PPTFGlossary of prop trading terms
A glossary of prop trading terms: twenty-two concepts that appear in firms' rules and in conversation. Each definition is not a translation but what the concept changes in practice.
Why a translation is not enough
Most prop trading terms come straight from English, and their translation is obvious. The problem is elsewhere: one and the same word means different rules at different firms. “Maximum loss 10%” is both a static threshold from the start and trailing from the peak: the translation is identical, the consequences opposite.
So the definitions below state not only the meaning but what depends on the concept in practice. The word props, incidentally, appears in no rules or contracts at all — it is a colloquial shortening, and in correspondence with support the formal terms are better.
Twenty-two terms
| Term | What it means and what it affects |
|---|---|
| Drawdown | A loss from the previous high. In the rules it appears as daily loss and maximum loss. |
| Daily limit (daily loss) | The maximum loss over a single trading day. It resets every firm day. |
| Maximum limit (maximum loss) | The maximum loss over the whole life of the account. It never resets. |
| Trailing (trailing drawdown) | A drawdown threshold measured from the peak reached rather than from the start. It travels up and does not come back. |
| Static threshold (static) | A threshold from the starting balance. It stays put, so profit works as a cushion. |
| Equity | Balance plus the result of open positions. If the limit is measured from equity, a floating loss already reduces the cushion. |
| Target (profit target) | The profit target for closing a stage. At two-step programmes around 10% and 5%. |
| Challenge | A paid evaluation before access to the firm's account. |
| Funded account | The account after the evaluation is passed: no profit target, the limits remain, and a split appears. |
| Instant funding | Access to an account with no evaluation stage, for a higher fee. |
| Split (profit split) | The rule for dividing profit. The notation 80/20 means 80% to the trader. |
| Reset | A paid reset of the account after a failure. Cheaper than a new challenge, but not always available after a breach. |
| Consistency rule | A cap on the share of one day in a stage's profit. It rules out passing on a single trade. |
| Minimum trading days | A requirement for the number of days with activity. It sets the floor on the length of a stage. |
| Scaling plan | A plan for growing the account, and sometimes the split, on results over several cycles. |
| Best Day Rule | A variety of consistency: the best day no more than a set share of the profit of all winning days. |
| KYC | An identity check. Most often done before the first payout, less often at purchase; the name on the document must match the name on the account. |
| Hedging between accounts | Opposing positions on linked accounts. At most programmes it counts as manipulation and closes every account at once. |
| Multiple accounts | Several accounts held by one person. Usually allowed with restrictions: total capital under a cap, and linked trades between accounts prohibited. The wordings differ widely — look for them in the rules. |
| Pip value | The value of one pip of movement on one lot. Exactly $10 on pairs quoted in dollars (EUR/USD, GBP/USD); on USD/JPY and USD/CAD it depends on the rate, and on metals, indices and crypto it is derived from the contract size. |
| Props | A colloquial name for prop firms and prop accounts. It appears in no rules or contracts. |
| A simulated account | An account where execution is computed inside the firm's system rather than going out to the market. |
The terms are ordered by meaning rather than alphabetically: first drawdowns and their bases, then the stage conditions, then payouts and checks. That way you can see which concepts are linked.
“Props” is slang: four terms that are commonly misunderstood
Frequently asked questions
What does the word “props” mean?
A colloquial shortening of “prop firms” or “prop accounts”. It appears in no rules, contracts or correspondence with support — there the terms used are prop firm, prop trading account or funded account.
Are drawdown and a “drawdown” the same thing?
Yes, the word comes straight from English. What matters is not the word but the qualifier: daily or maximum, from balance or from equity, static or trailing. Without those qualifiers the term sets no rule.
How does a target differ from a profit target?
In no way, they are the same: profit target. The order of magnitude at two-step programmes is about 10% on the first stage and about 5% on the second.
What is equity and why should I know it?
The account balance plus the result of open positions. You need to know it because some firms measure the drawdown limit from equity: then an open loss reduces the cushion even though the trade is not closed.
Are a reset and a new challenge different things?
Yes. A reset restarts an existing account and costs less; a new challenge is bought afresh. But a reset is usually unavailable after a breach of a ban, whereas after a breached limit it is more often allowed.
What does the Best Day Rule mean?
A variety of the consistency rule: the best day must not give more than a set share of the profit of all winning days. At FTMO's 1-Step it is 50%. The rule rules out passing on a single lucky trade.
What is pip value and why does it differ?
The value of a one-pip move at a size of one lot. It depends on the contract size and the quote: for a standard lot of a major currency pair about $10, for gold, indices and crypto other figures.
Is a simulated account the same as a demo?
Technically close, but not the same: a demo has no payouts, while on a simulated prop account the payout is real and comes from the firm's funds. The difference lies in the contract, not in how execution works.
How does a funded account differ from a challenge?
It is the next stage of the same account. A challenge has a profit target, a funded account does not; the drawdown limits are identical, and on the funded account a split, a threshold and a payout cycle are added.
Where do I find definitions in a firm's own rules?
In the Trading Objectives or Trading Rules section — that is where the numbers are set — and in the General Terms, where the concepts are defined. Discrepancies between those sections do occur, and in that case what the contract says decides.
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