Prop Firm Glossary
40+ key terms and definitions every prop firm owner and trader should know. From challenges and drawdown to white labeling and risk management.
Active Account
A trader account that has been used for trading activity within the current billing period. Active accounts are the primary metric many technology providers use for usage-based pricing, though Propriotec charges a flat monthly fee regardless of how many accounts are active. Tracking active versus inactive accounts helps prop firms understand engagement and forecast costs.
Affiliate Program
A referral system where partners earn commissions for referring new traders or prop firms to a platform. Affiliate programs are a core growth channel for prop firms, incentivizing influencers, educators, and existing traders to drive sign-ups. Commissions are typically a percentage of challenge fees paid by referred traders. A robust affiliate management system tracks referrals, calculates payouts, and provides partners with marketing materials.
Auto-Liquidation
The automated closing of all open positions when a trader breaches a risk rule threshold such as a daily loss limit or maximum drawdown. Auto-liquidation protects the firm's capital by immediately removing market exposure once a predefined risk boundary is hit. It is a critical component of any prop firm's risk management engine and operates without manual intervention to ensure consistent rule enforcement.
Broker
A financial intermediary that executes trades on behalf of clients by connecting them to liquidity providers and exchanges. Prop firms use brokers or broker-like setups for trade execution, routing orders through platforms such as MetaTrader, cTrader, or DXtrade. The choice of broker affects spreads, execution speed, and the range of tradeable instruments available to funded traders.
Challenge
An evaluation period where traders must meet specific profit targets while respecting risk rules to qualify for a funded account. Challenges typically last between 14 and 60 days and require traders to demonstrate consistent, disciplined trading. Most prop firms charge a one-time fee for challenge entry, which serves as the firm's primary revenue stream. Multi-phase challenges add additional stages to further verify trader skill before granting live capital.
Copy Trading
A practice where one trader automatically replicates the trades of another trader's account in real time. Most prop firms prohibit copy trading during evaluations because it undermines the purpose of assessing individual skill. Firms use trade-pattern analysis and IP monitoring to detect copy trading activity. Violations typically result in account termination and forfeiture of any pending payouts.
CRM (Customer Relationship Management)
Software that manages trader relationships, evaluations, payouts, and day-to-day operations for a prop firm. A prop firm CRM handles everything from onboarding new traders and tracking challenge progress to processing profit splits and managing support tickets. Propriotec's CRM is purpose-built for the prop trading industry and includes KYC verification, automated evaluation management, payout processing, and an integrated affiliate system.
cTrader
An electronic communication network (ECN) trading platform popular with prop firms for its depth-of-market display, advanced charting, and fast execution. Developed by Spotware, cTrader supports forex, CFDs, and other asset classes. Its algorithmic trading capabilities through cAlgo (now cTrader Automate) make it a preferred choice for firms catering to sophisticated traders. Propriotec integrates with cTrader as one of several supported trading platforms.
Daily Loss Limit
The maximum amount a trader can lose in a single trading day before their account is suspended or closed. Daily loss limits are typically expressed as a percentage of the initial account balance or current equity, commonly set between 4% and 6%. When a trader hits the daily loss limit, auto-liquidation triggers and no further trading is permitted until the next trading day. This rule prevents traders from compounding losses during a single bad session.
Drawdown
The peak-to-trough decline in account equity, measuring how much value has been lost from a high point before recovering. Prop firms set maximum drawdown limits to manage risk and protect capital, typically allowing between 8% and 12% total drawdown. There are two common types: static drawdown, measured from the initial balance, and trailing drawdown, which rises with equity gains. Understanding drawdown rules is essential for traders navigating evaluations and funded accounts.
DXtrade
A multi-asset trading platform developed by Devexperts, used by prop firms for forex, CFDs, and cryptocurrency trading. DXtrade offers a modern web-based interface, mobile apps, and robust API connectivity. It is popular among newer prop firms because of its flexible configuration options and relatively straightforward integration process. The platform supports custom risk parameters and can be white-labeled to match a firm's brand.
Evaluation
The process of assessing a trader's skill through structured challenges with specific rules and profit targets before granting access to funded capital. Evaluations test discipline, risk management, and consistency rather than just raw profitability. Most evaluation programs consist of one or two phases, each with progressively stricter requirements. Successful completion of all evaluation phases results in the trader receiving a funded account.
Funded Account
A trading account provided to traders who have passed evaluation challenges, allowing them to trade with the firm's capital. Funded accounts come with defined risk parameters including maximum drawdown, daily loss limits, and position size restrictions. Traders keep a percentage of profits generated (the profit split) while the firm assumes the capital risk. Account sizes typically range from $10,000 to $400,000 depending on the firm and the evaluation tier passed.
Funded Trader
A trader who has successfully passed evaluation challenges and received a funded trading account from a prop firm. Funded traders trade the firm's capital under agreed-upon risk rules and receive a share of the profits they generate. Maintaining funded status requires ongoing compliance with drawdown limits, trading guidelines, and any consistency rules set by the firm. Top-performing funded traders may qualify for scaling plans that increase their capital allocation.
HYPTRADER
Propriotec's built-in white-label trading platform featuring TradingView-powered charts, included free with every Propriotec plan. HYPTRADER provides a modern, web-based trading experience that prop firms can deploy under their own brand without additional licensing costs. The platform supports forex, indices, commodities, and cryptocurrency trading with real-time price data and advanced order types. It eliminates the need for separate platform licensing agreements, reducing both cost and operational complexity.
KYC (Know Your Customer)
An identity verification process required before traders can receive payouts or access funded accounts. KYC involves collecting government-issued identification, proof of address, and sometimes a selfie to confirm the trader's identity. This process is mandated by financial regulations to prevent fraud, money laundering, and terrorist financing. Propriotec's CRM includes built-in KYC verification workflows to streamline compliance for prop firms.
Latency Arbitrage
A trading strategy that exploits price delays between different platforms or liquidity providers to execute risk-free or near-risk-free trades. Latency arbitrage takes advantage of the fact that prices update at slightly different speeds across brokers and exchanges. Most prop firms explicitly prohibit this strategy because it does not reflect genuine trading skill and can create execution problems. Firms use trade-analysis tools to detect latency arbitrage patterns and will typically terminate accounts found engaging in it.
Leaderboard
A public ranking of traders based on performance metrics such as profit percentage, consistency score, or total returns. Leaderboards are used by prop firms to drive engagement, foster healthy competition among traders, and showcase the success of their evaluation programs. They serve a dual purpose as both a marketing tool and a community-building feature. Many firms offer prizes or accelerated funding to top-ranked traders on their leaderboards.
Leverage
The ratio of trading capital to the margin required to open a position, allowing traders to control larger positions with less capital. Prop firms typically offer leverage ranging from 1:10 to 1:100 depending on the asset class and account type. Higher leverage amplifies both potential gains and losses, making it a double-edged sword that requires careful risk management. Forex pairs usually receive the highest leverage, while indices and commodities may have lower ratios.
Match-Trader
A web-based trading platform designed for brokers and prop firms, known for its modern interface and native TradingView chart integration. Match-Trader offers a clean user experience with fast execution, multi-device support, and built-in social trading features. The platform is increasingly popular with prop firms looking for an alternative to MetaTrader. It provides white-label customization options and straightforward API connectivity for CRM integration.
Maximum Drawdown
The absolute maximum decline from peak equity allowed before an account is permanently terminated. Maximum drawdown is typically set between 8% and 12% of the initial account balance and serves as the ultimate safety net for the firm's capital. Unlike a daily loss limit, which resets each day, maximum drawdown is a cumulative measure across the entire life of the account. Breaching the maximum drawdown results in immediate auto-liquidation and loss of the funded account.
MetaTrader 4 (MT4)
A widely-used retail trading platform for forex and CFD trading, developed by MetaQuotes Software and released in 2005. MT4 is known for its stability, extensive library of custom indicators, and support for automated trading through Expert Advisors (EAs). Despite being the older platform, it remains popular with many traders and prop firms due to its mature ecosystem and broad broker support. Propriotec integrates with MT4 for firms that wish to offer it alongside newer platforms.
MetaTrader 5 (MT5)
The successor to MT4, developed by MetaQuotes Software, supporting multi-asset trading including forex, futures, stocks, and commodities. MT5 offers an improved strategy tester, more timeframes, an economic calendar, and depth-of-market data not available in MT4. It uses the MQL5 programming language for custom indicators and automated strategies, which is more powerful but not backward-compatible with MT4's MQL4. Many prop firms now default to MT5 for its broader asset coverage and modern architecture.
Payout
The distribution of profits from a funded trading account to the trader, typically processed on a scheduled basis such as bi-weekly or monthly. Payouts are calculated based on the trader's profit split percentage applied to net profits earned during the payout period. Most firms require traders to submit a payout request and complete KYC verification before receiving funds. Common payout methods include bank transfers, cryptocurrency, and digital payment platforms.
Per-Account Fee
A charge applied by technology providers for each active trader account on the platform. Per-account fees can escalate rapidly as a prop firm scales, turning what appears to be an affordable solution into a significant operational expense. This pricing model creates unpredictable costs that grow proportionally with trader volume. Propriotec does not charge per-account fees, instead offering flat monthly pricing that remains the same regardless of how many traders are on the platform.
Phase (Evaluation Phase)
A stage in a multi-step evaluation process that traders must complete before receiving a funded account. Many prop firms use two-phase evaluations: Phase 1 typically has a higher profit target (such as 8-10%) while Phase 2 has a lower target (such as 4-5%), both with the same risk rules. Each phase must be passed independently, and failing any phase usually requires the trader to restart or purchase a new evaluation. The multi-phase approach helps firms verify that a trader's performance is consistent rather than the result of luck.
Profit Split
The percentage of trading profits shared between the prop firm and the funded trader. Profit splits typically range from 70% to 90% in favor of the trader, with some firms offering up to 95% for top performers or through scaling plans. The split is applied to net profits after accounting for any fees or losses, and is calculated at each payout cycle. A competitive profit split is one of the key factors traders consider when choosing a prop firm.
Profit Target
The minimum profit percentage a trader must achieve during an evaluation phase to pass and progress to the next stage or receive a funded account. Profit targets are typically expressed as a percentage of the starting account balance, commonly ranging from 5% to 10% depending on the evaluation phase. Traders must reach the target while staying within all risk parameters including daily loss limits and maximum drawdown. Meeting the profit target demonstrates that a trader can generate meaningful returns under controlled conditions.
Prop Firm (Proprietary Trading Firm)
A company that provides capital to traders, who trade the firm's money in exchange for a share of profits generated. Modern prop firms typically operate an evaluation-based model where traders pay a fee to attempt a challenge, and successful traders receive funded accounts. The firm assumes the financial risk of providing capital while traders contribute their skill and strategy. Prop firms have grown rapidly since the early 2020s, with technology providers like Propriotec enabling entrepreneurs to launch their own firms.
Revenue Share
A pricing model where technology providers take a percentage of the prop firm's gross or net revenue as their fee. Revenue share models can become extremely expensive as a firm grows, with providers capturing a significant portion of the firm's earnings. This model creates a misalignment of incentives where the technology provider benefits from higher challenge fees even if that is not in the best interest of the firm. Propriotec does not use revenue share pricing, instead charging a predictable flat monthly fee.
Risk Management
The systems, rules, and processes designed to limit financial exposure and protect a prop firm's capital. Risk management encompasses drawdown controls, daily loss limits, position size restrictions, leverage caps, and fraud detection mechanisms. An effective risk management system operates in real time, automatically enforcing rules through auto-liquidation and trade monitoring. Propriotec provides a comprehensive risk management engine that prop firms can configure with custom rules tailored to their evaluation and funded account programs.
Scaling Plan
A program that increases a funded trader's account size and sometimes improves their profit split based on consistent, profitable performance over time. Scaling plans reward disciplined traders by gradually allocating more capital, often in increments of 25% to 100% of the original account size. To qualify, traders typically need to achieve a specific profit target over multiple consecutive payout cycles without breaching risk rules. Scaling plans help prop firms retain their best traders while also encouraging long-term consistency.
Slippage
The difference between the expected price of a trade and the actual execution price, occurring when market conditions shift between order placement and execution. Slippage is most common during periods of high volatility, around major news events, or when trading with large position sizes in low-liquidity markets. It can be positive (executing at a better price) or negative (executing at a worse price), though negative slippage is more commonly discussed. Prop firms monitor slippage as part of their trade quality analysis and execution reporting.
TradeLocker
A next-generation trading platform with TradingView-powered charts, purpose-built for brokers and prop firms. TradeLocker offers a modern, intuitive interface with advanced charting, multi-device support, and a developer-friendly API. It has gained popularity in the prop firm space for its sleek design and seamless TradingView integration, which provides traders with a premium charting experience. The platform supports white-labeling, allowing firms to customize the interface with their own branding.
TradingView
A leading charting and financial analysis platform whose technology is integrated into HYPTRADER, TradeLocker, Match-Trader, and several other modern trading platforms. TradingView is known for its powerful charting tools, vast library of technical indicators, and active social community of traders sharing ideas. Its chart technology has become the industry standard for web-based trading interfaces, offering superior usability compared to legacy charting solutions. Many traders specifically seek out prop firms that offer TradingView-powered platforms for their evaluation and funded accounts.
Trailing Drawdown
A drawdown limit that moves upward with account equity gains but never moves back down, creating an increasingly tight floor under the account's peak value. For example, if a $100,000 account has a $6,000 trailing drawdown, the liquidation level starts at $94,000 but rises to $96,000 once equity reaches $102,000. The trailing drawdown typically locks in once it reaches the initial account balance, at which point it becomes a static drawdown. This mechanism encourages traders to protect their gains and discourages overly aggressive trading after reaching profit.
White Label
A product or service produced by one company that is rebranded and sold by another company under their own brand name. In the prop firm industry, white labeling allows entrepreneurs to launch a fully branded trading firm without building the underlying technology from scratch. The white-label provider handles the platform, CRM, risk management, and infrastructure while the firm focuses on branding, marketing, and trader acquisition. This approach dramatically reduces time-to-market and upfront development costs.
White Label Prop Firm
A prop firm that operates under its own brand using white-labeled technology from a provider like Propriotec. White-label prop firms benefit from enterprise-grade infrastructure, proven evaluation systems, and professional trading platforms without the years of development time required to build these systems independently. The end user (the trader) interacts with a seamlessly branded experience and typically has no visibility into the underlying technology provider. Propriotec powers 50+ white-label prop firms worldwide with its all-in-one CRM, HYPTRADER platform, and risk management suite.
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