Prop trading has its own vocabulary, and misunderstanding a single term, such as trailing drawdown or best day rule, can cost you an account. Here are the terms you’ll meet most often, in plain English.
- Activation fee
- A one-time fee some firms charge when you pass an evaluation and move to a funded account, such as Topstep’s $149 on its standard path.
- Best day rule
- A consistency rule limiting how much of your total profit can come from your single most profitable day, for example 50%.
- Challenge / evaluation
- The test phase where you trade a simulated account to a profit target without breaking the loss rules.
- Consistency rule
- Any rule that limits how concentrated your profits can be in one day or one trade.
- Copy trading
- Copying trades from another person or account. Most firms ban copying third parties; some allow copying between your own accounts.
- Daily loss limit
- The most your account can lose in one trading day, usually 3–5%. Often measured on equity.
- Drawdown
- A decline from a peak in your account balance or equity. Prop firms set daily and maximum drawdown limits.
- EA (Expert Advisor)
- An automated trading program for MetaTrader. Some firms allow EAs, others ban them.
- End-of-day (EOD) drawdown
- A trailing drawdown that updates only from your closing balance, not from intraday peaks.
- Equity
- Your balance plus or minus the profit or loss on open trades.
- Funded account
- The account you trade after passing an evaluation, where you earn a share of profits. Usually still simulated.
- Hard breach
- A rule violation that immediately fails the account, such as breaking the daily or maximum loss limit.
- High water mark
- The highest balance or equity your account has reached; trailing drawdowns are measured from it.
- HFT (high-frequency trading)
- Automated trading that places very large numbers of fast orders. Banned by almost all prop firms.
- Instant funding
- A program that gives you a funded account without an evaluation, usually for a higher fee and with tighter rules.
- KYC (know your customer)
- Identity verification, usually photo ID and proof of address, required before payouts.
- Latency arbitrage
- Exploiting price-feed delays in a simulated environment. Prohibited everywhere and a common reason for denied payouts.
- Leverage
- How large a position you can open relative to your account. Firms often cap leverage on gold, indices and crypto.
- Maximum loss / maximum drawdown
- The overall floor your account can never fall below, static or trailing.
- Minimum trading days
- The number of days you must trade before you can pass or request a payout.
- News window
- The minutes before and after high-impact news when some firms restrict trading or discount profits.
- Payout cycle
- How often you can request payouts, such as weekly, bi-weekly, monthly or on demand.
- Profit split
- Your share of the profits on a funded account, typically 80–90%.
- Profit target
- The gain you must reach to pass an evaluation phase, for example 10% then 5%.
- Refundable fee
- An evaluation fee returned to you, usually with your first payout.
- Reset
- Paying to restart a failed or struggling evaluation, often at a discount.
- Scaling plan
- A program that increases your account size, and sometimes your split, as you meet profit milestones.
- Soft breach
- A rule violation that closes a trade or voids profit without failing the account.
- Static drawdown
- A maximum loss fixed below your starting balance that never moves up.
- Trailing drawdown
- A maximum loss that follows your high water mark upward as you make profits.
For worked examples, read trailing vs static drawdown, daily drawdown explained and consistency rules explained.
Prop firms we currently recommend
-
1
FTMO Best overall
- Max account
- $200,000 (more via scaling)
- Profit split
- 80%, up to 90%
- Fee from
- €89 (≈ $10K account)
- Our rating
- 4.6 out of 5
-
2
FundedNext Best for MetaTrader users
- Max account
- $200,000 (up to $4M through scaling)
- Profit split
- 80%, up to 95%
- Fee from
- $59.99 USD (confirm at checkout)
- Our rating
- 4.4 out of 5
-
3
Funding Pips Best budget pick
- Max account
- $100,000 per account (scales to $2M)
- Profit split
- 60–100% (depends on payout cycle)
- Fee from
- About $29–$36 USD ($5K)
- Our rating
- 4.3 out of 5
FAQ
What does 'funded account' mean at a prop firm?
The account you trade after passing an evaluation, where you earn a share of profits. At most firms it’s still a simulated account.
What's the difference between a hard and soft breach?
A hard breach fails the account immediately; a soft breach closes a trade or removes profit without failing the account.
What is a high water mark?
The highest balance or equity your account has reached. Trailing drawdowns are measured from it.