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Prop trading glossary
71 terms, defined in plain English.
Prop trading terms — the short answer
Most prop firm rules come down to four ideas: how much you must make, how much you may lose, when the loss limit is measured, and what you are not allowed to do to get there. Everything below is a variation on one of those. The terms that most often cost traders an account are the consistency rule, the trailing drawdown and the daily reset time — none of which are about trading skill.
Evaluations and challenges
10 terms.
Evaluation
A paid test requiring a trader to hit a profit target without breaching a drawdown limit, in order to qualify for a funded account.
Funded account
The account a trader receives after passing an evaluation, on which they earn a share of profits.
Instant funding
A funded account bought outright, with no evaluation to pass.
Minimum trading days
The least number of days on which you must place a trade before an evaluation can be passed.
One-step challenge
An evaluation with a single phase: hit one profit target without breaching the risk limits and you are funded.
Profit target
The percentage gain required to pass a phase of an evaluation.
Reset
Restarting a failed evaluation, usually at a discount to the original fee.
Scaling plan
A programme that increases a funded account’s size as the trader hits performance milestones.
Time limit
A deadline by which an evaluation phase must be completed.
Two-step challenge
An evaluation with two phases: a profit target, then a verification phase at a lower target before funding.
Risk and drawdown
10 terms.
Balance-based drawdown
A drawdown measured only on closed trades, so unrealised losses do not count.
Daily drawdown
The most an account may lose in a single trading day before it is failed.
Drawdown
The loss limit on an account. Breach it and the account is failed.
End-of-day drawdown
A drawdown limit recalculated once at the daily close rather than continuously.
Equity-based drawdown
A drawdown measured on live equity, so open positions count against the limit in real time.
Leverage
How much position size an account may control relative to its balance, expressed as a ratio like 1:100.
Maximum drawdown
The most an account may lose overall, measured either from the starting balance or from its peak.
Risk of ruin
The probability that a strategy loses enough to hit an account’s drawdown limit before reaching its target.
Static drawdown
A maximum drawdown fixed to the starting balance. It does not move as the account grows.
Trailing drawdown
A maximum drawdown that follows the account’s peak, tightening as profits are made.
Payouts and profit
7 terms.
Buffer
An amount of profit a funded account must hold above its starting balance before, or after, a withdrawal.
First payout
The earliest a funded trader can withdraw, usually expressed in days from funding.
Payout
A withdrawal of the trader’s share of profits from a funded account.
Payout denial
A refused withdrawal, usually because a rule breach was found when the account was reviewed.
Payout frequency
How often a funded trader may request a withdrawal — commonly on demand, weekly, bi-weekly or monthly.
Profit split
The share of trading profits the funded trader keeps, typically 70–90%.
Refundable fee
An evaluation fee returned to the trader, normally alongside a first payout.
Trading rules
10 terms.
Consistency rule
A cap on how much of total profit may come from a single day or a single trade — commonly 15–50%.
Copy trading
Mirroring trades between accounts, either your own or someone else’s.
Expert Advisor
An automated trading script, typically for MetaTrader.
Gambling rule
A clause allowing a firm to fail an account for position sizing it considers reckless, even without a hard limit breach.
Hedging
Holding opposing positions in the same or correlated instruments.
Latency arbitrage
Exploiting the delay between a firm’s quoted price and the underlying market.
Martingale
Increasing position size after a loss to recover it.
News trading
Holding or opening positions during high-impact economic releases such as NFP, CPI or FOMC.
Overnight holding
Keeping a position open through the daily close.
Weekend holding
Keeping a position open across the weekend close.
Platforms and execution
16 terms.
Commission
A per-lot or per-contract charge on each trade, separate from the spread.
cTrader
A platform favoured for transparent order execution and depth-of-market display.
DXtrade
A web-based multi-asset platform used by many prop firms as an alternative to MetaTrader.
Match-Trader
A white-label trading platform commonly deployed by prop firms running their own brand.
MetaTrader 4
The long-standing retail forex platform, still widely supported for its enormous library of Expert Advisors.
MetaTrader 5
The successor to MT4, with more instruments, more timeframes and a different scripting language.
NinjaTrader
A desktop futures platform with advanced order-flow tooling, standard across futures prop firms.
Quantower
A multi-asset platform popular with futures traders for its order-flow and volume tooling.
Rithmic
A futures order-routing and market-data provider that many platforms connect through.
Slippage
The difference between the price you expected and the price you were filled at.
Spread
The gap between the bid and ask price — the cost of entering a trade.
Swap
The interest charged or paid for holding a position overnight.
Swap-free account
An account with no overnight interest, offered so the account complies with Islamic finance rules.
TradeLocker
A browser-based platform used widely by newer prop firms, with TradingView-style charting.
TradingView
A charting platform increasingly supported for order entry directly against a prop account.
Tradovate
A cloud-based futures platform, common on futures evaluation programmes.
Markets and instruments
9 terms.
Commodities
Physical goods traded as contracts — oil, natural gas, agricultural products.
Forex
Currency trading — the most widely offered market on prop evaluations.
Futures
Exchange-traded contracts to buy or sell an asset at a set date and price.
Indices
Instruments tracking a stock index such as the S&P 500 or the DAX.
Lot
The standard unit of position size in forex — one standard lot is 100,000 units of the base currency.
Metals
Gold, silver and other precious metals, usually quoted against the dollar.
Micro contract
A futures contract at a fraction of the standard size, letting a small account trade the same market.
Pip
The standard smallest price increment in forex, normally 0.0001 of a quote.
Tick value
What one minimum price movement is worth on a futures contract.
How prop firms work
9 terms.
Affiliate link
A tracked link that pays a commission to the referrer when someone buys a challenge.
KYC
Identity checks a firm runs before releasing a payout.
Liquidity provider
The institution supplying the prices a firm’s platform quotes.
Prop firm
A company that gives a trader access to a funded account, usually after an evaluation, in exchange for a share of the profits.
Prop firm collapse
A firm ceasing operations, usually leaving unpaid payouts and voided funded accounts.
Restricted country
A country whose residents a firm will not accept, usually for sanctions or licensing reasons.
Simulated funded
A funded account that trades on simulated capital rather than in the live market, with the firm paying real profit shares.
Verification
On Prop Firm Pal, a check that a firm’s published rules, pricing and payout terms match its own documentation.
White label
A prop firm running on another company’s trading platform and back office under its own brand.
Browse Prop Firm Lists
Rankings by country, platform, assets, challenge type and more—built from live firm data.
Countries
Prop firms that accept traders from your country or region.
Platforms
MT5, cTrader, TradeLocker and other supported trading platforms.
Assets
Forex, crypto, futures, stocks and other tradable asset classes.
Features
Instant funding, scalping rules, profit splits and program benefits.
Challenges
One-step, two-step, instant funding and evaluation program types.
Trader types
Beginners, scalpers, swing traders and other trading styles.
Payment methods
Card, crypto, bank transfer and other ways to pay for challenges.
Payout methods
How firms pay traders—Wise, crypto, bank wire and more.
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FAQs — Prop Trading Questions Answered
Answers on prop firms, funded accounts, challenges and how our platform works
What is Prop Firm Pal?
Prop Firm Pal is a comparison and review platform for proprietary trading firms. We list popular prop firms, publish detailed descriptions, collect real trader reviews, and provide verified discount codes for challenges and funded accounts. Our goal is to help traders compare prop firms, save money with promo codes, and choose the best funded trading program for their needs.
How does Prop Firm Pal work?
Prop Firm Pal allows traders to browse a curated list of proprietary trading firms, read in-depth information about each firm, and view real user reviews. When you find a prop firm you like, you can click the discount code button to copy the promo code and visit the firm’s website through our link. If you complete a purchase, you receive the advertised discount and we may earn a commission from the prop firm at no additional cost to you.
What is a proprietary trading firm (prop firm)?
A proprietary trading firm, also known as a prop firm, is a company that provides traders with access to funded trading accounts. Instead of risking your own capital, you trade the firm’s funds and earn a share of the profits. Most prop firms require traders to pass an evaluation or challenge that tests consistency, risk management, and profitability before granting a funded account.
How do prop firm challenges work?
Prop firm challenges are evaluation programs where traders must meet specific profit targets while following strict risk management rules. These rules often include maximum daily drawdown, overall drawdown limits, minimum trading days, and consistency requirements. If you successfully complete the challenge and any verification phase, you can qualify for a funded trading account and receive a profit split.
How do I use a prop firm discount code on Prop Firm Pal?
To use a prop firm discount code on Prop Firm Pal, go to the prop firm’s profile page and click the discount button. The promo code will automatically copy to your clipboard and you will be redirected to the official prop firm website. At checkout, paste the code into the coupon or promo field to apply the discount to your challenge or funded account purchase.
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