Trading Glossary

Every term a prop firm trader needs to understand, explained clearly with practical context. 29 terms and counting.

ChallengeThe evaluation process a trader must pass to receive a funded account. Involves ... Compound GrowthThe process of reinvesting profits to generate additional returns over time. In ... Daily DrawdownThe maximum loss allowed in a single trading day. Exceeding the daily limit imme... DrawdownThe decline from a peak account balance to its lowest point. In prop trading, dr... EquityThe current value of a trading account including unrealized profits and losses f... ExpectancyThe average amount you expect to make per trade over a large number of trades. P... Funded AccountA trading account provided by a prop firm after successfully passing the evaluat... Kill ZoneSpecific time windows during trading sessions where institutional order flow cre... LeverageThe ability to control a large position with a small amount of capital. In forex... Lot SizeThe volume of a trade measured in lots. 1 standard lot = 100,000 units of base c... Max DrawdownThe maximum total drawdown allowed from the initial account balance. Exceeding t... OvertradingTaking more trades than your strategy justifies, usually driven by emotion rathe... PipPercentage in Point — the smallest standard price movement in forex. For most pa... Pip ValueThe dollar amount gained or lost per pip of price movement, determined by the cu... Position SizeThe number of lots or units traded in a single position. Correct position sizing... Profit FactorThe ratio of gross profits to gross losses. A profit factor above 1.0 indicates ... Profit SplitThe percentage of trading profits the trader keeps. The remainder goes to the pr... Profit TargetThe minimum percentage gain required to pass a prop firm evaluation phase. Typic... Prop FirmA proprietary trading firm that provides traders with capital to trade in exchan... Revenge TradingTrading impulsively to recover losses, typically with larger position sizes and ... Risk ManagementThe process of identifying, assessing, and controlling risks in trading. In prop... Risk Reward RatioThe ratio between the potential loss (risk) and potential profit (reward) on a t... Risk of RuinThe probability that a trader will lose enough capital to reach a specified draw... Scaling PlanA program where prop firms increase a trader's account size based on consistent ... SlippageThe difference between the expected price of a trade and the actual price at whi... SpreadThe difference between the bid (sell) price and ask (buy) price of a currency pa... Stop LossA predetermined price level at which a losing trade is automatically closed to l... Trading SessionA period when a specific financial market is open and actively trading. The four... Win RateThe percentage of trades that result in profit. A 55% win rate means 55 out of 1...