Prop firm terms explained: a plain-English glossary
Prop firm terms pages use a vocabulary of their own. This is what the common phrases mean — in plain English, with no recommendation attached. Where a term means different things at different firms, we say so.
Evaluation / challenge
The test you pay to take. You trade a simulated account under a set of rules; if you hit the profit target without breaking a rule, you "pass" and move to the next stage. The fee is the firm's main source of revenue from most customers.
Profit target
The amount of simulated profit you must reach to pass, usually expressed as a percentage of the account size. A higher target makes the evaluation harder.
Drawdown
The most you are allowed to lose before the account is closed. The word hides three quite different rules:
- Static drawdown — a fixed floor. It never moves.
- End-of-day trailing drawdown — the floor rises as your closed balance rises, recalculated once a day.
- Intraday trailing drawdown — the floor rises with your unrealised peak, tick by tick. A trade that goes up and comes back can move your floor even though you never banked the gain. This is the version traders most often misunderstand.
Firms also differ on whether the drawdown stops trailing at some point (often once it reaches the starting balance) or keeps going.
Daily loss limit
A separate, smaller cap on how much you may lose in one session. Breaching it usually closes the account, though at some firms it only locks trading for the day.
Consistency rule
A cap on how much of your total profit may come from a single day — for example, no one day may account for more than a set percentage of the total. It exists to stop one lucky trade from passing an evaluation. Some firms apply it only in the evaluation; some apply it to payouts too; some have removed it entirely.
Minimum trading days
The smallest number of days on which you must place at least one trade before you can pass or request a payout. A "trading day" sometimes has a minimum size attached.
Activation fee
A second payment, charged after you pass the evaluation, before the funded-stage account is opened. Not every firm charges one. Where it exists, it is often the least visible number on the pricing page.
Reset fee
What you pay to restart an evaluation after breaking a rule, rather than buying a new one. Usually cheaper than a fresh purchase.
Simulated funded account / "sim funded"
The stage after the evaluation. Despite the name, at most firms this is still a simulated account: no real capital is allocated to you. The firm pays you a share of your simulated profit out of its own revenue. This is worth understanding clearly, because it explains why payout rules matter so much — the payout is not a transfer of your money, it is a payment by the firm under its own conditions.
Profit split
The percentage of simulated profit the firm pays you. Some firms scale it up over time; some let you buy a higher split for a fee.
Payout cap / payout cycle
Limits on how much and how often you can be paid. A cap limits the size of each payout; a cycle sets how many days must pass between requests. Changes to these are among the most common adverse changes we see.
Scaling plan
A schedule under which the account size grows if you hit certain milestones. Read the conditions carefully: the milestones are sometimes defined in ways that are hard to reach.
Where the live numbers are
This page explains the words. For what any specific firm currently says, go to that firm's own terms page — and to its page here to see what has changed over time.