Our glossary of terms provides clear and concise definitions for key concepts you’ll encounter when dealing with prop firms, especially those related to simulated trading accounts and evaluations.
For those new to the world of forex trading, this guide will help you grasp the fundamental terms and ensure you’re well-prepared for any prop trading program. From daily loss limits to profit targets and withdrawal criteria, each term is explained to give you a comprehensive understanding of the requirements and opportunities within the prop trading industry.
Daily Simulated Loss
Explanation: This term refers to the maximum allowable loss that a trader can incur in a single trading day within a simulation or evaluation account. If this threshold is exceeded, it may result in the termination of the account or the trader failing the evaluation.
EAs Allowed
Explanation: “EAs” stands for Expert Advisors, which are automated trading systems used in platforms like MetaTrader. “EAs Allowed” indicates whether a prop firm permits the use of these automated trading strategies in their evaluation or funded accounts.
Funded Trading Plus
Explanation: This typically refers to an enhanced funded trading program offered by a prop firm. It may include additional benefits such as higher profit splits, advanced trading tools, or access to a larger trading account size upon successful evaluation.
Hold over the weekend?
Explanation: This term refers to whether traders are permitted to keep their positions open over the weekend. Some prop firms may have rules that require all positions to be closed before the weekend to avoid gaps and volatility risks when markets reopen.
Maximum Simulated Leverage
Explanation: This is the highest leverage ratio a trader can use in a simulated or evaluation account. Leverage allows traders to control larger positions with a smaller amount of capital, but higher leverage also increases risk.
Maximum Simulated Loss
Explanation: This term refers to the total amount of loss that a trader can incur in a simulated or evaluation account before the account is terminated. It is a cumulative limit set to manage risk.
Maximum Simulated Lot Size
Explanation: This refers to the largest trade size (in lots) that a trader is allowed to place in a simulated or evaluation account. This restriction helps manage risk and ensure that trades are within acceptable size limits.
Maximum Simulated Trading Days
Explanation: This is the maximum number of days a trader is allowed to trade in a simulated or evaluation account to meet the firm’s criteria. Exceeding this limit without meeting the objectives may result in failing the evaluation.
Minimum Simulated Trading Days
Explanation: This term refers to the minimum number of trading days required for a trader to participate in a simulated or evaluation account. It ensures that the trader demonstrates consistent performance over a certain period.
Minimum Withdrawal Amount
Explanation: This is the smallest amount of profit that a trader can withdraw from their account. Some firms set this threshold to manage transaction costs and ensure significant withdrawals.
Minimum Withdrawal Criteria
Explanation: These are the conditions that must be met before a trader can make a withdrawal from their account. Criteria may include reaching a certain profit level, trading for a minimum number of days, or adhering to specific risk management rules.
Refundable Fee
Explanation: This is a fee that traders pay to participate in a prop firm’s evaluation program, which is refundable upon successful completion of the evaluation. It serves as a commitment from the trader and covers administrative costs.
Scaling Plan
Explanation: A scaling plan refers to the structure by which a prop firm increases a trader’s account size based on their performance. This plan rewards successful traders with larger accounts and potentially higher profit splits as they meet certain targets.
Simulated Profit Split
Explanation: This term refers to the proportion of profits that a trader can retain from their simulated or evaluation trading account. The remaining profits typically go to the prop firm as their share.
Simulated Profit Target
Explanation: This is the profit level that a trader must achieve in a simulated or evaluation account to successfully complete the evaluation process and potentially qualify for a funded account.
Simulated Stop Loss Required?
Explanation: This term indicates whether traders are required to set stop loss orders on their trades in a simulated or evaluation account. A stop loss is a risk management tool that automatically closes a position at a predetermined loss level to prevent further losses.
