Prop Firm Rules Glossary: 30 Terms, Defined Precisely

Most rule disputes come from a term that meant something slightly different from what the trader assumed. Definitions below are precise rather than approximate, and note where firms vary.

A to D

Balance-based drawdown — A drawdown calculated from closed-trade balance only. Open positions moving in your favour do not raise the reference point. More forgiving than equity-based. See static vs trailing drawdown.

Breach — Violating a rule in a way that ends the account. Distinguished from a soft violation, which may only delay a payout or remove profit. Always establish which applies.

Challenge — Used interchangeably with evaluation. A simulated account with a profit target and risk rules that must be satisfied to qualify for a funded account.

Consistency rule — A cap on how much of total profit a single day or trade may represent, commonly 20% to 50%. Work it backwards and your best day sets a floor on total profit required before withdrawal. See consistency rules explained.

Copy trading — Replicating trades from another source. Many firms define it by correlation pattern rather than intent, which means running one strategy across several of your own accounts can qualify. See EA and copy trading rules.

Daily drawdown — The maximum loss permitted within a single trading day, reset at the daily close. Separate from and additional to maximum drawdown.

Drawdown — The decline from a reference point to a low. In prop trading it is a hard limit rather than a performance statistic, and the reference point is what varies between firms.

E to H

End-of-day drawdown — Evaluated once at the daily close rather than continuously. Intraday excursions do not count. Substantially more forgiving than intraday evaluation, particularly for positions held overnight.

Equity-based drawdown — Calculated including unrealised profit and loss. An open position running in your favour raises the high-water mark before you close it, so a retracement can breach you using profit you never banked.

Evaluation — The simulated account and rule set a trader must satisfy to qualify for funding. Usually one or two phases. See one-step vs two-step.

Expert Advisor (EA) — Automated software executing or managing trades. Firms permitting EAs usually mean trade management — trailing stops, partial exits — rather than signal generation. The distinction is rarely on the pricing page.

Funded account — The account issued after passing an evaluation, on which payouts are earned. Governed by its own rulebook, frequently stricter than the evaluation rules.

Hedging — Holding opposing positions in correlated instruments. Sometimes permitted within one account and prohibited across accounts, which is where most accidental breaches occur.

High-water mark — The highest value an account has reached, used as the reference point for a trailing drawdown. It rises with new highs and does not fall back.

I to P

Instant funding — A funded account issued without an evaluation phase. Costs more per dollar of simulated capital, and you enter the funded rulebook with no opportunity to learn it cheaply first.

Intraday drawdown — Evaluated continuously rather than at the close. A spike on thin overnight liquidity can breach an account before the trader is aware of it.

Maximum drawdown — The total loss limit for the life of the account. The single most important rule to understand, because its type — static or trailing, balance or equity, intraday or end-of-day — changes what the same percentage means.

Minimum trading days — The number of days that must show activity before an evaluation can be passed or a payout requested. Some firms require days to be profitable and to clear a threshold, which is stricter than it sounds.

News window — A period either side of a high-impact release, typically two to five minutes, during which opening or closing positions is restricted. Whether an automatic stop-out counts is the detail worth confirming. See news trading rules.

One-step evaluation — A single phase with one profit target. Faster to funding, usually more expensive, and carries a tighter target-to-drawdown ratio.

Payout — A withdrawal of the trader’s share of profit from a funded account. Subject to eligibility requirements and a review stage. See how payouts work.

Payout review — The check of trading history against the rulebook before funds are released. Rules enforced only at review, rather than live in the dashboard, cannot be traded around.

Profit split — The share of profit retained by the trader. Advertised figures are usually ceilings requiring an add-on or a scaling milestone. The number that matters is the split on your first payout.

Profit target — The gain required to pass a phase, expressed as a percentage of starting balance. Meaningless without the drawdown figure beside it.

Prohibited strategies — Methods that void an account regardless of profitability. Commonly latency arbitrage, tick scalping exploiting simulated fills, and certain grid or martingale approaches. Varies more between firms than pricing does.

R to T

Reset — Restarting a failed evaluation, sometimes at a discount. Check whether purchased add-ons and profit-split upgrades survive a reset; frequently they do not.

Scaling plan — The path to larger allocations after sustained profitability. Terms vary enormously and matter more than entry price for traders building toward size.

Simulated account — An account trading against real market data without live capital at risk. Payouts are real; the positions are not executed in the market.

Static drawdown — A fixed floor set from the starting balance that never moves. Your room grows as you profit. More forgiving than trailing in essentially every scenario.

Target-to-drawdown ratio — Profit target divided by drawdown allowance. A ratio of 1.0 means you must make as much as you are permitted to lose. A better difficulty measure than the target alone.

Trailing drawdown — A floor that follows the high-water mark upward and does not fall back. Your room never grows however well you trade, and you can breach while down only slightly from your starting balance.

Two-step evaluation — Two phases, usually with a lower target in the second and a drawdown reset between them. Cheaper and easier per phase; more cumulative profit required.

Where to Check Your Own Firm

Every definition above has a firm-specific answer in a rulebook. FOREXIVE publishes both its evaluation and funded-account rules at help.forexive.com, readable before purchase. Our 1-Step, 2-Step and Instant accounts list sizes and pricing.

If you read one section before buying anywhere, make it prohibited strategies. If you read two, add the funded-account drawdown rules — they are frequently not the ones you practised under.

Trading involves substantial risk of loss. Evaluation and funded accounts described here are simulated trading environments. Definitions describe common industry usage; individual firms vary. Nothing on this page is financial advice.