Your comprehensive guide to understanding prop trading terminology and concepts
A financial instrument is the entity being bought and sold while trading.
A firm that provides traders with capital to trade financial instruments, such as futures. Traders retain a percentage of the profits they generate, while the firm assumes the risk.
The average profit in dollars a trader earns on a winning trade. It measures profitability per successful trade.
The average loss in dollars a trader incurs on a losing trade. It reflects the risk exposure per unsuccessful trade.
The specific account or evaluation package offered by the prop firm. Plans vary in account size, evaluation difficulty, profit targets, and rules.
The percentage of trades that result in a profit.
A measure of profitability, calculated as the ratio of total profits to total losses. A profit factor above 1 indicates a profitable strategy.
The total count of all trades executed within a specified period (usually a month).
The number of calendar days during which trades were placed. Used to evaluate trader consistency and activity.
A risk/reward metric showing the ratio of profit or loss to the risk taken on a trade. For example, a 2R win means the profit is twice the risk.
The total quantity of contracts traded over a specific period.
The single trading day with the highest net profit.
The total fees charged for both opening and closing a futures position (a full trade cycle).
The number of phases a trader must complete to qualify for a funded account. Each phase typically includes meeting profit targets while adhering to risk rules.
The initial amount of capital allocated to a trading account in an evaluation or funded account.
The specific profit amount a trader must achieve to pass an evaluation or progress to a higher account level.
The maximum amount a trader is allowed to lose in a single trading day. Exceeding this limit typically disqualifies the trader. There are different types of loss limits, so it is important to understand the type that applies to a chosen plan.
The maximum permissible loss from the starting balance or peak balance. Breaching the drawdown limit ends the evaluation or funded account.
The profit cushion above the starting balance, which traders must maintain to stay compliant or qualify for payouts.
A scaling parameter that determines the ratio of full contracts to micro contracts a trader is permitted to use.
A smaller-sized futures contract (e.g., 1/10th the size of a standard contract), which allows for more flexible risk management.
The standard-sized futures contract traded in the market.
A set milestone where a trader can increase their contract size or risk, typically based on achieving profits.
A requirement ensuring traders generate profits steadily over time rather than relying on a single large winning day.
The ability for traders to manage multiple evaluation or funded accounts simultaneously, either separately or combined.
A recurring fee traders pay to participate in an evaluation or maintain access to a trading platform and tools.
A discount to the monthly fee that can be accessed by using the Prop Firm Genius affiliate discount code.
The fee traders pay to reset an evaluation and start over if they fail to meet the trading requirements.
The action of restarting an evaluation process after failing or breaching the trading rules.
The costs associated with accessing real-time or historical market data, required for trading futures.
A one-time fee charged when transitioning from a passed evaluation to a funded trading account.
A specific period during which traders can reset their evaluation to avoid disqualification.
Basic market data, including real-time bid/ask prices and trade volume.
More detailed market data that includes the order book, showing depth of market (DOM) with pending buy/sell orders at various price levels.
Advanced market data that includes detailed order flow and trading intentions, often available to institutional traders.
The software used for executing trades, accessing market data, and managing trading accounts.
The cost of using the trading platform, either as a one-time or recurring fee.
The percentage of trading profits shared between the trader and the prop firm. For example, a 70/30 split means the trader keeps 70% of the profits.
The trader’s entitlement to profits before the split is applied, often used for specific promotions or payouts.
How and when traders can request a payout from the prop firm. Many firms require requests to come in certain windows and take a pre-defined amount of time to payout.
How long it takes to get your payout request approved.
The minimum number of active trading days required before a trader can request a payout.
The limit on the number of profit withdrawals allowed in a single calendar month.
The highest dollar amount a trader can withdraw per payout request.
The smallest dollar amount required for a trader to submit a payout request.
How long it takes to pass your evaluation.
The total profit generated after accounting for commissions, fees, and losses. It is the basis for payouts and performance evaluation.
An automatic process that closes open positions when risk limits are breached.