Futures prop firm glossary: trailing drawdown, consistency, daily loss limit and more

The 45 words you hear most when talking about futures prop firm accounts, explained in one or two sentences.

Account rules · Costs and size · Measuring a strategy · Orders and market

Account rules

Evaluation: The test you have to pass to get a funded account: reach a profit target without touching the floor or breaking the other rules.
Profit target: What you need to make to pass the evaluation. In every 50K account we compared, $3,000.
Drawdown (max loss): The largest drop allowed from the starting balance or from a high. It sets the account's floor: if your balance touches it, the account is blown.
Trailing drawdown: A floor that moves up as the account makes money. Intraday: it also follows profits you haven't closed yet. End of day (EOD): it only updates with the closing balance. That's why, with a trailing drawdown, winning also brings you closer to blowing the account. More
Trailing lock: The point where the floor stops moving up. In the 50K accounts we analyzed, the starting balance plus $100.
Daily loss limit: The most you can lose in one day. Depending on the firm, hitting it ends your day or blows the account. More
Consistency rule: A rule that caps how much of the total profit your best day can be (in the accounts we compared, 40% or 50%). Breaking it doesn't blow the account, but you have to keep trading until it evens out. More
Time limit: The maximum time to pass. APEX's 2026 accounts give you 30 calendar days (about 21 sessions); other firms have no limit. It matters more than the discount when choosing a firm. More
Minimum days: The minimum number of sessions you must trade to pass or to get paid, even if you reached the target earlier.
Cushion: The distance between your balance and the floor. Today's cushion is the smaller of that distance and what's left of your daily loss limit. It's what should decide your size.
Funded account: The account you get when you pass, the one that can pay you. Its rules can differ from the evaluation's.
Activation fee: A one-off or monthly payment some firms charge when you pass, to activate the funded account. Add it to the evaluation price when comparing firms.
Reset: Paying to restart a blown or expired evaluation without buying a new one. Usually cheaper, but it's one more attempt in your cost per passed account.
Payout: Withdrawing profits from the funded account. Every firm sets conditions: days traded, minimum profit, a buffer you must leave or a cap per withdrawal.
Scaling: A contract limit that grows as the funded account makes money: at the start you may trade fewer contracts than the evaluation allowed.

Costs and size

Tick: The minimum price move. On the Nasdaq futures, 0.25 points.
Micros (MNQ, MES, MGC…): Futures contracts ten times smaller than the big ones (NQ, ES, GC). MNQ is worth $0.50 per tick and $2 per point.
Commission: What the firm or broker charges per contract, round trip. In our tests, about $1.20 per Nasdaq micro.
Slippage: The difference between the price you expected and the one you got. We assume at least 1 tick on entry and another on exit.
Costs: Commission plus slippage: on the micro Nasdaq, about $2.20 per contract and trade (4.4 ticks). The smaller the bars you trade, the more they weigh.
Typical loss: Your average loss over your recent losing trades, at your normal size. It's how you size: cushion ÷ (10 × typical loss per contract).

Measuring a strategy

Win rate: The percentage of winning trades. On its own it says nothing: you have to read it together with the average win, the average loss and the costs.
Expectancy: What you make on average per trade: win rate × average win − loss rate × average loss. If it isn't positive after costs, no position size can fix it.
Profit factor: Gross profit from winning trades divided by gross loss from losing ones. Below 1, the strategy loses money.
Sharpe ratio: Return divided by its volatility. Useful to compare strategies with different risk.
95% confidence interval: The range where, with 95% confidence, your true average result lies. If it includes zero, your edge isn't proven. More
t-statistic: How many times bigger the average result is than its noise. Below 2 it's easily explained by chance; if you tested many variants, ask for 3 or more.
Overfitting: Fitting a strategy so closely to past data that it stops working on new data.
Plateau: A region of parameters where neighbouring settings also make money. The opposite of an isolated peak, which doesn't repeat.
In-sample, validation and test: The three parts the data is split into: you choose in-sample, you discard in validation, and you look at the test only once, with the settings frozen.
Clean test: A period of data the strategy hasn't seen, used only once per configuration. We use the Nasdaq from 2006 to 2019.
Control group (random baseline): The same test with direction or timing decided at random. It tells you how much of a result chance explains.
Monte Carlo: A simulation that reshuffles the order of trades (or whole days) many times to see the range of possible results and drawdowns. It's what the simulator does with 3,000 evaluations. More
Parity: Checking that the strategy coded in the platform takes exactly the same trades as the simulation.
Pre-registration: Writing down the rule, the variants you'll test and the pass criterion before looking at the results.
Market regime: The character of a market period: trending up, ranging, volatile or quiet. What works in one may not work in another.
Daily correlation: How similar the daily results of two strategies are. Above 0.6 they're almost the same, and combining them doesn't spread the risk.

Orders and market

Limit and stop orders: A limit order buys or sells at the given price or better. A stop order becomes a market order when a price is touched: it's what you use to enter breakouts or to exit with a loss.
OCO (one cancels the other): Two linked orders: when one fills, the other is cancelled. Essential for trading breakouts in both directions.
Straddle: A buy order above the price and a sell order below it, waiting for a sharp move, for example on a news release. Many firms ban it.
Regular trading hours: The main New York session, 9:30 to 16:00 New York time, when most of the volume trades.
VWAP: The session's average price weighted by volume. Widely used as the day's fair-price reference.
Sweep: A large market order that takes out several price levels at once. It's what aggression bubbles highlight.
Tick rule: A way to estimate whether a trade was a buy or a sell: if the price goes up from the previous one, a buy; if it goes down, a sell.
Tick Replay: A NinjaTrader option that recalculates indicators with every historical tick. Without it, many order-flow indicators draw the past differently from how they would have live.

How do these rules affect you? The free simulator applies each firm's trailing drawdown, daily loss limit, consistency rule and time limit to the way you trade and tells you how many evaluations you would pass.

Educational content based on our own experience. Not investment advice. Firm rules change: check them on each firm's website. This article contains no affiliate links.