Prop-firm glossary

Short, plain-English definitions of the terms you meet in prop-firm challenges. Firms word their rules differently, so always check your firm’s own definition.

Profit target: The profit, usually a percentage of the starting balance, that you must reach to pass a challenge phase.
Maximum drawdown: The largest loss an account may take, measured from a reference level, before the account fails.
Static drawdown: A maximum drawdown whose floor is fixed at the starting balance minus the allowed loss and never moves.
Trailing drawdown: A maximum drawdown whose floor follows your highest balance or equity upward, a fixed distance below it.
End-of-day (EOD) drawdown: A trailing drawdown that updates its floor only from the balance at the daily close, not from intraday highs.
Daily loss limit: The most an account may lose within one trading day, usually a percentage of the starting balance or of the day’s opening balance.
Consistency rule: A rule that limits how much of your total profit may come from a single day or trade.
Minimum trading days: The smallest number of days on which you must place at least one trade before a challenge phase can be passed.
Time limit: The maximum number of calendar or trading days allowed to reach the profit target.
Evaluation vs funded account: The evaluation (challenge) is the paid test with a profit target; the funded account is what you trade after passing, where profits can be paid out.
Profit split and payouts: The share of funded-account profits paid to you, and the conditions for withdrawing it.
Scaling plan: A firm’s rules for increasing the size of a funded account after consistent profitable performance.
Reset: A paid restart of a challenge with a fresh balance, usually offered after a failed attempt or before one fails.
News trading rules: Restrictions on opening, closing or holding trades around scheduled high-impact economic releases.
Balance vs equity: Balance counts only closed trades; equity is balance plus the profit or loss of open trades.
High-water mark: The highest balance or equity an account has reached; trailing drawdowns are measured from it.
Risk per trade: The amount you would lose if a trade hits its stop, usually stated as a percentage of the account.
Expectancy: The average result per trade, after costs, usually expressed in R (multiples of the amount risked).