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Prop trading glossary

54 terms, each with the plain meaning, how firms actually apply it, and which firms it affects. Written for someone about to spend money, not for a dictionary.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

14 terms Clear

B 3 terms

Balance-based drawdown Risk rules A limit measured on closed balance only, ignoring floating loss. Materially more forgiving than equity-based. Breach Risk rules Any rule violation that closes the account. Most often the daily loss limit, including floating loss. Buffer Risk rules The distance between your current equity and the level that would breach. The only number that matters intraday.

C 2 terms

Consistency rule Risk rules A cap on how much of your total profit may come from a single day or trade. Often applied only at payout review. Cushion Risk rules Profit banked above the starting balance that widens your drawdown room. Erased by trailing limits.

D 2 terms

Daily loss limit Risk rules The maximum you may lose in one session, usually reset at the firm’s midnight rather than yours. Drawdown Risk rules The decline from a reference point to your current equity. Which reference point is the entire question.

E 2 terms

End-of-day balance Risk rules The closed balance at session end, used by firms whose trailing limit only moves overnight. Equity high-water mark Risk rules The highest equity your account has reached. Trailing limits are measured from it.

F 1 term

Floating loss Risk rules Unrealised loss on open positions. Counts toward the daily limit at most firms.

R 1 term

Risk per trade Risk rules What one losing trade costs you. Size it against the distance to your breach level, not the account size.

S 2 terms

Static drawdown Risk rules A maximum loss level fixed at your starting balance. It never moves, so profit you make is genuinely yours to risk. Stop-loss requirement Risk rules A rule obliging every position to carry a stop. Enforced automatically by some platforms.

T 1 term

Trailing drawdown Risk rules A loss limit that follows your highest equity instead of staying at your starting balance, so profit permanently tightens your room to lose.