• Challenge — the firm’s evaluation, typically a profit target under strict drawdown rules
  • Drawdown — the maximum tolerated loss from peak, after which the account is closed
  • Scaling — automatic growth of the account size after sustained performance
  • KYC — Know Your Customer, the identity verification required before payout
  • HFT — High Frequency Trading, sub-second activity that is universally banned

The prop firm world has a jargon density that makes most beginners pause halfway through their first sign-up. The list below covers the terms that recur in rules, dashboards, and trader discussions. In practice, knowing the vocabulary is half the work of avoiding a rule violation — most failed payouts trace back to misreading a single term in the fine print.

Evaluation and account terms

  • Challenge / Evaluation — the firm’s gating test before you receive a funded account
  • Phase 1 / Phase 2 — the two stages of a 2-step evaluation, typically +10% and +5% targets
  • 1-step / 2-step — single-phase versus two-phase evaluation models
  • Instant Funding — a no-evaluation program where you pay upfront to skip the challenge
  • Bootcamp — a multi-stage growth program (specifically associated with The5%ers)
  • Express / Aggressive — single-phase, faster but higher-target variants
  • Trading Combine — Topstep’s futures-specific evaluation product
  • Funded account — the live (usually simulated) account you receive after passing
  • Live Funded — a Topstep-specific path where your trades reach the real market
  • Account size — the notional capital you trade against ($25K, $100K, etc.)

Risk and rule terms

  • Drawdown (DD) — the maximum loss the account is allowed to take from peak before being closed
  • Static drawdown — the loss limit fixed at the starting balance
  • Trailing drawdown — the loss limit that follows the account’s high water mark
  • Daily loss limit — a hard cap on losses inside a single trading day
  • Profit target — the percentage gain required to pass a phase
  • Minimum trading days — the floor on the number of days you must trade
  • Consistency rule — a cap on how much of total profit can come from a single day
  • Inactivity rule — the requirement to trade at least once every 30 days
  • HFT (High Frequency Trading) — sub-second activity, universally banned
  • News trading window — the restricted period around scheduled economic releases
  • Hedging across accounts — opening opposing positions on multiple accounts, usually banned

Payout and money terms

  • Profit split — your share of trading profits (typically 80–90%)
  • Scaling plan — the rules under which your account size grows after sustained profit
  • Payout cycle — the frequency of withdrawal windows, typically 5–14 days
  • KYC (Know Your Customer) — identity verification, required before payout
  • Wise / SEPA / wire — common withdrawal channels
  • Refund / Reimbursement — the return of the evaluation fee after a first payout (FTMO offers this)

Strategy and platform terms

  • Scalping — short-duration trades, typically held seconds to minutes
  • Swing trading — multi-day position holds, often requiring weekend-hold permission
  • EA (Expert Advisor) — an automated trading script on the MT4/MT5 platforms
  • MT4 / MT5 / cTrader / NinjaTrader / Tradovate — major trading platforms
  • VPS — Virtual Private Server, used to run EAs continuously
  • ICT (Inner Circle Trader methodology) — Michael Huddleston’s framework for reading institutional flow
  • SMC (Smart Money Concepts) — the broader institutional-flow framework that ICT is built on
  • Order Block / Fair Value Gap / Break of Structure — institutional-flow setups
  • Lot size — the volume of a forex position (1 lot = 100,000 base currency units)
  • Pip — the smallest meaningful price increment on a currency pair
  • Spread — the difference between bid and ask price
  • Slippage — the gap between expected and actual execution price

Funding model terms

  • Simulated funded account — the dominant model in 2026: trades are settled on the firm’s internal ledger against real market data; the firm pays profit shares from a pool funded by evaluation fees. Not “fake money” — the cash that lands in your bank account is real; what is simulated is the firm putting capital at risk on the live market on your behalf. See: is a funded account real money.
  • Live funded account — trades reach actual exchanges through the firm’s broker partner. Concentrated in futures programs (Topstep, Apex, others).
  • CFD-mirror account — a structure where “funded” trades are executed as CFDs at a partner broker. Drew regulatory scrutiny in 2023–2026; most surviving firms have moved away from it.
  • Payout pool — the cash pool funded by evaluation fees, subscriptions, and losses from failed traders, from which simulated-funded payouts are made.

Industry structure terms

  • FCM (Futures Commission Merchant) — a US-licensed firm authorised to handle futures trading. Futures prop firms operate through FCM relationships.
  • Prop firm wind-down — a planned closure with a refund/payout schedule, distinct from an unplanned shutdown. FundingTicks (Jan 2026) is the prominent recent example.
  • Shutdown tracker — a public record of firms that have closed or restructured. We maintain one: shutdown tracker.
  • MetaQuotes action (Feb 2024) — the platform-license withdrawal that triggered the heaviest cluster of prop firm closures of the 2024–2026 stretch.
  • Retroactive rule change — a rule change applied to already-active accounts. The contractual issue that defined the FundingTicks case. See: retroactive rule changes guide.

Regulatory and jurisdiction terms

  • CFTC — US Commodity Futures Trading Commission; regulates futures and has taken enforcement action against prop firms (notably MyForexFunds in 2023).
  • FCA — UK Financial Conduct Authority; has issued consumer warnings against specific prop firms.
  • DFSA — Dubai Financial Services Authority, regulator of firms in the DIFC.
  • DIFC — Dubai International Financial Centre, the regulated free zone where firms operate under DFSA oversight (distinct from non-DIFC “Dubai-based” firms).
  • MAS — Monetary Authority of Singapore.
  • ASIC — Australian Securities and Investments Commission.
  • CySEC — Cyprus Securities and Exchange Commission, common in EU-facing CFD-adjacent firms.
  • Offshore jurisdiction — Saint Vincent, Belize, Seychelles, etc.; common for low-regulation prop firm registration and over-represented in the shutdown tracker.

Psychology and risk terms

  • Prospect theory — Kahneman-Tversky’s 1979 finding that losses feel ~2× as intense as equivalent gains; the foundation of revenge trading behaviour.
  • Revenge trading — sizing up after a loss to “get it back” — the most common psychological failure in evaluations.
  • Consistency curve — the shape of your equity curve relative to the firm’s consistency rule.
  • Loss aversion — the general bias that drives revenge trading.

Data and methodology terms

  • Trustpilot suppression — Trustpilot marking a profile with “rating unavailable due to breach of guidelines” after detecting coordinated reviews. Several prop firms have triggered this.
  • Aggregate rating — schema.org markup type for ratings; Google requires user-generated, not editor-assigned, ratings to be eligible.
  • Pass rate — the share of evaluations that result in a funded payout. Industry consensus is 5–15%; numbers above that are usually unverified self-reports.

Cost terms

  • Evaluation fee — the headline cost; rarely the total cost.
  • Reset fee — fee to restart a failed evaluation; turns “fixed cost” into something closer to per-attempt cost.
  • Activation fee — additional fee charged at the start of a funded account (Topstep: $149).
  • Withdrawal minimum — minimum balance required before a payout request; ranges $50–$300 across firms.

Reading the rules — key cross-references

This page is informational and is not investment advice.