Prop trading 101: key terms explained

You pay a one-time fee for a virtual trading account with a profit target, a daily loss limit, a maximum loss limit and sometimes a minimum number of trading days. Pass every phase and you reach a Real account, where you can request rewards based on your simulated results.

1. 1
   Open a position

   A market order fills at the ask for a buy or the bid for a sell. The day counts as a trading day.

2. 2
   Floating profit and loss

   While the position is open, its unrealised result moves with the price.

3. 3
   Equity is checked

   Equity, balance plus floating P/L, is checked against the daily and maximum loss limits as prices move.

4. 4
   Close the position

   By hand, or by stop loss or take profit. The result moves into your balance.

5. 5
   Pass the phase

   When closed profit reaches the target, every position is closed and the minimum trading days are done, the next phase or the Real account starts at the initial balance.

Initial balance

The account size you start with. Every loss limit and target is a percentage of this amount.

Balance

Your account value from closed trades. It changes when a position closes.

Equity

Balance plus floating profit and loss on open positions. Loss limits are checked against equity.

Floating P/L

The unrealised profit or loss of open positions.

Daily loss

How far equity is below the day’s opening balance, as a percentage of the initial balance.

Drawdown / maximum loss

The equity level that ends the account when touched. Static: fixed below the initial balance. Trailing: rises with your highest closed balance.

Loss floor

The equity level that ends the account when touched. It is fixed on 2-Step Standard, 2-Step Flex, 2-Step Pro and 1-Step Flex and trailing on Zero.

Stop-out

If equity falls to 50% of the margin in use or lower, open positions are closed and the account is breached.

Leverage

How much exposure you can hold for a given margin. 1:100 means a position needs 1/100 of its value as margin.

Margin

Equity set aside to hold open positions: lots × contract size × the USD value of the base currency ÷ leverage.

Free margin

Equity minus margin in use. New market orders need enough free margin.

Lot

The trade size unit. 1.00 lot of forex is 100,000 units of the base currency; 1.00 lot of gold is 100 oz.

Pip

The standard price step: EUR/USD 0.0001, USD/JPY 0.01, XAU/USD 0.1. One pip on 1.00 lot of EUR/USD is worth $10.

Spread

The gap between the bid and ask price. Buys fill at the ask and sells at the bid. At Fundzoria the typical EUR/USD spread is 0.6 pips and there is no commission.

Trading day

A day (02:00 UTC to 02:00 UTC) on which you open or close at least one position.

Profitable day

A trading day whose closed profit is at least 0.25% of the starting balance. Payouts need a number of them.

Consistency rule

On Zero, your best day may not exceed 40% of total profit when you request a reward.

Payout cycle

How often a Real account can request a reward: weekly (80%), bi-weekly (85%), monthly (100%).

Real account

The funded simulation stage, reached by passing an evaluation or straight away on Zero. It needs identity verification and can request rewards.

On a $100K 2-Step Standard account with a 5% daily loss limit, your daily allowance is $5,000. If the day opens at $100,000, the account is breached if equity touches $95,000, including floating losses.

The same account has a 10% static maximum loss, so the floor is $90,000 for the life of the account, however much the balance grows.

On a $100K Zero account with a 6% trailing maximum loss, the floor starts at $94,000. If your highest closed balance reaches $103,000, the floor moves up to $97,000; from $106,000 it stays at $100,000 until your next payout request.

• Decide how much you are willing to lose before each entry.
• Keep each trade small compared with the daily limit.
• Count open losses, not only closed ones.
• Check the economic calendar before your session.