Prop Firm Glossary: Your Words vs the Contract's Words
You say "they banned me", the contract says breach. Thirty terms translated from contract language to plain words, with what each one actually does.
Prop firms speak two different languages: you write “they banned me”, “they won’t pay me”, “the fee”; the contract writes breach, payout request denied, evaluation fee. This is not a question of style: almost every surprise on a first account comes from reading a word in its everyday sense instead of its contractual one. Below is the translation, term by term, with the real count from the 415 accounts of 17 firms verified on 12 November 2026.
Why a glossary, and not a dictionary
A dictionary gives you a definition. Here you need something else: what that word does when it sits in your contract, that is, what it can take from you. So every entry has three columns: the word you use to search, the word you find in the terms, and a sentence saying what it does in practice.
One warning that applies to the whole page: these are the industry's general meanings. Almost every term has its own variant at each company, and where they differ the contract you accepted always wins, not this page.
The words about money
| How you say it | What the contract calls it | What it actually does |
|---|---|---|
| The test | Challenge / Evaluation | The challenge is the paid test you must pass by respecting profit and loss rules in order to get a funded account, and it is neither a course nor a subscription: it is a test with a binary outcome. |
| The fee | Evaluation fee | The evaluation fee is the price you pay to start the evaluation, and it is the only number almost every advert shows. |
| The second fee | Activation fee | The activation fee is a second amount due only after you pass, to open the funded account: across the 415 verified accounts 76 accounts from 6 firms charge one, from $50 to $1,247. |
| Starting over | Reset | A reset is the purchase that clears a failed evaluation and restarts it from zero on the same account, usually priced below the challenge itself, and it belongs in the total cost if your strategy risks breaking the limit often. |
| Do I get my money back? | Refund / Fee reimbursement | A refund is the return of the initial fee, usually alongside one of the first payouts and only under conditions: it is a conditional promise, not a guarantee, and 36 accounts from 3 firms offer one among those verified. |
| What I keep | Profit split | The profit split is the share of profits that stays with you, and across the verified accounts the median is 80% with a maximum of 100%: the most advertised number and, at a first payment, the least decisive. |
| The withdrawal | Payout / Withdrawal request | A payout is the request to collect your share of the profits, and it is not automatic: you start it, the firm approves it, and it passes an identity check before it becomes a payment. |
| The cushion | Buffer | The buffer is the distance between where you are now and the loss limit that would close the account, and it is the only number that matters while you trade: profit says how you are doing, the buffer says how much more you can get wrong. |
| Getting a bigger account | Scaling plan | A scaling plan is the rule that raises the funded account's capital when you hit certain results, and it usually raises the limits and constraints too: a contractual progression, not an automatic prize. |
The words about the rules
| How you say it | What the contract calls it | What it actually does |
|---|---|---|
| How much I have to make | Profit target | The profit target is the profit needed to pass a phase, stated as a percentage of the capital: across verified $100,000 accounts the median is 6%. |
| How much I can lose overall | Maximum loss / Overall drawdown | The maximum drawdown is the floor below which the account closes, and it fails more challenges than any other rule: across verified $100,000 accounts the median is 4.5% of the capital. |
| How much I can lose in a day | Daily loss limit | The daily loss limit is the most you may lose in a single day, and because it resets every day it punishes anyone trying to win it straight back: 120 of the 415 verified accounts have none. |
| Does it close the account or just stop me? | Hard vs soft daily limit | A hard daily limit closes the account when you cross it, a soft one only stops your trading for the rest of the day: among the verified accounts 235 are hard and 60 soft, a difference the price never shows. |
| I can't do it in one shot | Consistency rule | A consistency rule caps how much the best day or trade may weigh on total profit, so an account cannot be passed on one shot: 264 verified accounts have none, 151 do. |
| I have to wait anyway | Minimum trading days | Minimum trading days is the number of days you must have traded before passing or requesting a payout, and it cannot be shortened by trading more in one day: 146 verified accounts have one, 269 do not. |
| How many tests I have to take | Phase / Step | A phase is an evaluation block with its own target and rules; two-phase programs require two in a row before funding, one-phase programs just one: 310 verified accounts are single-phase and 105 multi-phase. |
| What I'm not allowed to do | Prohibited practices | Prohibited practices are the list of strategies the contract excludes — copying the same trades across accounts, trading only on news, exploiting latency or off-market prices — and they are checked when you request the payout, not while you trade. |
Thresholds and formulas change from firm to firm: this is the general meaning, the exact number is in your firm's terms.
The four drawdowns, which are not the same rule
"Drawdown" is the word that does the most damage, because it names four different rules and the difference between them is worth more than any price difference. They all say where the floor of the account sits; they differ on one thing only, whether that floor moves.
| What the contract calls it | What it actually does | Accounts | Firms |
|---|---|---|---|
| Static drawdown | The floor is set at the start and never moves: the more you earn the more room you have, and it is the easiest type to manage. | 157 | 10 |
| End-of-day trailing | The floor rises with profit but is only recalculated at the close of the day: what you make during the day does not tighten the limit until the day ends. | 148 | 12 |
| Intraday trailing | The floor chases the running peak in real time, even with a position still open: the strictest type, because profit you later give back still raises the limit. | 49 | 4 |
| Balance trailing | The floor follows the closed-trade balance instead of equity, so it does not move for open profits. | 61 | 6 |
| How you say it | What the contract calls it | What it actually does |
|---|---|---|
| The balance | Balance | The balance is the account total counting closed trades only, so it does not move while a position stays open. |
| What I have right now | Equity | Equity is the total that also includes the profit or loss of open positions, and it is the measure almost every loss rule is checked against: an open position deep in the red can break the limit without you closing anything. |
| When it stops chasing me | Trailing lock / Threshold freeze | A trailing lock is the point where a moving drawdown stops following you and freezes, usually at the starting level plus a margin, and both the exact level and when it triggers are among the items that vary most between firms. |
The words about the account
| How you say it | What the contract calls it | What it actually does |
|---|---|---|
| The fake account | Simulated account / Demo environment | A simulated account is an environment that mirrors real prices but where your orders never reach the market in your name: that is why a loss leaves you no debt and why you are not an intermediary's client. |
| The real account | Funded account | A funded account is the one you get after the evaluation and the one that lets you request payouts, but it is almost always still simulated: "funded" describes the contract, not ownership of the money. |
| They banned me | Breach / Account violation | A breach is the automatic closing of the account because a contractual threshold was crossed, and it is neither a disciplinary measure nor a dispute: it is the designed effect of a rule, and it costs the fee you paid plus any profit not yet withdrawn on that account. |
| The paperwork | KYC / Identity verification | KYC is the identity verification required before you can be paid — document, selfie or video, proof of address — and it is worth completing as soon as you get the funded account, because at many firms it only fires at the first withdrawal, which is the worst moment. |
| They won't pay me | Payout request denied | "Payout request denied" is the formula for a rejected withdrawal, and the recurring causes are a failed identity check, a consistency or minimum-days rule not met, or a review of the period's trades. |
Where the definition is not enough
Some entries here mean the same thing everywhere: balance, equity, breach and KYC are stable across the industry. Others are not. Consistency rule, trailing lock, scaling plan and even the way minimum days are counted change formula between companies, and two firms can use the same word for two different rules.
The countermove is simple and works for all of them: when you meet one of those terms in the terms and conditions, look for the number next to it. If there is no number the rule is discretionary, and a discretionary rule belongs in your calculation before you pay, not after.
The numbers that make the words concrete
A glossary helps you read the contract; to know whether your strategy survives those rules you have to test it. The Validator applies each account's real rules to a strategy and says where it would pass and where it would be closed, before you pay the fee.
Test your strategy on the real rules › · The first payout: what can block it ›
Frequently asked questions
What does breach mean at a prop firm?
Breach is the contractual term for the rule violation that closes an account: in everyday words it is "they banned me", but it is not a disciplinary sanction, it is the automatic end of that account because a threshold written in the contract was crossed. It leaves you no debt towards the firm, because the account is simulated: it costs you the fee you paid and any profit not yet withdrawn on that account.
What is the difference between balance and equity?
Balance is the account total counting closed trades only; equity is the total that also counts open positions. The difference matters because most loss rules are measured on equity: an open position deep in the red can break the limit even if you never closed it and even if it would have recovered.
What is a consistency rule?
A consistency rule caps how much your best day or best trade may weigh on total profit, so that an account cannot be passed on one lucky shot. That is the general meaning, but the threshold and the way it is calculated change from firm to firm and must be read in its terms: across the 415 verified accounts, 264 carry none and 151 do.
What is trailing drawdown?
A trailing drawdown is a loss limit that does not stay put: it rises with your profit, so the floor of the account moves up as you make money. It comes in three variants — recalculated continuously intraday, updated only at the end of the day, or tied to balance — and across the 415 verified accounts 258 use one of them, against 157 on a static drawdown.
What does it mean that the account is simulated?
It means your orders do not reach the market in your name: they run in an environment that mirrors real prices, and what the firm pays you is not the profit of those trades but a contractual payment calculated from them. That is why a loss leaves you no debt, and also why you are not the client of a supervised intermediary.
Are the activation fee and the evaluation fee the same thing?
No. The evaluation fee is what you pay at the start to take the evaluation; the activation fee is a second fee, due only if you pass, to open the funded account. Across the 415 verified accounts, 76 accounts from 6 firms charge one, from $50 to $1,247.
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Educational content, not financial advice. Prop firm challenges are simulated accounts; most traders do not pass them and trading involves risk. Links to props are affiliate links.