This is your one-stop prop trading dictionary—packed with every key term, rule, and piece of jargon you’ll see in a prop firm challenge, explained in plain English and updated for 2025.
From static drawdown to scaling plans, instant funding to Second Life resets, this glossary cuts through the confusion and spells out exactly what you need to know to pass, get funded, and actually keep your profits. Each definition comes with real-world examples and internal links to deeper guides, so whether you’re a rookie or a seasoned trader, you’ll find every answer you need right here.
Bookmark this page. If you’re serious about getting funded, this is the only trading glossary you’ll ever need.
How to Use This Glossary
Simple. Just scroll —A for Account Size, T for Trailing Drawdown, S for Second Life, and so on.
- Click on any term for a simple definition, a real trading example, and links to our deep-dive guides, rule pages, or product walkthroughs.
- Use the search bar (if you have one) to instantly find terms or phrases—no endless scrolling.
- Bookmark this page and refer back whenever a prop firm term leaves you scratching your head.
- Check back often: We update this glossary every quarter with the latest industry lingo, challenge rules, and funded trader terms—so you never get caught off guard.
Ready to actually understand prop trading?
A
Account Size
Account size is the amount of money in your prop trading account, like $10,000 or $50,000, that you use to hit profit targets and manage risk.
Example: In a $10,000 challenge, you need to make $800 for an 8% profit target.
Account Types
Prop firms offer different account types, like Challenge Accounts (where you prove your skills), Instant Funding Accounts (live capital right away), and Funded Accounts (what you get after passing the test).
Example: You start with a Challenge Account—if you pass, you get upgraded to a Funded Account.
Algorithmic Trading
Algorithmic trading means using computer programs, called bots or EAs (Expert Advisors), to make trades for you automatically.
Example: Some prop firms let you use EAs, but others ban them—always check the rules before you start.
Assets
Assets are everything you can trade with a prop firm, like forex pairs, stocks, crypto, commodities (like gold), indices (like the S&P 500), and even synthetic markets.
Example: Most firms let you trade forex, gold, and stock indices. Some offer crypto or synthetic assets too.
Ask Price
The ask price is the lowest price someone is willing to sell an asset for right now—it’s what you pay when you buy.
Example: If EUR/USD has an ask of 1.1005, you’ll buy at 1.1005, not the lower bid price.
B
Bid Price
The bid price is the highest price a buyer is willing to pay for an asset right now—it’s what you get if you sell.
Example: If the bid on EUR/USD is 1.1003, you’ll sell at 1.1003, not the higher ask price.
Balance
Balance is the total money in your account, not counting open trades, just your actual cash after closed trades.
Example: If you start with $10,000 and close a winning trade for $200, your balance is now $10,200.
Buy Order
A buy order (or “going long”) means you’re buying an asset because you think the price will go up.
Example: Buying gold at $2,000 hoping to sell at a higher price.
C
CFD (Contract for Difference)
A CFD is a type of contract that lets you trade price moves on assets (like gold or stocks) without actually owning them—most prop firms use CFDs for non-currency assets.
Example: You can trade gold or the S&P 500 using CFDs with most prop firms.
Challenge
A prop firm challenge is the test you take to prove you can trade safely and profitably before getting a funded account.
Example: You have to pass the Master Funders Core Challenge before trading real money.
Challenge Fee
The challenge fee is the price you pay to enter a prop firm challenge—sometimes you get it back if you pass, sometimes you don’t.
Example: Master Funders charges $75 for a $10,000 Core Challenge, and it’s refundable when you pass.
Commodities
Commodities are tradable goods like gold, oil, and metals that you can buy or sell through most prop firms.
Example: Trading gold (XAUUSD) or crude oil (WTI) is common in prop trading.
Consistency Rule
A consistency rule means you have to keep your trading size or volume steady—no huge swings or one-off lucky trades allowed.
Example: Some firms will fail you if you make all your profits in one big trade instead of consistent performance.
Core Challenge
The Core Challenge is Master Funders’ main two-step trading evaluation, with realistic rules and a second-chance feature.
Example: Pass the Core Challenge to get funded, or use your Second Life Reset if you fail Step 2.
Crypto
Crypto means digital currencies like Bitcoin and Ethereum—some prop firms let you trade these along with forex and other assets.
Example: Trading BTC/USD or ETH/USD on a prop firm account.
D
Daily Loss Limit
The daily loss limit is the most you’re allowed to lose in one day during a prop firm challenge—go over and you fail the challenge.
Example: If your daily loss limit is 5% on a $10,000 account, losing $500 or more in a day means you’re out.
Dashboard
The dashboard is your online control panel with a prop firm, showing trades, stats, progress, and rule status in real time.
Example: Check your dashboard to see if you’re close to hitting the profit target or breaking a rule.
Demo Account
A demo account uses fake money to let you practice or take the challenge without risking real cash—prop firms use demo accounts for evaluations.
Example: You trade on a demo account until you pass the challenge, then move to a real funded account.
Drawdown (DD)
Drawdown is the biggest drop your account balance takes from a high point to a low point, used to measure risk.
Example: If your account grows to $12,000 and then drops to $10,800, your drawdown is $1,200 or 10%.
Dynamic Drawdown
Dynamic drawdown means your max loss limit rises as your account profits increase—it’s based on your highest equity, not your starting balance.
Example: If you hit $12,000, your 10% dynamic drawdown lets you go down to $10,800 before failing.
E
EA (Expert Advisor)
An EA, or Expert Advisor, is a trading robot that can make trades for you—some prop firms allow EAs, others don’t, so always check.
Example: Using a MetaTrader EA to trade forex automatically in your challenge account.
Equity
Equity is your account balance plus or minus any open trades—it shows your real account value if you closed everything right now.
Example: If you have $10,000 balance and a $200 open profit, your equity is $10,200.
Evaluation Phase
The evaluation phase is Step 1 of a prop firm challenge, where you prove you can trade profitably and follow all the rules.
Example: Pass the evaluation phase to move to verification or get funded.
F
Funded Account
A funded account is the real money account you get from a prop firm after passing their challenge—you trade with their capital and keep a profit split.
Example: After passing, you get a $10,000 funded account and keep up to 90% of profits.
Futures
Futures are contracts to buy or sell assets (like oil, gold, or indices) at a set price in the future—some prop firms let you trade futures as well as forex.
Example: Trading S&P 500 or oil futures with a prop firm that offers futures access.
Forex
Forex stands for the foreign exchange market, where you trade currencies like EUR/USD, GBP/JPY, or USD/JPY—forex is the most common asset in prop trading.
Example: Taking a trade on EUR/USD in a $10,000 prop firm account.
G
Growth/Scaling Plan
A growth or scaling plan lets your funded account size increase as you hit profit targets and trade safely.
Example: If you start with $10,000, a scaling plan could boost your account to $20,000 after a few payouts.
H
Hedging
Hedging is holding trades in opposite directions at the same time to manage risk—some prop firms allow it, others ban it.
Example: You’re long EUR/USD and short EUR/USD at the same time to limit your risk.
I
Indices
Indices are groups of stocks traded as one unit, like the S&P 500 or NASDAQ—most prop firms let you trade indices as CFDs.
Example: Trading the US30 (Dow Jones) or NAS100 (NASDAQ) with your funded account.
Instant Funding
Instant funding means you can skip the challenge and pay a fee to get a live trading account with real money right away.
Example: Some firms offer instant funding accounts for higher fees, but with stricter rules.
Instrument
An instrument is any tradable asset in your account, like forex pairs, indices, stocks, crypto, or commodities.
Example: EUR/USD, NAS100, and XAUUSD are all instruments.
J
Journal
A journal is where you track your trades, notes, and results—helps you spot mistakes and improve, but isn’t required by all firms.
Example: Writing down entry, exit, and why you took each trade during your challenge.
K
KYC (Know Your Customer)
KYC means you have to prove your identity with documents like a passport or utility bill—every prop firm requires KYC before they pay out profits.
Example: Uploading your ID and a bank statement to get paid from your funded account.
L
Leverage
Leverage is the multiplier that lets you control big trades with a small account—like trading $100,000 with just $1,000.
Example: If you have 1:100 leverage, a $1,000 balance lets you trade up to $100,000.
Lite Challenge
The Lite Challenge is Master Funders’ easier two-step evaluation with lower profit targets and drawdown, designed for new or cautious traders.
Example: Pass the Lite Challenge with just a 5% profit in Step 1 and 5% in Step 2.
Liquidity
Liquidity means how easily you can buy or sell an asset without moving the price—a liquid market lets you trade large amounts with no problem.
Example: Forex pairs like EUR/USD have high liquidity, so trades fill fast with little slippage.
M
Margin
Margin is the amount of money you need in your account to open and keep a trade—it’s set by the leverage and the asset you’re trading.
Example: With 1:100 leverage, a $10,000 trade requires just $100 margin.
Master Funders
Master Funders is a prop trading firm that offers unique challenges, fast payouts, high leverage, and no minimum trading days to help real traders get funded quickly.
Example: Traders worldwide use Master Funders to access capital and start trading live in days, not months.
Max Drawdown
Max drawdown is the biggest loss you’re allowed from your account’s highest point—hit this and your challenge or funded account ends.
Example: If your max drawdown is 10% on $10,000, falling to $9,000 fails the challenge.
Minimum Trading Days
Minimum trading days are the number of days you’re required to trade during a challenge—most firms set 5 or more, but Master Funders lets you pass with zero.
Example: Some firms need 5 trading days to pass, but Master Funders has no minimum.
Multiple Accounts
Multiple accounts means having more than one challenge or funded account at the same time—check your firm’s rules, as some limit this.
Example: You might run two Core Challenges at once if the firm allows it.
N
News Trading
News trading is placing trades during big economic news releases, which can move the markets fast. Some prop firms allow it, others ban it to reduce risk.
Example: Trading during the US jobs report can be banned or allowed, depending on the firm.
No Minimum Trading Days
No minimum trading days means you can pass a challenge in as little as one day if you hit your targets—this is a unique feature at Master Funders.
Example: Hit your profit goal in two trades, pass the challenge instantly with no waiting.
O
Order Types
Order types are the different ways you can enter or exit a trade—like market orders (instant), limit orders (at your price), and stop orders (triggered at a set level).
Example: Use a market order to buy now, or a limit order to buy only if price drops to your chosen level.
Overnight Holding
Overnight holding means keeping a trade open after the markets close for the day or over the weekend—some prop firms allow it, others restrict it to reduce risk.
Example: Master Funders lets you hold trades overnight and through weekends with no penalty.
P
Payout
Payout is the process of getting your profits from a funded account—firms set the schedule, method, and your share of the profits.
Example: Master Funders pays out in as little as 72 hours after you request a withdrawal.
Partial Close
Partial close means closing part of your trade while letting the rest run—some prop firms allow this, some don’t, so check the rules.
Example: Close half your position for profit, let the other half ride in case the trend continues.
Payment Methods
Payment methods are the ways you can pay challenge fees or receive payouts—these can include crypto, credit card, wire transfer, and more.
Example: Pay your challenge fee with Bitcoin, get paid out to your bank or crypto wallet.
Profit Split
Profit split is the percentage of your trading profits you keep from a funded account—common splits are 80%, 90%, or even 95%.
Example: If you earn $1,000 and your split is 90%, you keep $900 and the firm gets $100.
Profit Target
Profit target is the total gain you need to reach to pass a prop firm challenge—usually a set percentage of your account size.
Example: With an 8% target on $10,000, you need to make $800 to pass.
Prop Firm
A prop firm, or proprietary trading firm, is a company that gives you their money to trade after you pass a challenge—they split profits with you instead of taking your losses.
Example: Pass a Master Funders challenge, get funded, and trade with the firm’s money.
Psychology
Psychology in trading is all about keeping your emotions under control—staying calm, patient, and disciplined is key to passing any prop firm challenge.
Example: Don’t let fear or greed make you break rules or overtrade; stick to your plan.
Q
Qualifying Phase
The qualifying phase is another name for Step 1 or Step 2 in a prop firm challenge, where you prove your trading skills to move forward or get funded.
Example: Complete the qualifying phase by hitting the profit target and following all rules.
R
Refundable Fee
A refundable fee is the challenge entry cost you get back if you pass the challenge—some prop firms refund, some don’t, so always check.
Example: Master Funders refunds your fee once you get funded and complete the payout requirement.
Reset
The Reset feature at Master Funders lets you restart your challenge balance one time if you haven’t lost too much, giving you a second shot without paying again.
Example: If you’re in Step 1 and below 25% of your max drawdown, email support to reset your account and try again.
Risk Management
Risk management means using rules like lot size limits, stop losses, and daily loss caps to protect your account and avoid blowing up during the challenge.
Example: Never risk more than 1% of your account on any single trade.
Rollover
Rollover is the cost or credit for keeping trades open overnight, also called swap.
Example: If you hold a forex position after the trading day ends, you might pay or earn rollover fees.
S
Scaling Plan
A scaling plan is a prop firm feature that lets your funded account size grow as you trade successfully and hit milestones.
Example: Start with $10,000—trade well, and the firm might bump you up to $20,000.
Second Life Reset
Second Life Reset is Master Funders’ feature where, if you fail Step 2, you can start your next challenge right at Step 2 instead of going back to the beginning, once per month.
Example: Fail Step 2, email support, buy a new challenge, and skip right to Step 2.
Slippage
Slippage is when your trade fills at a different price than you wanted, usually because the market moved too fast.
Example: You set a buy at 1.1000, but get filled at 1.1002 during high volatility.
Speed Challenge
The Speed Challenge at Master Funders lets you try to pass in just 24 hours with high leverage and unique rules.
Example: Trade a $10,000 account, hit a 10% profit target, and complete at least five trades in one day.
Spread
Spread is the difference between the bid and ask price for an asset—it’s the cost you pay to open a trade.
Example: If the bid is 1.1000 and the ask is 1.1002, the spread is 2 pips.
Static Drawdown
Static drawdown means your max loss limit is based on your starting balance and never moves, no matter how high your profits go.
Example: With a $10,000 account and 10% static drawdown, dropping to $9,000 at any time fails your challenge.
Step 1 Challenge
Step 1 is the first phase of most prop firm challenges, where you trade on a demo account and must hit your profit target while following all rules.
Example: Complete Step 1 to advance to Step 2 or get instant funding if it’s a one-step challenge.
Step 2 Challenge
Step 2 is the verification phase after Step 1—usually with easier rules, proving your results weren’t luck before you get funded.
Example: Hit a 5% profit target in Step 2 to receive your funded account.
Stop Loss
A stop loss is an order that automatically closes your trade if price moves against you—critical for not blowing up your account.
Example: Place a stop loss 20 pips below your entry to limit your risk.
Strategy Rules
Strategy rules are extra prop firm restrictions—like no grid trading, no copy trading, or no martingale—to keep trading fair and prevent cheating.
Example: Some firms don’t allow trading bots or certain high-risk strategies.
Swap
Swap is the overnight interest fee or payment you get for holding a trade after the trading day ends.
Example: Hold EUR/USD overnight and pay a small swap fee, or sometimes earn a credit.
Take Profit
Take profit is an order that auto-closes your trade when it hits a certain profit level—locking in your gains without having to watch the screen.
Example: Set a take profit 50 pips above your entry, and your trade closes for profit automatically.
Trailing Drawdown
Trailing drawdown is a rule where your max loss limit moves up as your account grows, so you can never fall more than a set amount from your highest balance.
Example: If your peak equity is $12,000 and your trailing drawdown is 10%, dropping below $10,800 fails your challenge.
Trader Evaluation
Trader evaluation is the process where a prop firm scores your trading to decide if you get funded, based on profit, risk, and rule-following.
Example: Pass the evaluation by hitting targets and not breaking any rules.
Trading Desk
The trading desk can mean either the prop firm’s team that monitors trades or a special room where pro traders work together.
Example: Some prop firms offer access to their trading desk for advanced support or team trading.
Trading Platform
A trading platform is the software you use to place trades—common ones are MT4, MT5, cTrader, and DXTrade.
Example: Download MT5 and log in to your Master Funders demo account to start your challenge.
U
Unlimited Time
Unlimited time means there’s no deadline to finish your challenge—take as long as you need to hit your targets.
Example: Master Funders offers unlimited time, so you never have to rush your trades.
Update/Upgrade
An update or upgrade is when your account features or size improve after good performance, like a bigger funded account or extra trading tools.
Example: After two months of steady profits, you might be upgraded from $10,000 to $25,000.
V
Verification Phase
The verification phase is usually Step 2 in a prop firm challenge—showing your winning wasn’t luck by following rules with a new profit target.
Example: Pass the evaluation phase, then complete verification to get funded.
Volume
Volume means how much you’re trading, measured in lots or contracts—prop firms may set volume requirements or limits.
Example: Trading one standard lot of EUR/USD adds to your daily trading volume.
W
Weekend Holding
Weekend holding means keeping trades open when markets close for the weekend—some firms allow it, some close trades automatically to avoid gaps.
Example: Master Funders lets you hold positions over the weekend if your strategy needs it.
Withdrawal
Withdrawal is taking your profits out of your funded account—check firm rules for payout schedule and methods.
Example: Request a withdrawal Monday, get your payout in 72 hours.
X
XAUUSD, XAGUSD
XAUUSD is the symbol for trading gold, XAGUSD is for silver—both are popular pairs at most prop firms.
Example: Many traders pass their challenge by trading gold (XAUUSD) for bigger moves.
Y
Yield
Yield is your return or gain on an account over time, often shown as a percentage.
Example: If you make $500 on a $10,000 account, your yield is 5%.
Z
Zero Minimum Trading Days
Zero minimum trading days means you can finish the challenge as fast as you want—no waiting for “five-day” rules.
Example: Hit your profit target on day one at Master Funders, and you’re done—no slowdowns.
Ready to Trade Like a Pro?
Now you know every key prop trading term—no more guessing or Googling jargon.
Whether you’re just starting out or already in a challenge, bookmark this glossary and use it whenever you need straight answers, fast.
If you’re ready to put these terms to work, check out the Master Funders Core Challenge, or explore our full challenge lineup.
Still got questions? Drop a comment, contact our support, or suggest new terms.
