Technical glossary

Prop Trader Dictionary: Key Concepts of Funded Accounts 2026

Q: What is Max Drawdown?

Max Drawdown is the maximum loss allowed from the highest peak of your account. If your $100,000 account reaches $105,000 and then falls to $98,000, your drawdown is $7,000 (6.67%).

Q: What is Trailing Drawdown?

Trailing Drawdown follows your profits upward. If you start with $100,000 and reach $105,000, your new maximum is $105,000 and the drawdown is calculated from that point.

Q: What is the Consistency Rule?

The Consistency Rule limits your daily profit generally to 30-50% of the total target. For a $10,000 target with 30% rule, you cannot earn more than $3,000 in a single day.

Q: What is Profit Split?

Profit Split is the percentage of profits you share with the prop firm. Common is 80/20 (you keep 80%, the firm gets 20%) or 90/10 for consistent traders.

Master the language of prop firms. Clear and visual definitions of drawdown, consistency, payout rules, and all key terms for futures traders.

Updated April 13, 2026 | By Agustin Bianciotti - Trader with more than 4 years in the market

📚 Essential Trading Concepts

All the technical vocabulary you need to succeed

📑 Quick index

🛡️ Risk Management 📋 Evaluation Rules 💰 Capital and Payments

🛡️ Risk Management

The most critical concepts to protect your capital

📉 Max Drawdown

The maximum loss allowed from the highest peak of your account. If your $100,000 account reaches $105,000 and then falls to $98,000, your drawdown is $7,000 (6.67%).

💡 Practical example: With a 10% max drawdown on a $100K account, you cannot lose more than $10,000 from the highest point.

📈 Trailing Drawdown

Follows your profits upward. If you start with $100,000 and reach $105,000, your new maximum is $105,000 and the drawdown is calculated from that point, not from the beginning.

⚠️ Risk: It can reduce your operating margin as you grow, but allows greater initial flexibility.

📊 Static Drawdown (EOD)

Daily limit that resets each day. You lose $2,000 today, tomorrow you have your full margin again. More predictable and safe for conservative traders.

✅ Advantage: Ideal for beginners or traders who prefer to know exactly what their daily limit is.

⏰ Daily Loss Limit

Maximum daily loss limit. Generally 4-5% of initial capital. If you exceed it, the evaluation ends automatically that day.

🛡️ Protection: Prevents a bad day from destroying your progress in the evaluation.

💡 Expert Tip

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📋 Evaluation Rules

Conditions you must meet to pass your exam

🎯 Profit Target

Profit goal you must reach to pass the evaluation. Generally 8-12% of initial capital in 1-step accounts or 8-10% + 5-8% in 2-step accounts.

📊 Example: In a $100K account with 10% target, you need to generate $10,000 in net profit.

📏 Consistency Rule (30% Rule)

Limits your daily profit generally to 30-50% of the total target. For a $10,000 target with 30% rule, you cannot earn more than $3,000 in a single day.

⚠️ Important: Violating this rule voids your evaluation, even if you almost have the entire target completed.

📅 Minimum Trading Days

Minimum days you must trade before being able to complete the target. Generally 5-10 days (not necessarily consecutive).

📈 Purpose: Demonstrates that you are a consistent trader and not someone who got lucky in one day.

📊 Scaling Plan

Growth plan that allows you to gradually increase your position size as you demonstrate consistency and generate profits.

🚀 Benefit: You start with small limits and grow until you can handle the full account capital.

💰 Capital and Payments

How money works in prop firms

💸 Profit Split

Percentage of profits you share with the prop firm. Common is 80/20 (you keep 80%, firm gets 20%) or 90/10 for consistent traders.

🎯 Optimization: Some firms improve the split to 90/10 after 3-6 months of consistency.

💎 Payout Threshold

Minimum amount of profits you must accumulate before requesting a payout. Generally $1,000-$2,000 to avoid frequent processing.

⏱️ Frequency: Once the threshold is reached, you can request payouts generally every 7-14 days.

🛡️ Withdrawal Buffer

Percentage of profits you must leave in the account after each payout. Generally 10-20% to protect capital during your recovery.

💡 Example: If you earn $5,000 and the buffer is 20%, you can withdraw $4,000 and must leave $1,000 in the account.

🔄 Account Reset

Reset of your account to initial capital after violating rules. Some firms offer free or discounted resets as part of their program.

📋 Types: Free reset, discounted reset, or full price.

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