Prop Firm Glossary
25 essential terms every prop firm trader must understand before purchasing an evaluation. Don't let confusing jargon cost you money.
Evaluation (Challenge)
The testing phase you must pass to prove you can trade profitably. You pay an upfront fee (monthly or one-time) to access a simulated futures account with specific rules. If you hit the profit target without violating the drawdown limit, you "pass" and move to a funded account. Some firms offer 1-step evaluations (one phase), while others use 2-step processes with progressively lower profit targets.
Funded Account
The account you receive after passing the evaluation. Despite the name, most firms keep you in a simulated environment initially — your trades are copied to a real live account on the backend. You can withdraw real money from this account based on the firm's payout rules. Some firms call this a "Performance Account" (PA) or "Sim-Funded" account.
Performance Account (PA)
A term popularized by Apex Trader Funding. Once you pass the evaluation, you are placed in a PA — a simulated account where your profitable trades are copied to a live market account by the firm. PAs come with stricter rules than the evaluation (e.g., consistency rules, mandatory stop-losses). At Apex, PAs are capped at 6 lifetime payouts before the account closes permanently.
End of Day (EOD) Trailing Drawdown
The most retiree-friendly drawdown type. Your maximum loss limit only updates at the close of each trading session, based on your highest closing balance. This means if your trade goes up $500 during the day but you close it for $200, your drawdown only moves up by $200 — not $500. EOD trailing gives you room to let trades breathe intraday without being penalized for unrealized profit spikes. Firms like Topstep, TradeDay, and Elite Trader Funding offer EOD options.
Intraday Trailing Drawdown
A much stricter drawdown type where your maximum loss limit trails your highest open equity in real-time, tick-by-tick. If your trade is up $500 unrealized but you close it for only $200, your drawdown limit still moves up as if you captured the full $500. This punishes traders who let winners come back against them. Firms like MFFU (Rapid plan) and Take Profit Trader (PRO stage) use intraday trailing. Scalpers and aggressive traders must be especially careful with this type.
Static Drawdown
A fixed loss limit that never moves regardless of your profits. If you start with a $50,000 account and a $2,500 static drawdown, your account will only fail if it drops below $47,500 — even if your balance grows to $55,000. This is the most forgiving drawdown type for profitable traders because your floor never rises. Elite Trader Funding and Top One Trader offer static drawdown options.
Daily Loss Limit (DLL)
The maximum amount of money you are allowed to lose in a single trading day. Exceeding this limit will either lock your account for the rest of the day (soft breach) or terminate your account entirely (hard breach), depending on the firm. Some firms like Topstep have removed the mandatory DLL and instead let you set a personal one through their platform. Always confirm whether a DLL is based on realized losses, unrealized losses, or both.
Consistency Rule
A rule that prevents you from passing an evaluation or receiving payouts by relying on one lucky "home run" trade. For example, a 30% consistency rule means your best single trading day cannot account for more than 30% of your total profits. A 50% rule is more lenient (Topstep, MFFU). A 20% rule is very strict (Top One Trader). Some firms remove the consistency rule once you are funded (e.g., Tradeify Select, Top One Futures). This is one of the most common reasons traders fail payouts.
Micro-Scalping
An ultra-short-term trading strategy where trades are held for mere seconds (typically under 30 seconds) to capture tiny price movements. Many prop firms have specific rules about micro-scalping — some require a minimum hold time (e.g., Lucid Trader requires 30 seconds, Take Profit Trader requires 1 minute on PRO accounts). Firms that flag micro-scalping may reject your payout or terminate your account if they detect patterns consistent with latency exploitation or HFT strategies.
Activation Fee
A one-time fee charged by many firms after you pass the evaluation to "activate" your funded account. This typically covers live market data feeds and administrative processing. Activation fees range from $0 (Tradeify, MFFU, TradeDay) to $149 (Topstep Standard Path). Modern firms are increasingly eliminating activation fees as a competitive differentiator, so always check the fine print before purchasing an evaluation.
Reset Fee
The fee charged to restart your evaluation account after you fail by violating a drawdown or rule. Reset fees are typically cheaper than buying a brand-new evaluation. For example, if your $197 evaluation fails, the reset might cost $97. Some firms offer free resets during promotional periods. With the industry shifting toward one-time evaluation fees (Apex, Tradeify 3.0), the concept of resets is becoming less common.
Profit Split
The percentage of your trading profits you get to keep from funded account withdrawals. Most reputable futures prop firms offer 80/20 or 90/10 splits in favor of the trader. Some firms (like Apex and Elite Trader Funding) give you 100% of the first $10,000–$12,500 withdrawn. Profit splits can also be tiered — TradeDay, for example, starts at 80% and increases to 95% after $100K in cumulative withdrawals.
Buffer Zone (Safety Net)
The amount of profit you need to accumulate in your funded account before you can request your first withdrawal. This acts as a cushion to protect the firm's capital against your drawdown limit. For example, Take Profit Trader requires a $2,000 buffer on 50K accounts. Elite Trader Funding's "Safety Net" works differently — once your realized profits exceed your max drawdown + $100, the trailing drawdown locks permanently, protecting your gains.
Trailing Drawdown
A drawdown limit that "trails" or follows your account's highest equity point. As your account grows, the floor beneath you rises. The critical distinction is WHEN it trails — End of Day (EOD) only updates at session close, while Intraday updates tick-by-tick in real time. Once a trailing drawdown reaches your starting balance (e.g., $50,000 on a 50K account), it typically stops trailing and becomes a static floor. Understanding this mechanic is the single most important concept for surviving a prop firm account.
Tier 1 News Restriction
A rule that prohibits opening or closing trades within a specific time window around major economic data releases — typically CPI, NFP (Non-Farm Payrolls), FOMC rate decisions, PPI, and GDP reports. Windows vary by firm: MFFU requires 2 minutes flat before/after, while others use 1-minute or 5-minute windows. Violating this rule usually results in an instant account failure, even if the trade was profitable. TradeDay handles this uniquely — instead of failing you, they auto-liquidate your position before the event.
Overnight Hold Ban
A rule prohibiting traders from holding futures positions after the market close (usually 4:10 PM EST / 3:10 PM CT). The vast majority of futures prop firms — over 95% — strictly enforce this. If you are not flat by the cutoff, your account may be immediately terminated. This is the #1 rule that swing traders and position traders must check before purchasing any evaluation. A few firms like Elite Trader Funding (Diamond Hands plan) explicitly allow overnight holding.
Trade Copier
Software or a firm-side system that automatically copies trades from your simulated funded account to a real live market account. This is how most prop firms manage their risk — your trades are executed in simulation on your end, and the firm selectively mirrors profitable traders' orders on the live market. You never directly access the live capital.
Scaling Plan
A system where your maximum allowed position size (number of contracts) increases as your account balance grows. For example, a 50K account might start with a 5-contract limit, increasing to 7 contracts at $52,000 and 10 contracts at $55,000. Accidentally exceeding your current scaling tier — even by clicking "Buy" one extra time — can result in an instant hard breach at some firms. Always double-check your allowed contract count before every session.
Profit Target
The dollar amount of net realized profit you must reach to pass the evaluation. For a typical 50K account, profit targets range from $2,500 to $3,000. This must be reached without violating any drawdown rules, and many firms also require a minimum number of trading days (e.g., 2–10 days). Some firms like Apex have no minimum day requirement, allowing you to pass in a single session.
Data Fee
A monthly fee for real-time market data (price quotes) from futures exchanges like CME Group. Many prop firms bundle this into your evaluation or activation fee, but some charge it separately (typically $10–$15/month). When comparing total costs between firms, always factor in data fees — a "free activation" firm may still charge $15/month for live data.
Overtrading
Taking more trades than your strategy calls for, usually driven by emotions like revenge trading (trying to recover losses) or FOMO (fear of missing out). Overtrading is the leading cause of account failures in prop firms. Many modern platforms (like TopstepX) now include built-in trade limiters and account lockout features specifically to prevent this destructive behavior.
Hard Breach vs. Soft Breach
A hard breach means your account is immediately and permanently terminated — there is no recovery. This typically happens when you exceed your maximum drawdown or violate a critical rule. A soft breach is a warning or temporary lockout (e.g., hitting your daily loss limit locks you out for the remainder of the day, but you can resume trading tomorrow). Always confirm which rules trigger hard vs. soft breaches at your specific firm.
Payout Request
The process of withdrawing profits from your funded account. Payout processing times vary wildly: Tradeify processes in 60 minutes, MFFU Rapid allows daily requests, while others may require 7–14 business days. Most firms require you to meet certain conditions first — minimum trading days, buffer zone requirements, and consistency rule compliance. Payouts are typically sent via ACH bank transfer, Rise (crypto), PayPal, or wire transfer.
Sim-Funded vs. Live Funded
An important distinction. "Sim-funded" means you are trading in a simulated environment even after passing the evaluation — your profitable trades are copied to the firm's live account via a trade copier. "Live funded" means you are trading directly with real capital. Most firms start you in sim-funded and may graduate you to live after consistent profitability (e.g., Take Profit Trader's PRO → PRO+ transition). The practical difference for traders is minimal — you get paid real money either way.
One-Time Fee vs. Monthly Subscription
The two pricing models for evaluations. Monthly subscriptions charge you every month until you pass or cancel (e.g., Topstep at $49/mo). One-time fees charge a single payment and your evaluation never expires (e.g., Apex at $197, Tradeify 3.0). One-time fees are generally better for traders who need more time, while monthly subscriptions favor confident traders who expect to pass quickly.
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