to qualify for a funded account. Read full →
First-Loss Model Funding Models: In a first-loss model, the trader posts a deposit that absorbs initial losses; the firm provides amplified capital and leverage. Read full →
Free Reset Rules: A free reset lets a trader restart a failed evaluation without paying again. Used as a competitive differentiator by some firms. Read full →
Funded Account Funding Models: A funded account is the live or simulated trading account a prop firm grants after a trader passes evaluation. Most are simulated. Read full →
High-Water Mark Risk: High-water mark is the highest equity level an account has reached. Trailing drawdown and performance fees are calculated against it. Read full →
Instant Funding Funding Models: Instant funding skips the evaluation phase — pay an upfront fee and trade firm capital immediately, with risk rules active from day one. Read full →
Leverage Funding Models: Leverage multiplies a trader's buying power above the cash balance. Prop firms set leverage limits by asset class and account type. Read full →
Live Account Funding Models: A live account routes real orders to real markets, in contrast to the simulated accounts most retail prop firms use. Read full →
Max Drawdown Risk: Max drawdown is the absolute maximum loss a funded account is allowed before termination, measured from a defined reference point. Read full →
One-Step Evaluation Funding Models: A one-step evaluation is a single-phase challenge — hit one profit target without breaching risk rules and the account is funded. Read full →
Payout Compensation: A payout is the withdrawal of a trader's profit-split earnings. Frequency, minimum thresholds, and KYC requirements vary by firm. Read full →
Profit Split Compensation: Profit split is the share of net trading profits a trader keeps versus what the prop firm retains. Splits often improve with milestones. Read full →
Profit Target Funding Models: Profit target is the gain a trader must achieve during an evaluation phase to qualify for the next stage or for funding. Read full →
Prop Firm Core Concepts: A prop firm is a company that funds traders to trade proprietary capital — either real or simulated — in exchange for a share of profits. Read full →
Real-Time Drawdown Risk: Real-time drawdown includes unrealized PnL from open positions and triggers the instant the threshold is crossed, not at end of day. Read full →
Scaling Plan Compensation: A scaling plan increases a funded trader's account size as they hit consistency and profit milestones over time. Read full →
Simulated Account Funding Models: A simulated account mirrors live market conditions but does not route real orders. Most prop-firm funded accounts are simulated. Read full →
Static Drawdown Risk: Static drawdown is a fixed maximum loss measured from the account's starting balance — it does not move with account highs. Read full →
Trailing Drawdown Risk: Trailing drawdown is a maximum loss limit that ratchets upward with new account highs, locking in a portion of profits. Read full →
Two-Step Evaluation Funding Models: A two-step evaluation has a profit-target phase followed by a verification phase with a lower target — the dominant prop-firm structure. Read full →
Account Size Funding Models: Account size is the nominal capital allocated to a funded account. It determines position limits and drawdown thresholds. Read full →
Bank / Institutional Funding Models: Bank and institutional prop trading desks employ professional traders to trade real firm capital, typically with base salary plus performance bonus. Read full →
Blow Up Risk: Blow up means hitting the maximum drawdown or daily loss limit on a funded account, resulting in account termination. Read full →
Breakeven Risk: Breakeven is the price level at which a trade neither gains nor loses money after costs. Read full →
Brokerage Infrastructure: Brokerage refers to the firm that executes trades and to the commission structure charged per transaction. Read full →
Clearing Firm Infrastructure: A clearing firm settles trades and handles margin requirements between exchanges, brokers, and end-users. Read full →
Commission Fees: Commission is the fee charged per trade or per contract. In prop trading it is usually deducted from the trader's profit before the split. Read full →
End of Day (EOD) Operations: End of day (EOD) marks the close of the regular trading session and is used as the calculation moment for many prop-firm rules. Read full →
Equity Curve Analytics: Equity curve is the chart of account balance over time. Smoothness matters as much as slope. Read full →
Firm Capital Model Funding Models: In the firm capital model, the firm allocates its own capital to a trader directly — no evaluation fee, no trader deposit. Read full →
Front Running Compliance: Front running is trading ahead of a known large order to profit from the price impact it will cause. It is illegal in regulated markets. Read full →
Funded Trader Agreement Compliance: The funded trader agreement is the contract governing the trader's relationship with the prop firm, including profit splits, risk rules, and termination clauses. Read full →
High-Frequency Trading Strategy: High-frequency trading is the use of algorithms to execute large volumes of orders at extremely high speed, often held for milliseconds. Read full →
Holding Period Rules: Holding period is the length of time a position is kept open. Some firms enforce minimum or maximum holding periods. Read full →
KYC Compliance: KYC is the identity verification process required at payout. Most firms accept a passport or government ID plus proof of address. Read full →
Liquidity Execution: Liquidity is the ease with which a trade can be executed without significantly moving price. Read full →
Margin Risk: Margin is the collateral required to open and hold a leveraged position. Read full →
Margin Call Risk: A margin call is a demand to add capital or close positions because account equity has fallen below maintenance margin. Read full →
Market Maker Infrastructure: A market maker continuously quotes bid and ask prices on an instrument and profits from the spread. Read full →
News Trading Rules: News trading is entering positions around scheduled economic announcements or unexpected events. Many prop firms restrict it. Read full →
Overtrading Risk: Overtrading is taking too many trades, often driven by boredom or revenge, leading to mounting commission costs and emotional decisions. Read full →
P&L Performance: P&L (profit and loss) is the net financial result of a trader's positions over a period. Read full →
Platform Platforms: Platform refers to the trading software used to enter and manage orders. Common prop-firm platforms include NinjaTrader, MetaTrader, cTrader, and TradingView. Read full →
Position Sizing Risk: Position sizing is the process of determining how many contracts or shares to trade based on account size, stop distance, and risk per trade. Read full →
Refund Fees: Refund refers to the return of the evaluation fee, usually granted after the trader's first payout on the funded account. Read full →
Reset Rules: Reset is the option to restart an evaluation after breaching a rule, sometimes free and sometimes for a discounted fee. Read full →
Revenge Trading Risk: Revenge trading is placing trades immediately after a loss to "win it back," usually driven by emotion rather than strategy. Read full →
Risk-Reward Ratio Performance: Risk-reward ratio compares the expected gain on a trade to the planned loss. A 2:1 RRR risks $1 to make $2. Read full →
Round Turn Fees: A round turn is one open-plus-close trade. Commissions and performance stats are commonly quoted per round turn. Read full →
Scalping Strategy: Scalping is short-term trading that targets small gains on quick in-and-out positions. Read full →
Slippage Execution: Slippage is the difference between the expected execution price and the actual fill, common in fast or thin markets. Read full →
Spread Execution: Spread is the gap between bid and ask price. Tighter spreads reduce transaction costs. Read full →
Stop Loss Risk: Stop loss is a pre-set order to close a position at a specific price to cap losses. Read full →
Take Profit Risk: Take profit is a pre-set order to close a position at a target gain. Read full →
Volatility Risk: Volatility is the magnitude of price movement over time, often measured by standard deviation or ATR. Read full →
Choppy Strategy: Choppy describes a market moving sideways in a tight range, producing repeated small losses on directional trades. Read full →
Dead Cat Bounce Strategy: A dead cat bounce is a temporary recovery in a declining asset, followed by continued downtrend. Read full →
Flat Strategy: Flat means having no open positions, or describes a trading day with no net gain or loss. Read full →
Gap Up / Gap Down Execution: Gap up or gap down describes a security opening significantly higher or lower than the previous close, leaving a visible chart gap. Read full →
Long / Short Strategy: Long is a position that profits if price rises; short profits if price falls. Read full →
Order Block Strategy: Order block is a price area where institutional orders are believed to cluster, often used as a reference for entries. Read full →
Phase 1 Funding Models: Phase 1 is the first stage of a two-step evaluation: hit the profit target without breaching risk rules. Read full →
Phase 2 Funding Models: Phase 2 is the verification stage of a two-step evaluation: lower profit target, same risk rules. Read full →
Pullback Strategy: A pullback is a temporary counter-trend move within a larger trend. Read full →
Resistance Strategy: Resistance is a price level above current price where selling pressure has historically appeared. Read full →
Support Strategy: Support is a price level below current price where buying pressure has historically appeared. Read full →
Swap Fees: Swap (also called overnight financing or rollover) is the interest charged or credited for holding a forex position overnight. Read full →
Whale Strategy: Whale is slang for a trader or firm with enough capital to noticeably move price or absorb large blocks of orders. Read full →

Retail Trading Terminology

Informal slang from retail, crypto, and meme-stock trading. Not core to prop-firm decision-making, but commonly encountered in trader chat rooms and social media.

All In Retail Terminology: All in is deploying maximum position size or capital on a single trade.
Ape In Retail Terminology: Aping in is entering a position aggressively with little analysis, often driven by hype.
ATH Retail Terminology: ATH (All-Time High) is the highest price an asset has ever reached.
Bagged Retail Terminology: Bagged means stuck in a losing trade that continues moving against you.
Bagholding Retail Terminology: Bagholding is holding a losing position past the planned exit, hoping it recovers.
Blow Out Retail Terminology: A blow out is a sudden catastrophic loss that wipes out most or all of an account in one move.
BTFD Retail Terminology: BTFD ("Buy The F---ing Dip") encourages buying after a sharp price decline.
Chop Shop Retail Terminology: Chop shop is slang for a firm or strategy that produces mediocre, inconsistent results.
Diamond Hands Retail Terminology: Diamond hands describes holding a position through significant volatility without selling.
FOMO Retail Terminology: FOMO (Fear Of Missing Out) is entering a trade impulsively because price is moving without you.
HODL Retail Terminology: HODL is a deliberate misspelling of "hold," meaning to keep a position through volatility.
Paper Hands Retail Terminology: Paper hands describes exiting a winning trade too early out of fear.
Pump and Dump Retail Terminology: A pump and dump is artificially inflating an asset's price through promotion, then selling at the inflated price.
Rekt Retail Terminology: Rekt is internet slang for "wrecked" — getting completely wiped out on a trade or account.
Rug Pull Retail Terminology: A rug pull is a sudden price collapse that wipes out long positions, often after a brief rally.
Running Hot Retail Terminology: Running hot is trading with unusually large size or frequency, pushing close to risk limits.
Shill Retail Terminology: A shill promotes a trade or product with exaggerated or unsubstantiated claims, often for personal gain.
Simping Retail Terminology: Simping means blindly following another trader's calls without doing your own analysis.
Sweating Retail Terminology: Sweating describes watching a position move against you while agonizing over whether to cut.
To the Moon Retail Terminology: To the moon expresses extreme bullish expectation that an asset will rise dramatically.
YOLO Trade Retail Terminology: A YOLO trade risks an excessive amount of capital on a single setup. Almost always violates sound risk rules.