Prop Trading Glossary

Always confirm whether the firm measures drawdown from balance, equity, high-water mark, or end-of-day equity. Two firms can advertise the same percentage but enforce very different risk floors.

The reset time matters. A server-midnight reset can punish trades held across sessions, especially if floating loss counts against equity-based limits.

Trailing drawdown is strictest during early profit runs. It can convert unrealized gains into a higher loss floor before you have withdrawn or locked in any real payout.

Headline splits are not enough. Check payout minimums, consistency rules, refund rules, and whether the first payout has different eligibility than later payouts.

Profit target should be judged against max drawdown. A 10% target with 6% drawdown is much tighter than an 8% target with 12% drawdown.

Scaling plans often require clean payouts, minimum active days, or no rule breaches. Treat the maximum allocation as conditional, not guaranteed.

One-step challenges feel faster but often carry stricter drawdown, higher fees, or consistency rules to offset the shorter path.

Two-step models usually reduce the chance of reckless single-phase passing, but they extend time-to-funding and may add more minimum-day constraints.

Instant funding can include tighter drawdown, lower profit split, delayed payouts, or simulated capital rules. Verify whether it is actually paid from trader performance or internal bookkeeping.

EA allowance rarely means all automation is allowed. HFT, latency arbitrage, tick scalping, copy trading, and account mirroring may be separately banned.

Lot size interacts with leverage, stop distance, and drawdown limits. Passing a challenge usually depends more on risk per trade than account size alone.

High leverage is flexibility, not permission to oversize. Drawdown limits usually become the real leverage cap in prop trading.

Consistency rules can lower the practical value of a high profit split because they restrict how quickly and unevenly profits can be generated.

This rule stops one-shot passes. Check whether days with tiny symbolic trades count or whether meaningful volume is required.

Some firms ban opening, closing, or holding trades around news windows. The enforcement window can apply minutes before and after the event.

Many firms allow copying between your own accounts but ban copying from third-party masters or using identical trades across unrelated users.

Prop firms frequently prohibit HFT even when EAs are allowed because simulated fills can be abused by latency arbitrage.

Fast payout cycles matter only if paired with realistic minimum profit, verification, and no hidden delay after approval.

Refund conditions vary. Some firms refund at funding, some after first payout, and some only as credit rather than cash.

KYC failures can block payouts even after passing. Check country restrictions and document requirements before buying a challenge.

Large slippage around news or low liquidity can breach drawdown rules faster than planned stop-loss math suggests.

A cheap challenge can still be poor value if the drawdown is extremely tight. Compare fee, account size, and usable loss limit together.

Read disclosures carefully. The practical issue is not the label; it is whether rules, payouts, and fills are transparent and consistently enforced.