◆Method and reference
Glossary: Terms That Carry a Firm-Specific Definition
In prop trading, several core terms mean different things at different firms. This glossary gives the general meaning and flags where the definition varies.
Several terms in this industry have no standard definition. "Maximum loss", "daily loss", "profit split" and "funded account" mean materially different things at different firms, and the difference is usually in the terms rather than in the marketing. This page gives the general meaning and marks where you must check the specific firm's wording.
⚠️ = the definition varies enough between firms that the general meaning is not usable on its own.
Balance. Closed, realised account value. Does not include open positions.
Consistency rule ⚠️. A cap on how much of total profit may come from a single day or a single position. Applied at different stages by different firms: on the evaluation, on the funded account, or only at the point of a payout request. Typical values 15–50%. Some firms apply it as a general rule; at least one applies it selectively as a sanction.
Daily loss limit ⚠️. A secondary floor beneath the maximum loss, reset once per day. The percentage varies less than the base it is measured from, which may be: the initial balance; the balance at a fixed daily anchor; the greater of opening balance or opening equity; or the greater of the previous day's closing equity or balance. Reset times observed across firms include 00:00 CE(S)T, 00:00 UTC, 00:00 UTC+3, 00:30 UTC and 17:00 EST.
Equity. Balance plus open profit and loss, adjusted for swaps and commissions. Most drawdown limits are measured against equity, which is why an unclosed position can breach a limit. See trailing vs static drawdown.
Evaluation / challenge. The paid assessment stage. One, two or three phases depending on the product.
Funded account ⚠️. The stage after passing. In most of the industry this is a simulated account, not an account holding real capital. Firms' own terms are generally explicit about this — one states that funds are "fictitious, do not represent any currency"; another that "all trading is simulated only". The word "funded" describes the profit-share entitlement, not the presence of client capital.
High-water mark. The highest equity or balance an account has reached. Trailing drawdown floors are calculated from it.
Instant funding. A product with no evaluation phase. Typically carries a trailing drawdown and a lower initial split.
Maximum loss / maximum drawdown ⚠️. The floor below which the account fails. Static = fixed at the initial balance and never moves. Trailing = moves upward behind a peak. Which peak, whether the breach is evaluated in real time or at a daily reset, and where the floor locks all vary per firm and per product — including between two products at the same firm.
Payout / reward ⚠️. The payment of profit share. Firms generally use "reward" rather than "profit" or "withdrawal" in their terms, because the payment is contractual compensation under a service agreement rather than a withdrawal of a client balance. The distinction is legal, not cosmetic.
Payout cadence. How often a payout may be requested: daily, every 48 hours, weekly, bi-weekly, monthly, or on demand. At some firms the profit split is a function of the cadence chosen.
Profit split ⚠️. The share of profit paid to the trader. The advertised figure is frequently conditional — on cadence, on a paid add-on, on account size, or on months of scaling. See what "up to 100% profit split" means.
Profit target. The gain required to pass a phase, as a percentage of the starting balance.
Reset. Repurchasing a failed evaluation at a discount. Discounts range from a few per cent to around 30–70% of the original fee. Some firms have no reset product at all.
Scaling. Increasing account size after sustained performance. Conditions typically include elapsed time, cumulative profit and a number of processed payouts.
Simulated / demo. No real orders are sent to a market and no settlement occurs. This is the condition on which the product sits outside investment-services regulation in the one jurisdiction that has published a developed position. See are prop firms regulated.
Trade idea ⚠️. Used in per-trade risk caps. The definition matters more than the percentage: at least one firm's definition aggregates split positions and any new position in the same direction opened within ten minutes of closing a losing one, meaning re-entries count as one idea.
Unrealised P&L. Profit or loss on open positions. Counted toward the loss limit at most firms. The single most common reason a trader is surprised by a breach.
Written by the upme.com research desk. Definitions marked ⚠️ should always be checked against the specific firm's published terms. Corrections to the address on our sourcing page. Nothing here is investment advice.
Sources
Every factual claim above is drawn from one of the documents below. Where a document has been superseded since the date given, tell us and the piece is corrected with a dated line.
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