Learning path

How markets are quoted, what a position really risks, and the words you will meet every day.

Process, measurement and the rules of the accounts you trade — including prop-firm evaluations.

Relationships between markets, volatility and the biases that survive experience.

Plain-language terms

Short editorial notes for beginners. Prop-firm rules differ by firm and change — always check the firm's current rules.

Prop-firm rules

Consistency rule

A rule that limits how much of your total profit may come from a single day.
Example: With a 30% consistency rule, a $3,000 total cannot include one day above $900.
Watch out: Definitions vary by firm.

Daily loss limit

The most an account may lose within one trading day. Breaching it usually fails the account or ends trading for the day.
Example: $100,000 starting balance, 5% daily limit: a $5,000 loss in one day (often including open losses) breaches it.
Watch out: Firms differ on whether it is measured from the day's starting balance or equity, and when the day resets.

Drawdown

How far an account has fallen from a previous high point. A 'maximum drawdown' rule sets how far the balance may fall before the account fails.
Example: An account peaks at $10,500 and falls to $9,800: the drawdown from that peak is $700 (about 6.7%).
Watch out: Prop firms measure drawdown differently (static, trailing, end-of-day). Read the exact rule.

End-of-day drawdown

A trailing floor that is only updated from the account's end-of-day balance, not from intraday peaks.
Example: Equity touches $51,200 intraday but closes the day at $50,600: the floor trails from $50,600.
Watch out: Some firms still enforce intraday breaches against the end-of-day floor. Check the firm's rules.

Evaluation

A paid trial in which you trade under a prop firm's rules. Meeting the target without breaking a rule may qualify you for a funded (often simulated) account.
Example: Pay a fee, trade a $50,000 evaluation account, hit the target, respect the loss limits.
Watch out: Most evaluations are not passed. Budget for the fee as a cost, not an investment.

Funded account

The account a prop firm gives you after passing. Many are simulated; payouts follow the firm's contract rather than real-market fills.
Watch out: Read whether the account is simulated and how payouts are calculated.

Minimum trading days

The fewest separate days you must trade before passing or requesting a payout, even if the target is reached sooner.

Profit split

The share of eligible profits a funded trader receives under the firm's payout rules.
Example: An 80% split on $2,000 of eligible profit is $1,600 to the trader, before any payout conditions.
Watch out: Payout timing, minimums and eligibility rules matter as much as the percentage.

Profit target

The profit an evaluation account must reach, without breaking any rule, to pass that phase.
Example: $50,000 account with a 6% target: you must make $3,000.
Watch out: Reaching the target does not override other rules such as minimum trading days.

Reset

Restarting a prop evaluation from the original balance and rules, usually for a fee, after failing or to start over.
Watch out: Repeated resets add up — count them in the true cost of a programme.

Static drawdown

A loss floor that stays at one fixed level, usually set from the starting balance. Profits do not move it.
Example: $100,000 account, 10% static limit: the floor is $90,000 whether the account is up or down.
Watch out: Rules differ by firm and change — check the firm's current rules page.

Trailing drawdown

A loss floor that moves up as your account (often including open profit) reaches new highs. It never moves down.
Example: $50,000 account, $2,500 trailing: if equity peaks at $51,000, the floor rises to $48,500.
Watch out: Many programmes stop trailing at a set level (often the starting balance). Open profit that you give back can still breach it. Check the firm's rules.

Trading mechanics

Contract multiplier

The money value of a one-point move in a futures or options contract.
Example: E-mini S&P 500 (ES): $50 per index point, so a 10-point move is $500 per contract.

Leverage

Controlling a position larger than the money you put down. It magnifies gains and losses by the same factor.
Example: With 30:1 leverage, $1,000 of margin controls a $30,000 position; a 1% move against you costs $300.
Watch out: Leverage changes the size of mistakes, not the odds of being right.

Lot

A unit of position size in forex. A standard lot is 100,000 units of the base currency; a mini lot 10,000; a micro lot 1,000.
Example: 1 standard lot of EUR/USD: one pip is worth about $10.
Watch out: Size from your stop distance, not from a round number of lots.

Margin

The deposit a broker or exchange holds to keep a leveraged position open. It is collateral, not the cost and not the maximum loss.
Example: A $30,000 position at 30:1 needs about $1,000 of margin.
Watch out: If equity falls below the maintenance level you can get a margin call or be closed out automatically.

Pip

A standard unit of price movement in currency pairs: the 4th decimal for most pairs (0.0001), the 2nd for yen pairs (0.01).
Example: EUR/USD from 1.1000 to 1.1050 is 50 pips.

R-multiple

A trade's result measured in units of the amount you planned to risk (1R).
Example: Risk $150, make $375: the trade returned +2.5R. Lose the planned $150: −1R.
Watch out: R makes trades of different sizes comparable in a journal.

Reward-to-risk

How far your target is compared with your stop.
Example: Stop 20 pips away, target 60 pips away: 3:1 reward-to-risk.
Watch out: A high ratio with a low hit rate can still lose money — combine it with your win rate.

Slippage

The difference between the price you expected and the price you actually got.
Example: A stop at 1.0950 fills at 1.0942 during a fast move: 8 pips of slippage.
Watch out: Stops are instructions, not guarantees — gaps and fast markets cause slippage.

Spread

The gap between the price you can buy at (ask) and sell at (bid). It is a trading cost paid on every round trip.
Example: EUR/USD bid 1.1000 / ask 1.1002: the spread is 0.0002, or 2 pips.
Watch out: Spreads often widen around major news and at thin hours.

Stop-loss

An order that closes a position if price reaches a level you chose, to limit the loss.
Watch out: In a gap the stop becomes a market order and can fill well beyond your level.

Swap / rollover

Interest added to or charged on a leveraged position held overnight, based on the rate gap between two currencies plus the broker's markup.
Watch out: Long holding periods can turn a small swap into a meaningful cost.

Macro & markets

Backwardation

When nearer-dated futures trade above later-dated ones, often when the asset is scarce right now.

Bond yields

The annual return a bond pays relative to its price. When a bond's price falls, its yield rises, and the other way round.
Example: Higher US 10-year yields raise the benchmark for mortgages and company borrowing.

Contango

When later-dated futures trade above nearer-dated ones (or spot). Rolling a long position then tends to cost money over time.

CPI

The Consumer Price Index: the average change in prices consumers pay for a basket of goods and services. The headline figure for inflation in many countries.
Watch out: Markets usually react to the surprise versus expectations, not the level itself.

DXY (US Dollar Index)

An index of the US dollar against six major currencies; the euro has the largest weight.
Watch out: DXY is euro-heavy — it can hide what the dollar is doing against the yen or emerging-market currencies.

FOMC

The Federal Reserve committee that sets US monetary policy, including the target range for the federal funds rate. It meets eight times a year.
Watch out: The statement, projections and press conference can move markets more than the decision itself.

GDP

The value of all final goods and services produced in an economy over a period — the broadest measure of economic output.

Non-farm payrolls

The monthly US report of how many jobs were added or lost outside farming, published with the unemployment rate and wages.
Watch out: Revisions to earlier months can matter as much as the headline.

Policy rate

The short-term interest rate a central bank sets to steer borrowing costs and inflation.

Risk-off

Shorthand for periods when investors cut riskier assets (stocks, high-yield, some currencies) and favour perceived havens.
Watch out: It is a description of a pattern, not a rule — havens do not always rise together.

Safe haven

An asset many investors buy in stress, such as government bonds, gold, the US dollar, the Swiss franc or the yen.
Watch out: Haven behaviour changes with the cause of the stress.

Volatility

How much and how fast a price moves. Implied volatility is the market's priced-in estimate; the VIX tracks it for S&P 500 options.
Watch out: High volatility means wider ranges — size down rather than widen everything.

Yield curve

A line of yields across bond maturities. It is 'inverted' when short-term yields are above long-term yields.
Watch out: An inversion has preceded past US recessions, but timing varies widely and it is not a reliable timer.

Options

Delta

How much an option's price tends to change for a $1 move in the underlying. Also a rough gauge of directional exposure.
Example: A call with 0.40 delta gains about $0.40 if the stock rises $1.

Gamma

How fast delta changes as the underlying moves. Highest for at-the-money options close to expiry.

Strike price

The price at which an option lets its holder buy (call) or sell (put) the underlying.

The Greeks

Delta, gamma, theta and vega: the standard measures of how an option's price responds to price, time and volatility.

Theta

How much value an option tends to lose each day as time passes, all else equal.
Watch out: Time decay speeds up near expiry.

Vega

How much an option's price changes for a one-point change in implied volatility.
Watch out: Falling volatility after an event can hurt option buyers even when direction is right.

Behaviour

FOMO

Fear of missing out: entering because a move is running, not because your plan says so.
Watch out: A pre-written entry rule is the usual antidote.

Revenge trading

Quick, often larger trades taken to win back a recent loss.
Watch out: A daily stop rule ('two losses and I stop') is a common guard.