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Glossary
Prop trading terms, defined against real firm data
Plain-English definitions of the prop firm rules and terms that decide whether a trader passes, keeps an account, or gets paid.
47 terms
A
- Account SizeWhat account size means in prop trading, how it shapes profit targets, drawdown limits and fees, plus the misconception traders get wrong.
- Activation FeeWhat an activation fee is at prop trading firms, when it's charged, and why it differs from the evaluation fee. Plain-language glossary definition.
- Allocation LimitWhat an allocation limit is in prop trading, why firms cap total funded capital per trader, and the mistake traders make with it.
- Automated TradingWhat automated trading means for prop firm traders, why rules vary by firm, and the misconception that all EAs and bots are treated equally.
C
- Challenge FeeWhat a challenge fee is, when it's refunded, and how it differs from activation and admission fees at prop trading firms.
- Consistency RuleWhat the consistency rule means at prop firms, how it's calculated, and why one big trading day can delay your payout.
- Copy TradingWhat copy trading means for prop firm traders, why most firms restrict it to your own accounts, and the risks of using trade copiers.
D
- Daily Loss LimitWhat a daily loss limit is, how prop firms calculate it, and why breaching it ends a challenge or funded account instantly.
- Data FeedWhat a data feed is in prop trading, why it matters for challenge and funded accounts, and the most common misconception traders have about it.
- Depth Of MarketWhat Depth of Market (DOM) means for prop traders: how the order book shows liquidity, why it affects spreads and slippage, and how to read it.
- Drawdown LockWhat a drawdown lock is, when it triggers, and why it can help or hurt a funded trader's effective risk buffer.
F
- Floating PnLFloating PnL is the unrealized profit or loss on open trades. See how it affects equity, margin, and daily loss limits in prop trading.
- Front MonthWhat is the front month futures contract, why liquidity matters, and how trading the wrong contract can trigger account liquidation on a prop account.
- Funded AccountWhat a funded account is, how traders get one, and the rules that keep it active. Clear definition with examples for retail traders.
G
H
- Hard BreachWhat a hard breach means in a prop firm challenge or funded account, why it closes your account instantly, and how it differs from a soft breach.
- HedgingWhat hedging means in prop trading, why most firms restrict cross-account hedging, and the rule traders most often get wrong.
- HFTWhat high-frequency trading (HFT) means for prop firm traders, why most firms restrict it, and how it differs from normal fast trading.
- High Water MarkWhat a high water mark is in prop trading, how it sets trailing drawdown floors, and the misconception that trips up funded traders.
I
- Inactivity RuleWhat the inactivity rule means for prop firm challenge and funded accounts, why it exists, and the biggest misconception traders have about it.
- Instant FundingWhat instant funding means at prop firms: skip the evaluation, trade a funded account from day one, and what rules still apply.
K
L
M
- Maximum LossWhat maximum loss means in a prop firm challenge, how static and trailing drawdown rules differ, and why breaching it ends your account.
- Maximum Loss Per TradeWhat Maximum Loss Per Trade means in prop firm rules, how combined positions count, and the misconception that trips up most traders.
- Maximum PositionWhat maximum position means in prop trading: the cap on open exposure per account, how firms enforce it, and the mistake traders make with splitting orders.
- Minimum Payout ThresholdWhat a minimum payout threshold means in prop trading, why firms set one, and the misconception that trips up new funded traders.
N
- News Trading RestrictionWhat a news trading restriction means at prop firms, why it exists, and the misconception traders get wrong about blackout windows.
- NinjaTraderNinjaTrader is a desktop trading platform prop traders use for futures charting, execution and automation via Rithmic, Tradovate or CQG feeds.
O
P
- Pay After You PassCompare pay-after-you-pass fees at listed prop firms. See The5ers Bootcamp entry and remaining fees, plus how activation charges and refunds differ.
- PayoutWhat a payout is in prop trading: how withdrawals of trader profit share work, what gates them, and what traders commonly misunderstand.
- Payout CycleWhat a payout cycle is in prop trading, how the interval and review process work, and the mistake traders make about requesting withdrawals.
- Price Limit RuleWhat the Price Limit Rule means for futures prop traders, why firms enforce it, and the common mistake traders make about it.
- Profit SplitWhat a profit split is, why it matters, and the common mistake traders make when comparing prop firm payout percentages.
- Profit TargetWhat a profit target is in prop firm challenges, why it exists, and the misconception that trips up most traders. Clear, grounded definition.
R
- Restricted CountriesWhat restricted countries mean for prop firm traders, why firms enforce them, and the residency vs travel mix-up traders make.
- RithmicWhat is Rithmic? Learn how this futures data and execution network connects prop firm accounts to trading platforms like NinjaTrader and Sierra Chart.
S
- SlippageWhat slippage means for prop firm traders, why it happens, and the rule mistake that costs evaluation accounts. Clear definition and example.
- Soft BreachWhat a soft breach means at a prop trading firm, how it differs from a hard breach, and why the rule varies from firm to firm.
- Static DrawdownWhat static drawdown means in prop trading, how it differs from trailing drawdown, and the common mistake traders make about it.
T
- Trading HoursWhat trading hours mean at prop firms, why they vary by asset and firm, and the common mistake traders make about overnight positions.
- TradingViewWhat TradingView is, how prop traders use it for charting and execution, and why data-feed speed and platform compatibility matter.
- TradovateWhat Tradovate is, how prop firms use it for futures evaluations, and the platform quirks traders often misunderstand.
- Two-Step ChallengeWhat a two-step challenge is, how Phase 1 and Phase 2 differ, and the common misconception traders have about it.