Trading Terminology Every New Funded Trader Should Know
A prop firm glossary built for evaluations: every term defined in one sentence, then tied to the rule it affects — drawdown, equity, tick value, payouts.
By Marcel Hambálek · Senior Trader, For Traders
A prop firm glossary is a reference list of the trading and rule-book terms used inside a funded trading evaluation — covering account metrics (equity, trailing drawdown, daily loss limit), market mechanics (bid, ask, spread, slippage, tick value) and post-pass compliance language (consistency rule, scaling plan, reward split). On a $50,000 account with a 10% maximum drawdown and 5% daily loss limit, two of those terms — equity and trailing drawdown — are responsible for the majority of failed evaluations in 2026.
Key takeaways
- Prop firm rules are almost always measured on equity, not balance — an open XAUUSD position can breach your daily loss limit before a single trade is closed.
- Static (maximum) drawdown is a fixed floor set at the start; trailing drawdown moves up with your highest equity or balance and never moves back down.
- A pip, a point and a tick are not interchangeable: 20 pips on 1 lot EURUSD is $200, while 20 pips (200 points) on 1 lot XAUUSD is also roughly $200 — but the stop distance needed to survive gold's ATR is far wider.
- Leverage is not risk — position size and stop distance are. Margin only tells you how much simulated capital is tied up in the trade.
- At 1:2 risk/reward you only need a ~34% win rate to break even, which is why R:R and win rate must always be read together.
- Terms like consistency rule, scaling plan, reward split and payout cycle only appear after you pass — but reading them before you buy a challenge prevents the most expensive surprises.
Watch: related video
A–Z Prop Firm Glossary: Quick-Reference Table
This isn't a generic trading dictionary — it's a prop firm glossary built around one question: what does this term mean for your rule book? Every entry below ties back to something that can pass or fail your evaluation, not just market theory. Bookmark this page; you'll want it open in a second tab the first time you're staring at a margin call at 2am wondering if "equity" means the number on your balance or the number that's actually moving.
| Term | One-line meaning | Why it matters on an evaluation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Account size | Simulated capital assigned for your Challenge | Determines dollar value of every rule — 1% on $100k ≠ 1% on $10k | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ask price | Price you buy at | Wider ask during news events eats scalping entries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ATR | Average True Range, a volatility measure | Used to size stops relative to real noise, not guesswork | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance | Account value excluding open trades | Different from equity — breaches are judged on equity, not balance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis | Gap between futures price and spot price | Matters when rolling futures contracts near expiry | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bid price | Price you sell at | Bid-ask spread is a hidden cost on every entry | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Breach | Any rule violation that ends a Challenge | Can be "soft" (warning) or "hard" (instant fail) depending on the firm | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Breakout | Price clears a defined support/resistance level | Common entry trigger — also common source of false starts and daily loss limit hits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CME | Chicago Mercantile Exchange | The exchange behind most futures Challenge instru Related reading ↳ start a trading challenge — Lets readers who now understand the terminology move directly into plan selection and pricing. Prop Firm Basics: The Terms That Define the Relationship Before you touch equity curves or drawdown math, you need the vocabulary that defines who you're actually dealing with. Get this layer wrong and every other term in the glossary gets misread. Prop trading firm A prop trading firm is an educational platform that evaluates your trading decisions on simulated capital and pays performance rewards based on how well you trade within its rules. It's not a bank funding you with its own balance sheet in the traditional sense — it's a structured assessment business. You pay for an attempt, you follow a rule set (profit target, max drawdown, daily loss limit), and if you pass, you move to a funded account where the same rules keep applying, just at higher stakes. Proprietary capital and simulated capital Proprietary capital is capital the firm allocates to track your trading performance; simulated capital is the demo balance you actually place trades against. These two terms get conflated constantly. In practice, your orders execute on a simulated environment — no real position hits a live exchange on your behalf — while the firm's proprietary capital model determines what reward you'd receive if those same decisions had been made with real money. Nobody deposits their own funds into the market during the Challenge. Funded account meaning when the capital is simulated Funded account meaning, stripped down: it's the account stage you reach after passing a Challenge, where you trade a larger simulated balance under live rule tracking and become eligible for performance rewards. "Funded" does not mean your own deposited money is now exposed to market risk — it never was. What's real is the reward calculation tied to your simulated results, paid out according to the firm's reward split. Confusing this is the single most common misunderstanding new traders bring into their first evaluation. Trading Challenge, Two-Step Challenge and Instant Funding A Trading Challenge is the generic evaluation process; a Two-Step Challenge requires hitting a profit target in Phase 1 and a smaller target in Phase 2 before funding, while Instant Funding skips evaluation entirely and applies funded-account rules from your very first trade. Two-Step Challenge: Phase 1 target (e.g. 8-10%), Phase 2 target (often half of Phase 1), then funded status — drawdown and daily loss rules apply throughout both phases. Three-Step Challenge: same logic, one extra phase, usually smaller targets per step, used by traders who prefer a longer runway to prove consistency. Instant Funding: no phase structure — you're trading under funded-account rules (and eligible for performance rewards) from trade one, in exchange for typically tighter risk parameters. Performance rewards vs "profits" Performance rewards meaning in a prop firm context: a payout calculated from your simulated trading results, not a profit withdrawal from a personal brokerage balance. The distinction matters legally and practically — a prop firm is not a broker, you're not trading your own deposited funds against the market, and rewards are never a guaranteed income stream. They reflect disciplined execution inside a rule book, nothing more, nothing less. Related reading ↳ how funded trading accounts work — Gives new traders the fuller mechanics behind the basic relationship terms just defined. ↳ how prop firms make money — Deepens understanding of the business model behind the firm/trader relationship. ↳ prop trading rules before taking a challenge — Natural next step once basic terminology is understood — the actual rulebook context. Market Mechanics: Bid, Ask, Spread, Slippage and Liquidity The bid ask spread is the gap between what you can sell at and what you can buy at, and it's a real cost you pay before the market moves a single pip in your favor. Add slippage and widening liquidity gaps around news, and you've got the hidden tax most new funded traders underestimate until it eats into a daily loss limit. Bid, ask and spread — the EUR/USD example If EUR/USD shows 1.0850 / 1.0852, that's a bid of 1.0850 (what buyers will pay) and an ask of 1.0852 (what sellers want). The 2-pip gap between them is the spread, and on 1 standard lot (100,000 units) that's $20 you're down the instant you open the trade — before spread, before slippage, before the market even ticks. Tight, liquid pairs like EUR/USD run this kind of spread most of the trading day. Widen that gap and your breakeven point moves further away, which matters a lot when you're managing a 5% daily loss limit on a prop evaluation. Liquidity, depth and why XAUUSD spreads widen Liquidity is simply how much volume is sitting at or near the current price, ready to trade without moving it. Deep liquidity means tight spreads; thin liquidity means you pay more to get filled. XAUUSD spread behavior is the clearest example on the platform — gold often trades with spreads around 20 cents in normal conditions, but around major catalysts that gap can blow out past a dollar. On 1 standard lot of gold, that's roughly a $100 swing in cost alone, independent of where price actually goes. This is why gold, the most-traded instrument across For Traders challenges, demands tighter position sizing around high-impact releases than a casual read of the chart would suggest. Slippage, fills and what NFP and FOMC actually do to your stop Slippage is the difference between the price you set your stop or entry at and the price you actually get filled at — and it's not a glitch, it's liquidity drying up for a few seconds exactly when you need it most. NFP FOMC trading windows are the textbook case: spreads widen, order books thin out, and a stop set at a clean round number can fill 5, 10, even 20+ pips worse on a fast instrument. This is exactly why most prop firms, For Traders included, publish specific news-event trading rules — not to stop you from trading NFP or an FOMC statement, but because a stop that doesn't fill where you placed it can turn a planned loss into one that blows past your daily loss limit. Mark-to-market and unrealised P&L Mark-to-market means your open positions are revalued continuously against the live price, not just when you close them. That continuous revaluation produces your unrealised P&L — the floating gain or loss on trades still open — and it counts against your account equity in real time. This is the part new funded traders miss: a prop firm's drawdown limit doesn't wait for you to hit "close." If your floating loss pushes equity past the threshold mid-trade, that's a breach, live, whether or not you ever intended to let it run that far. Term Plain definition Dollar example (1 standard lot) Bid/Ask Spread Cost gap between buy and sell price EUR/USD 2 pips ≈ $20 XAUUSD Spread (NFP/FOMC) Widens sharply around high-impact news $0.20 → $1.00+ ≈ $100 swing Slippage Fill price worse than stop/entry set Varies, can exceed 10-20 pips in fast markets Mark-to-Market Continuous revaluation of open positions Counts live against drawdown limits Related reading ↳ setting stop loss and take profit in MT5 — Connects spread/slippage mechanics to practical order placement. Units of Risk: Pip vs Point vs Tick vs Lot A pip is the standard price increment on an FX pair (0.0001 on EURUSD, 0.01 on JPY crosses), a point is the smallest quoted price increment on an index or metal, a tick is the minimum price move defined by a futures contract spec, and a lot is the contract-size unit you're trading. Mix these up and your position sizing for funded accounts falls apart before you've placed the trade. Here's the trap: traders moving from forex to gold to futures assume a "pip" means the same dollar value everywhere. It doesn't. Tick value vs pip value is one of the most common reasons new funded traders blow through a daily loss limit without realizing their stop was three times bigger than they thought. Pip value on FX majors: the $10 per pip baseline One standard lot (100,000 units) of EURUSD moves roughly $10 per pip. That's your baseline pip value calculation for most majors. A 20-pip stop on 1 standard lot risks $200. Trade a mini lot (0.10) and that same 20-pip stop only risks $20 — the lot size, not the stop distance alone, decides your dollar exposure. Points and pips on XAUUSD and US100 / NSDQ Gold doesn't use pips the way FX does — XAUUSD quotes in points, and 1 standard lot (100 oz) moves $1 for every $0.01 the price shifts. A $2.00 stop on 1 lot risks $200, same dollar outcome as the EURUSD example above, completely different unit. On US100 / NSDQ, each point of movement typically carries its own dollar-per-point rate depending on contract size — always check the spec before sizing, don't assume it mirrors gold or forex. Tick and tick value on CME futures contracts Futures contracts traded on CME quote in ticks, not pips or points. Each contract has a fixed tick size and tick value baked into the contract spec: Contract Tick Size Tick Value ES (E-mini S&P 500) 0.25 $12.50 MES (Micro E-mini S&P 500) 0.25 $1.25 NQ (E-mini Nasdaq-100) 0.25 $5.00 MNQ (Micro E-mini Nasdaq-100) 0.25 $0.50 A 10-tick stop on 1 ES contract risks $125. The same 10-tick stop on MES risks $12.50 — the micro contract exists specifically so smaller funded accounts can size risk per trade down without changing strategy. Converting any instrument into dollars of risk Every instrument boils down to the same three-step formula: Stop distance in units (pips, points, or ticks) × value per unit (pip value, point value, or tick value) × size (lots or contracts) = dollars at risk On a funded account, risk per trade is usually capped at 0.5–1% of simulated capital — on a $50,000 account that's $250–$500 per trade, full stop. Run the formula before you click buy, not after you're already underwater and wondering why a "small" stop ate half your daily loss limit. Related reading ↳ risk-reward ratio guide — Extends the pip/lot risk-unit discussion into position sizing and R:R application. ↳ 7 risk management strategies for day trading — Practical follow-up for readers learning units of risk who want tactical application. Balance vs Equity: The Distinction That Fails Most Accounts Balance is your closed-trade capital — it only changes when a trade closes. Equity is balance adjusted by the floating P&L of whatever you still have open. Confuse the two and you'll be staring at a healthy balance while your account has already been flagged for breach. This single gap — equity vs balance — wrecks more funded evaluations than bad strategy ever does. Balance, equity, floating P&L and free margin defined Four terms, no ambiguity: Balance — your capital as of the last closed trade. Doesn't move while a position is open. Equity — balance plus or minus the floating P&L on anything currently open. Moves every tick. Floating P&L — the unrealized gain or loss on an open position, marked to the current bid/ask. Free margin — equity minus the margin currently locked up in open trades; what you've actually got left to deploy. Worked example: how an open XAUUSD trade breaches a daily loss limit before balance moves Take a $50,000 funded account with a 5% daily loss limit — $2,500. You're holding 2 lots of XAUUSD and gold drifts $13 against you. On gold, 2 lots moves at roughly $200 per dollar of price (2 lots × $100/point), so a $13 adverse move is a $2,600 floating loss. Your balance still reads $50,000 — untouched, because nothing has closed. Your equity, meanwhile, reads $47,400. That's a breach of the daily loss limit before a single trade has been booked as a loser. This is exactly why prop risk engines evaluate equity on every tick, not balance at end of day. "I was going to close it green" isn't a defence the system recognizes — it checks equity in real time, and once equity crosses the floor, the account is done, regardless of what happens next on the chart. This is the mechanic that catches traders who size gold positions like they would EURUSD. Gold's dollar-per-point value is brutal relative to its "small" number-of-lots feel, and a daily loss limit explained in percentage terms gets eaten fast when the floating P&L column is doing the damage, not the realized one. Why leverage and margin are not the same as risk Leverage and margin tell you what the broker-side mechanics require, not what you stand to lose. 1:30 leverage on a $50,000 account determines your margin requirement — how much capital gets locked up to open a position — it says nothing about risk exposure. Risk is calculated the same way regardless of leverage: stop distance × size, full stop. A trader can run 1:30 leverage and still blow through a daily loss limit with one oversized gold position, while another runs the same leverage with disciplined sizing and never comes close. Leverage amplifies position size you can open; it doesn't amplify the rule that your stop distance times your lot size is the only number that defines your real risk on the trade. Related reading ↳ understanding drawdown in prop trading — Directly expands on the balance vs equity failure point with drawdown context. Drawdown Vocabulary: Trailing vs Static vs Daily Loss Limit Drawdown in prop trading is the distance your account equity is allowed to fall before the evaluation breaches — and there are three separate drawdown rules stacked on top of each other, each with its own floor, each capable of ending your challenge on its own. Confusing them is the single most common reason funded hopefuls get blindsided by a breach while still sitting on an open profit. Maximum (static) drawdown: the fixed floor Maximum drawdown — sometimes called static drawdown — is calculated once, from your starting balance, and it never moves again. On a $50,000 account with a 10% maximum drawdown rule, your floor is $45,000. Permanently. It doesn't matter if your equity later climbs to $60,000 — the static floor stays anchored to the original $50,000 for the life of that account phase. This is the simplest rule to track and, ironically, the one traders worry about least once they're up a few thousand dollars — which is exactly when the trailing rule below becomes the real threat. Trailing drawdown: the floor that follows you up Trailing drawdown vs static drawdown is the distinction that catches people out. A trailing floor rises as your equity makes new highs and then locks in — it never falls back down even if you give profit back. The detail that costs traders real money: is the trail based on intraday equity (every tick, floating P&L included) or end-of-day balance (only what's realized when the trading day closes)? An intraday-equity trail can lock in a floor the moment you touch a high-water mark mid-trade, even if that trade later closes red — end-of-day trailing gives you thousands more headroom because only closed balance counts. Always check which version your dashboard runs; the rule book language on this varies firm to firm in 2026, and forum assumptions from a different prop firm's rules will get you killed here. Daily loss limit: how it's calculated and when it resets The daily loss limit explained simply: it's the maximum your equity can decline within a single trading day, measured from either your start-of-day balance or start-of-day equity depending on the firm. Breach that single-day limit and you're out, regardless of your overall drawdown status. The drawdown reset time matters just as much as the limit itself — most server clocks reset at 00:00 CET, so a losing streak that straddles midnight server time can give you a fresh daily limit mid-session, while a position opened minutes before reset carries its floating risk into the new day's count. Worked $50,000 example across all three rules Here's the path that breaks traders who think they're "safe" because they're up on the challenge: Rule Calculation base Floor on $50,000 account Moves with equity? Maximum (static) drawdown Initial balance, fixed at 10% $45,000 — forever No Trailing drawdown Highest equity/balance reached, 10% trail Rises as equity climbs Yes, upward only Daily loss limit Start-of-day balance/equity, 5% Resets each day Resets at server midnight Say your equity peaks at $53,000 during the challenge. A 10% trailing floor now sits at $47,700 — not $45,000. A trader still up $2,000 overall can breach that trailing floor on a single bad gold swing and be out, even though the static floor was never in danger. That's the gap that matters: read the actual number on your dashboard, not the generic percentage quoted in a forum thread, because the exact mechanics differ across providers. Related reading ↳ max drawdown formula and breach levels — Gives the precise formula and worked example referenced conceptually in the drawdown vocabulary section. ↳ daily drawdown rules explained — Directly matches the daily loss limit term just defined, with actionable detail. ↳ prop firms with low drawdown rules — Helps readers compare drawdown structures across firms after learning the vocabulary. Start trading without risking your own capital Take a For Traders Challenge — trade our simulated capital, prove your strategy on real-time markets, and earn performance rewards when you pass. Browse challenges → Performance Metrics: R:R, Win Rate, Profit Factor and Expectancy These four numbers decide whether a strategy survives a funded account past month one — and most new traders can define maybe one of them correctly. Get comfortable with all four before you touch a Two-Step Challenge; they're the language every trading plan review is written in. Risk/reward ratio and the win rate it demands Risk reward ratio meaning in trading: it's the planned loss on a trade versus the planned gain, expressed as a ratio like 1:2 or 1:3. The ratio sets your break-even win rate — the minimum percentage of winners you need just to flatline, before costs. At 1:1 you need 50% winners to break even. At 1:2 that drops to 33.3%. At 1:3 it's just 25%. This is why a trader who wins only 35% of trades can still be solidly profitable — the math isn't intuitive until you see it in a table. Risk/Reward Ratio Break-even win rate needed 1:1 50.0% 1:2 33.3% 1:3 25.0% Profit factor explained — and the number firms want to see Profit factor explained simply: it's gross winning dollars divided by gross losing dollars over a sample of trades. Below 1.0 means you're net losing money, full stop. A profit factor of 1.3-1.5 is workable — thin but survivable through a funded account's daily loss limit and trailing drawdown. Above 2.0 over a meaningful sample (100+ trades, not 12) is a genuinely strong edge, the kind that gets noticed in a consistency rule review. Expectancy per trade in dollars Expectancy trading is the one metric that actually tells you what a trade is worth on average, in dollars: (win rate × average win) minus (loss rate × average loss). A system with a 40% win rate, $400 average wins and $200 average losses nets +$40 per trade — that's (0.40 × $400) − (0.60 × $200) = $160 − $120 = $40. Run that for 100 trades and you've got a $4,000 edge before costs, independent of how it feels day-to-day (which, with a 40% win rate, is mostly losing). Volatility, ATR and Value at Risk ATR average true range measures how much an instrument typically moves per bar — it's what you use to size stops instead of guessing at round numbers. Standard practice: set stops 1.5× ATR from entry, not at the obvious round number, because round numbers get hunted first on a stop run. Implied volatility is the market's own forward-looking estimate of how much a price might move, baked into options pricing — it's why gold's implied vol spikes before an FOMC print even without a single trade executing. Value at Risk (VaR) is a statistical estimate of the worst-case loss over a given horizon at a stated confidence level — a desk running 95% VaR is saying "we don't expect to lose more than X on 19 days out of 20." None of these replace your daily loss limit or trailing drawdown rule, but they tell you why that rule sits where it does. Related reading ↳ best strategy to pass a funded account challenge — Ties expectancy and profit factor metrics to concrete strategy application. Futures Prop Trading Terminology: Tick, Contract Month, Basis, Contango Futures prop trading terminology is built around contract specs, not pips — a tick is the minimum price increment a contract can move, and tick value is what that single tick is worth in dollars per contract. Futures prop trading is the fastest-growing segment on the platform right now, and traders coming from FX or CFDs often get caught out because the vocabulary genuinely doesn't transfer. Tick, tick value and contract size on CME products Every CME futures contract has a fixed tick size and tick value — you don't calculate it, you look it up. Get this wrong and your position sizing math is wrong before you've placed a single order. Contract Tick size Tick value ES (E-mini S&P 500) 0.25 $12.50 MES (Micro E-mini S&P) 0.25 $1.25 NQ (E-mini Nasdaq) 0.25 $5.00 MNQ (Micro E-mini Nasdaq) 0.25 $0.50 GC (Gold futures) 0.10 $10.00 MGC (Micro Gold) 0.10 $1.00 Front month, rollover and expiry The front month is the nearest-expiry contract — it's also almost always the most liquid, which is why most funded accounts trade it by default. Rollover is the act of closing your position in the expiring front-month contract and opening the equivalent position in the next contract month before expiry actually hits. Here's the part that trips up new futures traders: if you're holding a position through a rollover window, you can see a price gap between the old and new contract on your chart. That gap reflects the basis between the two contract months — it is not a loss on your account, but it will look exactly like one if you don't know what you're staring at. Basis, contango and backwardation Basis is simply the difference between the futures price and the spot (cash) price of the underlying asset. When futures trade above spot, that's contango — normal for most financial futures because it prices in carry costs (storage, financing, insurance). When futures trade below spot, that's backwardation — often a signal of near-term supply tightness or strong immediate demand. Gold futures sit in contango more often than not; crude oil has flipped between both states multiple times in the last few years. You don't need to trade the basis to pass an evaluation, but understanding contango and backwardation stops you from mistaking a structural price difference for a trading edge. Micros vs full-size contracts for funded sizing Micro futures contracts are built at exactly 1/10th the notional size and dollar risk of their full-size counterparts. Trading MNQ instead of NQ cuts your dollar risk per tick from $5.00 to $0.50 — a 10× reduction. On a funded account with a tight daily loss limit, that ratio is often the entire difference between a position that breathes through a volatile open and one that breaches the rule before 9:31am ET. Related reading ↳ best futures trading platforms for funded traders — Natural continuation for readers learning futures-specific terms like tick value and contract month. Terms You Only Meet After You Pass The vocabulary doesn't stop when you clear the evaluation — it changes. Passing a challenge hands you a new rule book written in payout language: consistency rule, scaling plan, reward split, payout cycle. Miss these before you buy a challenge and you'll meet them for the first time at the exact moment you're trying to collect, which is the worst possible time to learn what they mean. Consistency rule and why one huge day can block a payout The consistency rule caps how much of your total simulated profit can come from a single day or single trade — commonly 30–50% of the overall target. Say your target is $5,000 and you catch a $4,000 NFP scalp in one session. That's 80% of your profit from one day. Under a 40% consistency rule, you haven't passed — you're flagged to keep trading until your profit curve smooths out across more sessions. Prop firms built this rule because a single lucky leg doesn't prove repeatable edge, and payout desks are pricing reinstatement, not a one-off fluke. Read your challenge terms for the exact percentage before you trade a news event hoping to hit your number in one shot. Scaling plan: how simulated capital increases A scaling plan is the schedule by which your simulated capital grows after consecutive profitable payout periods — for example, two straight profitable months might bump a $50,000 account to $75,000, then $100,000, with the ceiling varying by firm. It rewards traders who show up again and again instead of traders chasing one big swing. If you're comparing challenge providers, check whether scaling is automatic after hitting a profit threshold or requires a manual review — that detail decides how fast your simulated size actually grows. Reward split, payout cycle and first payout eligibility The reward split is the percentage of simulated profit paid to you — commonly 80–90%, with the remainder retained by the firm. The payout cycle is the fixed interval, often bi-weekly or monthly, at which withdrawal requests are processed; file outside that window and you wait for the next one. First payout eligibility sometimes carries its own minimum trading-day requirement separate from the evaluation itself — that's the real-world meaning behind "performance rewards" as a phrase: it's your share of simulated profit, paid on the platform's clock, not yours. Breach, reset and funded account reinstatement A breach is a rule violation — blowing through the daily loss limit, holding a position through a restricted news window, trading an unauthorized instrument — that ends the account outright. A reset is the paid option to restart a failed evaluation from scratch rather than buying a new challenge entirely, usually at a discount to the original fee. Reinstatement policies after a breach vary widely by firm: some offer a second chance, some don't. None of this is boilerplate you skim — it's the fine print that decides whether one bad Friday costs you a payout or costs you the whole account. Read it before you buy the challenge, not after you've passed it. Related reading ↳ how to withdraw profits from a funded account — Directly answers the post-pass terminology section's practical next question about payouts. ↳ psychology of trading with a funded account — Relevant for the mindset shift traders face once they move past evaluation terminology. Ready to test your edge? Pick the challenge that fits your style: one-step Instant Funding, two-step evaluations, or our crypto track. Trade up to $200k of our simulated capital. Choose your challenge → Frequently Asked Questions What is a prop firm glossary and why does it matter? A prop firm glossary is a reference list of the terms that govern how your evaluation is measured, scored, and ultimately passed or failed — things like trailing drawdown, daily loss limit, and consistency rule. Most blown challenges aren't bad trades, they're misread rules: a trader assumes static drawdown when it's actually trailing, or assumes the daily limit resets on balance when it tracks equity. Knowing the exact definitions used in your Challenge rules is as important as your entry strategy. Read the fine print before you read the chart. What does a funded account mean if capital is simulated? A funded account on For Traders means you're trading on simulated capital under live market conditions, and your performance rewards are calculated as if that capital were real. No actual client money sits behind your trades — the market data, spreads, and fills are real-time, but the balance is a demo environment designed to test discipline under realistic pressure. This is standard across the prop trading industry and isn't a workaround; it's how evaluation-based funding works. The skill and risk management you build transfer directly to any capital size later. What's the difference between trailing and static drawdown? Static (maximum) drawdown is fixed from your starting balance and never moves, while trailing drawdown rises with your peak equity and can tighten as you profit. On a trailing account, hitting a new equity high resets your floor upward — meaning early gains don't buy you as much cushion as traders assume. Static drawdown is more forgiving once you're in profit since the floor stays put. Always check which model your Challenge uses; confusing the two is one of the most common reasons traders get stopped out unexpectedly. Is the daily loss limit based on balance or equity? Most prop firms, including For Traders, calculate the daily loss limit from equity, not balance — meaning floating losses on open positions count against you in real time, even before you close the trade. The limit typically resets at a fixed server time (often midnight platform time), not after 24 hours from your first trade. This catches traders who hold a losing position overnight expecting a bounce. Check your specific rules page for the exact reset time and calculation basis before sizing any overnight position. What's the difference between balance and equity? Balance is your account value with all open trades excluded, while equity is your balance adjusted for the floating profit or loss of any currently open positions. Prop firm rules almost always measure equity for drawdown and daily loss limits because it reflects your real-time risk exposure, not just closed results. This matters most when you're holding multiple open positions — your equity can breach a limit even if your balance looks fine. Watch equity, not balance, when you're near a limit. What is a pip, tick, point and lot in forex and futures? A pip is the smallest standard price move in most forex pairs (0.0001, or 0.01 for JPY pairs), a point is the equivalent term used in indices and gold, and a tick is the minimum price increment in futures contracts — each with its own dollar value set by contract size. A lot is the standard trade size unit (100,000 units in forex); futures use fixed contract sizes instead. To convert any of these into dollar risk, multiply the move by the pip/tick value and your position size — this is the calculation that turns a stop-loss distance into an actual risk number. What risk/reward ratio and win rate do you need to be profitable? At a 1:2 risk/reward ratio, you only need to win roughly 34% of trades to break even, and anything above that is profitable before accounting for costs. Risk/reward (R:R) measures how much you stand to gain versus how much you're risking on a single trade — a 1:2 ratio means your target is twice your stop distance. Prop firms don't grade win rate alone; they look at profit factor (gross wins ÷ gross losses) and expectancy (average dollar result per trade) because a low win rate with strong R:R can outperform a high win rate with poor R:R. How do scaling plans and payout cycles work on funded accounts? A scaling plan increases your funded account size after you hit defined performance milestones, usually tied to consistent profitable months rather than one lucky run, while payout cycles set how often you can withdraw performance rewards — commonly every two to four weeks. Scaling rewards discipline over time instead of a single big trade, which is why consistency rules often cap how much of your total profit can come from one day. Check your specific plan for exact thresholds, since scaling triggers and payout frequency vary by Challenge type. Which terms are specific to futures prop trading vs forex? Futures prop trading uses tick value (dollar value of the minimum price move) and contract size (fixed per instrument) instead of forex's pip and lot system, plus terms like contango and basis that describe the relationship between futures and spot prices. Contango means futures prices sit above the expected spot price, common in markets with storage costs; basis is simply the gap between spot and futures price at any moment. These terms matter for futures traders because contract specs and rollover mechanics differ entirely from spread-based forex trading — know your instrument's contract sheet before sizing a trade. Marcel Hambálek · Senior Trader, For Traders Marcel trades Futures and Forex day-trading setups on funded accounts and writes about the executional details most traders skip — order types, slippage, session timing, platform quirks on MT5 and NinjaTrader. Pragmatic, mechanics-first, no fluff. Follow on LinkedIn | Term | Plain definition | Dollar example (1 standard lot) | Bid/Ask Spread | Cost gap between buy and sell price | EUR/USD 2 pips ≈ $20 | XAUUSD Spread (NFP/FOMC) | Widens sharply around high-impact news | $0.20 → $1.00+ ≈ $100 swing | Slippage | Fill price worse than stop/entry set | Varies, can exceed 10-20 pips in fast markets | Mark-to-Market | Continuous revaluation of open positions | Counts live against drawdown limits | Contract | Tick Size | Tick Value | ES (E-mini S&P 500) | 0.25 | $12.50 | MES (Micro E-mini S&P 500) | 0.25 | $1.25 | NQ (E-mini Nasdaq-100) | 0.25 | $5.00 | MNQ (Micro E-mini Nasdaq-100) | 0.25 | $0.50 | Rule | Calculation base | Floor on $50,000 account | Moves with equity? | Maximum (static) drawdown | Initial balance, fixed at 10% | $45,000 — forever | No | Trailing drawdown | Highest equity/balance reached, 10% trail | Rises as equity climbs | Yes, upward only | Daily loss limit | Start-of-day balance/equity, 5% | Resets each day | Resets at server midnight | Risk/Reward Ratio | Break-even win rate needed | 1:1 | 50.0% | 1:2 | 33.3% | 1:3 | 25.0% | Contract | Tick size | Tick value | ES (E-mini S&P 500) | 0.25 | $12.50 | MES (Micro E-mini S&P) | 0.25 | $1.25 | NQ (E-mini Nasdaq) | 0.25 | $5.00 | MNQ (Micro E-mini Nasdaq) | 0.25 | $0.50 | GC (Gold futures) | 0.10 | $10.00 | MGC (Micro Gold) | 0.10 | $1.00 |
| Term | Plain definition | Dollar example (1 standard lot) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bid/Ask Spread | Cost gap between buy and sell price | EUR/USD 2 pips ≈ $20 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| XAUUSD Spread (NFP/FOMC) | Widens sharply around high-impact news | $0.20 → $1.00+ ≈ $100 swing | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Slippage | Fill price worse than stop/entry set | Varies, can exceed 10-20 pips in fast markets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-Market | Continuous revaluation of open positions | Counts live against drawdown limits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contract | Tick Size | Tick Value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ES (E-mini S&P 500) | 0.25 | $12.50 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MES (Micro E-mini S&P 500) | 0.25 | $1.25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NQ (E-mini Nasdaq-100) | 0.25 | $5.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MNQ (Micro E-mini Nasdaq-100) | 0.25 | $0.50 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rule | Calculation base | Floor on $50,000 account | Moves with equity? | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Maximum (static) drawdown | Initial balance, fixed at 10% | $45,000 — forever | No | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trailing drawdown | Highest equity/balance reached, 10% trail | Rises as equity climbs | Yes, upward only | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Daily loss limit | Start-of-day balance/equity, 5% | Resets each day | Resets at server midnight | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk/Reward Ratio | Break-even win rate needed | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1:1 | 50.0% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1:2 | 33.3% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1:3 | 25.0% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contract | Tick size | Tick value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ES (E-mini S&P 500) | 0.25 | $12.50 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MES (Micro E-mini S&P) | 0.25 | $1.25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NQ (E-mini Nasdaq) | 0.25 | $5.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MNQ (Micro E-mini Nasdaq) | 0.25 | $0.50 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GC (Gold futures) | 0.10 | $10.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MGC (Micro Gold) | 0.10 | $1.00 |
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