The Funded Trader's Glossary: Prop Trading Terms Explained

Plan pages and rule documents assume you already speak the language, and half the vocabulary means something narrower in prop trading than in the rest of finance. Here are the thirty terms a funded trader actually meets, each defined in the sense that matters at a prop firm.

The firm and the account

Prop firm

A company that evaluates traders and pays them a share of the profits they generate on accounts the firm provides. Online prop firms typically run these accounts as simulations while paying out in real money.

Evaluation

The audition phase, often called a challenge: reach a profit target while respecting loss limits to qualify for a funded account. Formats differ mainly in how many phases sit between you and funding.

Funded account

The account you trade after qualifying, or from day one on instant plans. At FFUNDED it is simulated and runs on virtual capital; the profit split paid on it is real money.

Virtual capital

The simulated balance a prop firm account trades. No real funds are placed in the market by the trader, which is how large allocations are possible, while payouts against simulated profits are real.

Instant funding

A plan type with no evaluation phase, so the account starts funded from day one. FFUNDED's Instant plans, for example, carry no profit target at all.

Refundable fee

An evaluation fee that is returned to you after you qualify. At FFUNDED, Advance and Scale plan fees are refundable while Instant fees are not.

The rules that end accounts

Profit target

The gain that completes an evaluation phase, set as a percentage of the starting balance. FFUNDED's Advance 1-Step sets it at 10 percent; Instant plans have none.

Minimum profitable days

A required count of days closed in profit, there to prove the result was not one lucky session. FFUNDED plans ask for anywhere from zero to five such days.

Drawdown

How far the account has fallen from a reference point, in percent or money. Prop firm rules split it into a daily version and an overall version, and both are hard lines.

Daily loss limit

The most an account may lose in a single trading day. On a $100,000 account with a 4 percent daily limit the line is $4,000; FFUNDED's Advance 1-Step runs exactly that number.

Maximum drawdown

The overall loss limit for the life of the account, also written as max. loss. Crossing it fails the account regardless of how the month was going.

Static drawdown

A maximum drawdown measured from a fixed reference, so the floor never moves as you profit. All FFUNDED drawdown is static.

Trailing drawdown

A maximum drawdown that follows equity upward, raising the floor as you profit. Some firms use it, and in practice it is stricter, because a good run can leave the floor sitting just beneath current equity.

Breach

A rule violation that ends or sanctions an account, most commonly crossing a drawdown line. Firms usually distinguish hard breaches, which fail the account instantly, from softer violations handled with warnings or review.

Consistency rule

A limit on how much of total profit may come from a single day or trade, forcing results to be spread out. FFUNDED's Scale plans, for example, run a ±25 percent consistency band.

Execution and market mechanics

Pip

The standard price increment in forex: the fourth decimal place on most pairs and the second on yen pairs. Stops, targets and spreads are quoted in pips.

Lot

The unit of forex trade size. One standard lot is 100,000 units of the base currency, with mini and micro lots at one tenth and one hundredth of that.

Leverage

Exposure as a multiple of the money set aside for a position, so 1:50 controls fifty times the margin. It scales losses exactly as faithfully as it scales gains.

Spread

The gap between the buy price and the sell price, paid on every trade. It is the baseline cost of trading, and it widens around news and in dead hours.

Slippage

The difference between the price you requested and the price you received, largest in fast markets. It is why a stop loss guarantees an exit but not an exact price.

Stop loss

An order that closes a losing position automatically at a level chosen in advance. On a funded account it is also what keeps any single trade from reaching the daily loss limit.

Measuring performance

R

A result expressed as a multiple of the amount risked. Risk $250 and make $500 and the trade is +2R; lose the $250 and it is -1R, which makes trades of different sizes comparable.

Risk-reward ratio

The relationship between what a trade risks and what it targets, fixed at entry. Risking 20 pips to target 60 is 1:3.

Win rate

The share of trades that close in profit. It means nothing on its own: 40 percent is excellent when winners are three times losers and ruinous when that ratio is reversed.

Expectancy

The average R earned per trade across a sample: win rate times average win, minus loss rate times average loss. Positive expectancy repeated at survivable size is the entire business.

Equity curve

The plot of account value over time, trade by trade. Its shape, whether it grinds, streaks or cliffs, says more about risk than the ending number does.

Position sizing

The calculation that converts a chosen risk percentage and a stop distance into a lot size. It is the control that decides every trade's damage in advance.

Getting paid

Profit split

The trader's share of simulated profits, paid as real money. FFUNDED splits run from 75 percent up to 100 percent depending on plan.

Payout cycle

How often payouts can be requested once the first one has been made. At FFUNDED, cycles run as short as seven days on some plans.

Scaling plan

A schedule that grows the account allocation as milestones are hit. FFUNDED scaling reaches up to $2 million on Scale plans.

Where to go next

Vocabulary settles fastest in context. See how the whole FFUNDED process works from signup to payout, the complete trading rules with every limit in one place, and a longer walk through how prop firm drawdown works, the mechanism behind half the terms above.