Prop Trading Glossary

Activation Fee

A one-time or monthly fee some firms charge to activate a funded account after you pass the evaluation, separate from the evaluation cost.

Consistency Rule

A rule limiting how much of your total profit can come from a single day or trade, designed to reward steady trading rather than one lucky session.

Daily Loss Limit

The maximum you are allowed to lose in a single trading day. Breaching it usually fails the account, even if your overall drawdown is fine.

Drawdown

The maximum amount your account can lose from its peak before the account is breached. The drawdown model (trailing, end-of-day or static) is one of the most important differences between prop firms.

Instant Funding

A model where you skip the evaluation and pay for a funded account directly, usually with stricter rules or a lower initial profit split.

Profit Split

The percentage of profits you keep as a funded trader. Splits commonly range from 80% to 100%, sometimes scaling up as you hit milestones.

Scaling Plan

A program that increases your funded capital as you stay profitable and consistent, letting successful traders manage larger accounts over time.

Trailing Drawdown

A drawdown that follows your highest balance or equity upward, reducing your loss buffer as you make profit. It can be calculated intraday (tightest) or at end of day.