Prop firm glossary: 10 terms explained
10 terms from prop firm vocabulary, each defined in one sentence then explained in practice. Every entry also says how many of the 13 prop firms we track are concerned, computed from our records rather than copied from elsewhere. A comparison site's glossary should say what the word means and what it changes for the person buying. As of 20 September 2026.
Updated 20 September 2026Risk and rules
- Consistency rule
- A consistency rule caps the share that a single day, or a single trade, may represent in total profit: it prevents an evaluation from being passed on one lucky shot.
- Maximum daily loss
- A maximum daily loss is a loss cap measured over a single session: hitting it closes the day, sometimes the account, regardless of how much overall drawdown is still available.
- Static drawdown
- A static drawdown is a loss threshold fixed once and for all on the starting balance: it moves neither with gains nor with losses, and stays at the same level from the first day to the last.
- Trailing drawdown
- A trailing drawdown is a loss threshold that rises as the account gains, instead of staying fixed at the starting balance: the higher the account climbs, the closer the line you must not touch moves to the price.
Money and pay
- Payout
- A payout is the payment to the trader of their share of the simulated profits made on a funded account, on a schedule and under conditions set by the prop firm.
- Profit split
- The profit split is the share of simulated profits paid to the trader on a funded account, the rest going to the prop firm: 80% and 90% are the most common levels.
- Scaling plan
- A scaling plan is the mechanism by which the size of a funded account grows when the trader reaches profit milestones, without buying another evaluation.
Journey and accounts
- Evaluation
- An evaluation, or challenge, is the paid test on a simulated account that a trader must pass to obtain a funded account: reaching a profit target without crossing the loss thresholds.
- Funded account
- A funded account is the account, usually simulated, that a prop firm entrusts to a trader after a passed evaluation, and on which they receive a share of the profits made.
- Prop firm
- A prop firm, in the modern sense of proprietary trading, sells evaluations on simulated accounts and pays those who pass a share of the profits made on a funded account.
How this glossary is written
Each term is defined in one self-contained sentence, then explained from the angle of what it costs or allows the trader. The definitions are not lifted from the firms' sales pages, which tend to describe a rule in its most flattering light. Where a term covers several practices, the glossary says so rather than picking one: “trailing drawdown” is not the same constraint depending on whether it is computed at end of day or intraday, and that difference decides whether a trading style is viable at all.