Prop firm
Also called: prop trading, funded account
A proprietary trading firm that lets traders who pass an evaluation trade its capital for a share of profits, under strict drawdown rules.
In practice
A typical challenge asks a trader to reach a profit target without breaching a daily loss limit (often around 5%) or a maximum drawdown (often around 10%).
Taking oversized risk to pass quickly. Most failed challenges break the drawdown rule, not the profit target.
Related terms
Maximum drawdown
The largest peak-to-trough decline recorded over a period. It is a…
Risk per trade
The share of your account you lose if a trade hits its stop loss.…
Balance
Your account value from closed trades, deposits and withdrawals,…
Broker
The firm that gives you access to the market, holds your funds and…
Cent account
An account denominated in cents, so balances and lot values are…
Commission
A fixed fee per lot charged by some account types, usually…