Prop trading glossary

32 terms that decide whether you pass and get paid, in plain English.

Activation fee CFD Consistency rule Copy trading Cost per $1K Daily loss limit End-of-day (EOD) drawdown Evaluation / challenge Expert advisor (EA)Fee refund Funding rate Instant funding KYC Leverage Lot / contract size Max drawdown Minimum trading days News trading One-step challenge PA Score Payout cap Payout cycle Perpetual futures Profit split Profit target Prop firm Reset Scaling plan Static drawdown Trailing drawdown Two-step challenge Weekend holding

Activation fee: A one-time charge some firms, mostly futures, take after you pass and before the funded account goes live.
CFD: Contract for difference: you trade the price change without owning the asset. Multi-asset prop firms offer crypto, indices and commodities as CFDs.
Consistency rule: A cap on how much of your total profit can come from one day or one trade, such as no day above 40% of the target. It may apply to the evaluation, the funded account or both.
Copy trading: Mirroring trades from another account or trader. Usually banned between different people, sometimes allowed between your own accounts.
Cost per $1K: Evaluation fee divided by account size, times 1,000. The fairest way to compare a $49 $5K challenge with a $499 $100K one.
Daily loss limit: The most you can lose in one trading day. Firms measure it from the day's starting balance, starting equity or the higher of the two. Read the wording.
End-of-day (EOD) drawdown: A trailing drawdown that only updates on the daily close, ignoring intraday highs. Common at futures firms.
Evaluation / challenge: A paid test with a profit target and loss limits. Pass it and you get a funded account. Fail it and the fee is gone unless the firm offers a retry or refund.
Expert advisor (EA): An automated strategy running on MetaTrader. Firms allow, restrict or ban them, and many ban copy-trading EAs across accounts.
Fee refund: Return of the evaluation fee, usually paid with the first or a later payout from the funded account.
Funding rate: The periodic payment between long and short holders of a perpetual future. It can add to or subtract from your profit if you hold through funding times.
Instant funding: A funded account with no evaluation. Costs more up front and usually comes with tighter drawdown or lower splits.
KYC: Know Your Customer identity checks. Most firms require them before the first payout or before the funded contract.
Leverage: Position size relative to account balance. High leverage doesn't change the drawdown limit, it only makes it easier to hit.
Lot / contract size: The unit of position size: lots for forex and CFDs, contracts for futures. Prop firms often cap the maximum lots or contracts per account size.
Max drawdown: The overall loss limit for the account. Breach it once and the account is closed.
Minimum trading days: The number of days you must place trades before you can pass a phase or request a payout.
News trading: Trading around high-impact economic releases. Some firms ban opening or closing trades a few minutes either side of the release.
One-step challenge: A single phase: hit the target once without breaching the limits. Usually a higher target or tighter drawdown than each phase of a two-step.
PA Score: PropAnalyse's 0 to 10 score. Trust 30%, cost 20%, rules 20%, payout 20%, track record 10%. Missing data scores 4/10. The formula is public on the methodology page.
Payout cap: A maximum amount per withdrawal, often tied to account size. Common at crypto-native firms.
Payout cycle: How often you can withdraw: on demand, weekly, bi-weekly or monthly. The first payout often has its own waiting period.
Perpetual futures: Crypto futures with no expiry date. A funding rate paid between longs and shorts keeps the price close to spot. Crypto-native prop firms mostly trade perps.
Profit split: Your share of the profits on a funded account. Headline figures like 90% or 100% often only apply after scaling or as a paid add-on.
Profit target: The gain, as a percentage of the starting balance, you need to pass a phase.
Prop firm: A company that lets traders trade its capital (usually simulated) in exchange for a share of profits. Most retail prop firms earn mainly from evaluation fees.
Reset: Paying to restart a failed or struggling evaluation, usually at a discount to a new one.
Scaling plan: Rules for growing account size or split after consistent profitable months.
Static drawdown: A max drawdown fixed relative to the starting balance. The floor never moves.
Trailing drawdown: A max drawdown that follows your highest equity upwards, so unrealised profit you give back counts against you. Often stops trailing at the starting balance.
Two-step challenge: Two phases in a row, often 8% then 5% targets. Cheaper per dollar of account at many firms, but slower.
Weekend holding: Keeping positions open over the weekend. Matters a lot for crypto, which trades all week.