Prop-Trading-Glossar

A proprietary trading firm gives traders access to the firm's own capital rather than asking them to risk their own deposits. Traders earn a share of the profit they generate and the firm absorbs the losses.

A prop firm is not a broker. It does not accept deposits, hold client funds, or execute trades on behalf of customers, so the relationship is a performance agreement rather than a brokerage account.

Auch bekannt als: prop firm, proprietary trading firm, prop trading

A challenge is the skills test a prop firm uses to decide who gets a funded account. The trader pays a one-time entry fee and must hit a profit target without breaking the firm's risk rules.

The challenge runs in a simulated environment. Passing it is what unlocks a funded account, at which point profit share becomes real money.

Auch bekannt als: evaluation, assessment, audition

A 1-Phase evaluation asks the trader to reach a single profit target before funding. A 2-Phase evaluation splits the same journey into two smaller targets, which makes each individual step easier to clear.

1-Phase is the faster route and usually carries the higher entry fee. 2-Phase is cheaper to enter and more forgiving step by step, but takes longer overall. Risk rules are typically identical across both.

Auch bekannt als: one step, two step, 1-step, 2-step, single phase

The profit target is the percentage gain a trader must reach during an evaluation phase to advance. It is measured against the account's starting balance, not against peak equity.

Once a trader is funded there is normally no profit target left to hit. The account simply trades and withdraws on a payout cycle.

Auch bekannt als: target, profit goal

A minimum trading days rule requires a trader to be active on a set number of separate days before passing an evaluation or requesting a payout. It exists to filter out single lucky trades.

The count is days on which at least one position was opened, not calendar days elapsed. Firms often set a different minimum for evaluations than for funded payouts.

Auch bekannt als: min trading days, trading days requirement

A consistency rule caps how much of a trader's total profit may come from a single day or a single trade. It stops one oversized gamble from passing an evaluation that steady trading was meant to prove.

Firms enforce it differently. Some raise the profit target when one day dominates, some delay a payout, and some fail the account outright. Check which mechanism applies before sizing up.

Auch bekannt als: consistency, best day rule

A funded account is the account a trader receives after passing every evaluation phase. Profits made on it are shared with the trader according to the profit split.

The risk rules usually carry over from the evaluation, but the profit target disappears. Some firms tighten requirements, for example by making stop losses mandatory.

Auch bekannt als: live funded, funded trader account

A scaling plan increases the size of a funded account after a trader shows sustained profitability over a defined review period. Larger capital means a larger absolute profit share on the same percentage return.

Scaling is normally assessed on consistency across several months rather than on a single strong month.

Auch bekannt als: scaling, account growth, capital scaling

A reset returns a breached or stalled evaluation account to its starting balance so the trader can attempt the challenge again, usually for a reduced fee compared with buying a new challenge.

Auch bekannt als: retry, account reset

Drawdown is the decline in an account's value from a reference point down to its low. Prop firms turn it into a hard rule: breach the limit and the account fails immediately.

Drawdown is the single most common reason evaluations fail, and the exact reference point (starting balance, previous day's close, or highest equity) changes the rule completely. Always confirm which one applies.

Auch bekannt als: dd, loss limit

Daily drawdown is the most an account may fall within a single trading day before it is failed. It resets at a fixed time each day, commonly midnight UTC.

It is normally measured on equity, not balance, which means a large floating loss on an open position can breach the limit even though no trade has been closed.

Auch bekannt als: max daily loss, daily loss limit, daily stop

Maximum total loss is the floor an account may never fall below at any point in its life, regardless of how long it takes to get there. Touching it ends the account.

Unlike the daily limit, it does not reset. It usually applies during evaluations and on funded accounts alike.

Auch bekannt als: max total loss, overall drawdown, max loss

A static drawdown floor is fixed against the starting balance and never moves. A trailing drawdown floor follows the account's highest equity upward, so profitable trading raises the level at which the account fails.

Trailing is materially harder. A trader who gains and then gives it back can breach a trailing limit while still being up on the starting balance. Static is the more forgiving structure.

Auch bekannt als: trailing drawdown, static drawdown, trailing dd

Balance is the settled cash in an account, counting only closed trades. Equity is the balance plus or minus the profit and loss on positions still open.

This distinction decides whether a trader is breached. Most prop firms measure drawdown on equity, so an open losing position can fail an account that looks healthy on balance alone.

Auch bekannt als: floating pnl, unrealised, unrealized

A breach is any violation of a firm's trading rules. A hard breach, such as exceeding a drawdown limit, ends the account automatically. A soft breach, such as missing a minimum trading day, is usually correctable.

Knowing which category a rule falls into matters more than knowing the rule itself, because only one of them is recoverable.

Auch bekannt als: violation, rule break, blown account

A stop loss requirement obliges a trader to attach a protective exit to every position. Firms use it to cap the damage a single trade can do to capital they are underwriting.

It is often optional during an evaluation and mandatory once funded, since that is the point at which the firm's own money is exposed.

Auch bekannt als: mandatory stop loss, sl requirement

Risk per trade is the share of account value a trader stands to lose on a single position if the stop loss is hit. Prop firms often cap it explicitly to prevent one position from approaching the daily limit.

Auch bekannt als: per-trade risk, position risk

The profit split is the proportion of trading profit the trader keeps, with the remainder retained by the firm. It applies only to funded accounts, never to evaluation phases.

Some firms sell an upgrade that raises the trader's share. Compare the split against the entry fee rather than in isolation, since a higher split on a costlier challenge is not automatically better value.

Auch bekannt als: profit share, split, revenue share

The payout cycle is how often a funded trader may request a withdrawal of their profit share. It is usually expressed as a minimum number of days between requests.

Two separate clocks normally apply: elapsed days since the last payout, and a minimum number of active trading days. Both must be satisfied.

Auch bekannt als: withdrawal cycle, payout frequency, payout schedule

An entry fee refund returns the trader's original challenge cost, typically alongside their first payout after passing. It converts the fee into a deposit against future earnings rather than a sunk cost.

The refund is normally conditional on passing and reaching a first payout. Failed evaluations are not refunded.

Auch bekannt als: fee refund, refundable fee

Simulated capital is trading capital that exists in a professional-grade simulated environment fed by real institutional pricing, rather than orders routed to a live exchange.

The trading environment is simulated but the payouts are real: the firm pays the profit share from its own funds. This is the standard structure across the prop-firm industry and is why a prop firm is not a broker.

Auch bekannt als: demo capital, virtual account, simulated account

An Expert Advisor is software that opens and manages trades automatically according to a coded strategy. Many prop firms prohibit them so that evaluations measure a human trader's judgement.

Where EAs are banned, firms typically detect them through timing and pattern analysis rather than by inspecting software, so near-identical execution intervals can flag an account.

Auch bekannt als: ea, bot, algo, automated trading, robot

Copy trading replicates another account's positions automatically. Prop firms restrict it because it makes an evaluation a test of the source account rather than of the applicant.

The restriction usually extends to copying between a trader's own accounts, since that would multiply a single strategy across several funded allocations.

Auch bekannt als: mirror trading, trade copier, signal copying

Martingale is a strategy that increases position size after each loss in the expectation that an eventual win recovers everything. It produces long stretches of small gains punctuated by catastrophic losses.

Prop firms ban it because its risk profile is precisely inverted from what a drawdown limit is designed to control.

Auch bekannt als: martingale strategy, doubling down

Grid trading places a ladder of orders at fixed intervals above and below a price, adding exposure as the market moves against the position. It is commonly restricted for the same reason as martingale.

Auch bekannt als: grid strategy, grid

Latency arbitrage exploits the delay between a price feed and the platform quoting it, capturing gains that come from the infrastructure rather than from a market view.

Firms treat it as an exploit rather than a strategy, because the profit is extracted from the simulation's pricing lag rather than earned from the market.

Auch bekannt als: latency trading, arbitrage, tick scalping

A news trading window is a short blackout around scheduled high-impact economic releases during which new positions may not be opened. Existing positions can normally be held through it.

The restriction targets the spread widening and slippage around a release, not news trading as a discipline. Check the economic calendar before opening near a red-flagged event.

Auch bekannt als: news restriction, high impact news, news blackout

Hedging holds offsetting positions in correlated or opposing instruments to neutralise exposure. Prop firms restrict hedging across multiple accounts, because it can lock in a guaranteed pass on one account by sacrificing another.

Auch bekannt als: hedge, opposite positions

Weekend holding is keeping positions open across the market close on Friday. Firms that forbid it force a flat book before the weekend to avoid gap risk at the Sunday open.

This varies more between firms than almost any other rule, and a forced Friday close materially changes which strategies are viable.

Auch bekannt als: weekend positions, overnight holding, swap holding

KYC is the identity check a firm performs before releasing money to a trader, typically requiring government-issued photo identification and a recent proof of address.

It is normally required before a first payout rather than at signup, so a trader can buy and complete a challenge before ever submitting documents.

Auch bekannt als: know your customer, identity verification, id check

A restricted jurisdiction is a country where a firm will not offer its services, usually because of sanctions, local financial regulation, or payment restrictions.

The list changes over time as regulation and sanctions move, so it is worth checking the current terms rather than relying on a figure quoted elsewhere.

Auch bekannt als: restricted country, blocked country, geo restriction

An inactivity policy allows a firm to suspend or close an account that has gone unused for a defined stretch of time. Placing a single trade within the window normally keeps the account in good standing.

Firms typically send several notifications before acting, and a suspended account can often be reinstated by contacting support within a grace period.

Auch bekannt als: dormant account, inactive account