Prop Firm & Futures Trading
Glossary

49+ terms defined in plain English. Every definition includes how it applies specifically at Day Trader Funding.

A

Account Activation

The one-time fee paid when a trader passes their evaluation and moves to a funded account. This covers the administrative cost of setting up a live trading account with real capital.

At Day Trader Funding: $99 activation fee — pay once, trade with real capital. No recurring fees.

Related: Evaluation, Funded Account

B

Bid-Ask Spread

The difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask). Tighter spreads mean lower transaction costs. Spreads widen during low-liquidity periods like overnight sessions.

C

Consistency Rule

A rule used by some prop firms requiring that no single trading day accounts for more than a certain percentage of total profits. Designed to prevent lucky one-day traders from passing evaluations without demonstrating consistent skill.

At Day Trader Funding: Day Trader Funding has NO consistency rule. Trade for 3 days minimum, hit your target — we don't penalize skill.

D

Daily Loss Limit

The maximum amount of money a trader can lose in a single trading day before their account is locked or breached. This rule protects both the trader and the firm from catastrophic single-day losses.

At Day Trader Funding: Daily loss limits vary by account size. Our AI Risk Manager can automatically flatten your positions before you hit the limit.

Drawdown

The decline from a portfolio's peak value to its lowest point before a new high is reached. In prop trading, drawdown rules define how much you can lose before your account is breached. Understanding the type of drawdown (trailing vs. static, EOD vs. intraday) is critical.

E

E-mini

A class of electronically traded futures contracts that are a fraction (typically 1/5th) of the value of standard futures. E-minis are the most popular instruments among retail futures traders because of their manageable notional value and deep liquidity.

At Day Trader Funding: All major E-mini contracts (NQ, ES, YM, RTY) are available with $0 data fees.

EOD Trailing Drawdown

A trailing drawdown that only updates at the end of each trading day based on your closing balance, rather than intraday highs. This is more forgiving than real-time trailing drawdowns because it doesn't penalize you for giving back unrealized gains within a session.

At Day Trader Funding: Day Trader Funding uses EOD trailing drawdown — your drawdown floor only moves up at session close, not tick-by-tick.

Evaluation

The assessment phase where a trader must meet specific profit targets while respecting risk rules to prove they can trade profitably. Passing the evaluation earns the trader a funded account with real capital.

At Day Trader Funding: One-step evaluation with a 3-day minimum. Trade for 3 days, hit your profit target, and you're funded.

F

Front Month

The nearest expiration month for a futures contract, also called the "lead month" or "nearby." Front-month contracts have the highest volume and tightest spreads, making them the default choice for day traders.

Related: Rollover, Futures Contract, Volume

Funded Account

A trading account backed by a prop firm's capital that a trader earns access to after passing an evaluation. The trader keeps a percentage of profits and the firm absorbs the risk of losses up to the drawdown limit.

At Day Trader Funding: Funded accounts from $50K to $150K with an 80/20 profit split (up to payout caps) and day-1 payout eligibility.

Futures Contract

A standardized legal agreement to buy or sell an asset at a predetermined price at a specified time in the future. Futures trade on exchanges (CME, CBOT, NYMEX, COMEX) and cover equities, commodities, bonds, and currencies.

Related: E-mini, Front Month, Settlement

G

Green Day

A trading day where the trader finishes with a net profit. Some prop firms require a minimum number of green days to pass an evaluation or qualify for payouts.

At Day Trader Funding: No minimum green days required for evaluation or payouts. Trade on your own schedule.

Related: Consistency Rule, Win Rate

I

Intraday Drawdown

A drawdown calculation that updates in real-time based on your account's unrealized equity, including open positions. This is the strictest form of drawdown because it tracks every tick against you during the trading session.

L

Leverage

The use of borrowed capital to increase the potential return (and risk) of an investment. In futures trading, leverage is inherent in the contract structure — you control large notional value with a small margin deposit.

Limit Order

An order to buy or sell at a specific price or better. Limit orders provide price certainty but not execution certainty — the market may never reach your price. They're the preferred order type for funded traders who want to control entry prices.

M

Margin

The deposit required to open and maintain a futures position. Initial margin is needed to open the trade; maintenance margin is the minimum balance to keep it open. In prop trading, the firm provides the margin — you don't need your own capital.

At Day Trader Funding: Day Trader Funding provides all margin. You never need to deposit trading capital beyond your evaluation fee.

Related: Leverage, Futures Contract

Market Order

An order to buy or sell immediately at the best available price. Market orders guarantee execution but not price — you may experience slippage, especially in fast markets or low-liquidity instruments.

Max Drawdown

The absolute maximum loss allowed on a funded or evaluation account before it is breached. This is the hard line — if your account equity drops to this level, trading privileges are revoked.

Micro Contract

A futures contract that is 1/10th the size of the corresponding E-mini contract. Micro contracts (MNQ, MES, MCL, MGC, etc.) allow traders to take smaller positions with proportionally less risk — ideal for risk management in funded accounts.

At Day Trader Funding: All major micro contracts are available. Micros count as 1/10th of a contract toward your position limit.

Mini Contract

Another name for E-mini contracts — futures that represent a fraction of the full-size contract value. "Mini" and "E-mini" are used interchangeably in modern futures trading.

Related: E-mini, Micro Contract

O

Open Interest

The total number of outstanding (unsettled) futures contracts. Rising open interest with price increases signals strength; declining open interest can indicate a trend is losing steam. It's a key tool for gauging market conviction.

Related: Volume, Futures Contract

Order Flow

The real-time analysis of buy and sell orders hitting the market, typically viewed through tools like footprint charts, DOM (depth of market), or time & sales. Order-flow traders look for imbalances between aggressive buyers and sellers to anticipate short-term moves.

Related: Tape Reading, VWAP, Volume

Overnight Holding

Keeping a futures position open past the daily session close. Overnight positions carry gap risk — the market can open significantly higher or lower than where it closed due to news or events during off-hours.

At Day Trader Funding: Overnight holding rules vary by account type. Check your specific account rules before holding through the close.

P

Payout

The withdrawal of profits from a funded trading account. Each prop firm has its own payout schedule, minimum thresholds, and processing times.

At Day Trader Funding: Day-1 payout eligibility. Request a payout on your first profitable day. No minimum trading days required.

Payout Tier

A tiered structure where the profit split percentage or payout speed increases based on the trader's performance history or cumulative payouts. Higher tiers typically offer better terms as the trader proves consistent profitability.

At Day Trader Funding: 80/20 profit split from day one. You keep 80% of what you earn, up to your payout tier cap. More Green Days = higher caps.

Related: Payout, Profit Split

Position Sizing

Determining how many contracts to trade based on your account size, risk tolerance, and the specific instrument's characteristics. Proper position sizing is the single most important risk management decision a trader makes.

Profit Split

The percentage of trading profits that the trader keeps versus what the prop firm retains. Day Trader Funding offers an 80/20 profit split — you keep 80% up to your payout tier cap.

At Day Trader Funding: 80/20 profit split (up to payout cap). You keep the lion's share of what you earn.

Profit Target

The minimum profit amount a trader must achieve to pass their evaluation or reach a new payout tier. Profit targets vary by account size and prop firm.

At Day Trader Funding: Profit targets scale with account size. Achievable targets designed to be realistic, not punishing.

Related: Evaluation, Take Profit

Prop Firm

Short for proprietary trading firm. A company that provides traders with capital to trade in exchange for a share of the profits. Modern prop firms use evaluation models where traders prove skill before accessing funded accounts.

At Day Trader Funding: Day Trader Funding is built by traders, for traders. No subscription. No data fees. The most trader-friendly prop firm in the industry.

Pyramiding

Adding to a winning position as the trade moves in your favor. While pyramiding can amplify gains, it also increases risk if the market reverses. In funded accounts, it must be done carefully within position limits.

R

Reset

Paying a fee to reset a breached evaluation account back to its starting balance and rules, rather than purchasing a new evaluation. Resets are cheaper than buying a fresh account and let you try again without starting from scratch.

At Day Trader Funding: $79 / $129 / $169 reset fees — permanently locked at the cheapest prices in the industry. Other firms charge $200+.

Related: Evaluation, Max Drawdown

Revenge Trading

The emotional behavior of taking impulsive, oversized trades to recover losses quickly after a losing streak. Revenge trading is the #1 account killer in prop trading because it compounds losses with poor risk management.

Risk Management

The process of identifying, assessing, and controlling threats to your trading capital. In prop trading, risk management includes position sizing, stop-loss placement, daily loss limits, and emotional discipline.

At Day Trader Funding: Our optional AI Risk Manager monitors trades in real-time and can flatten positions before you breach rules.

Risk-Reward Ratio

The ratio comparing potential loss to potential gain on a trade. A 1:3 risk-reward means you risk $1 to make $3. Consistently favorable risk-reward ratios are essential for long-term profitability, even with a sub-50% win rate.

Related: Stop Loss, Take Profit, Win Rate

Rollover

The process of closing a position in an expiring futures contract and simultaneously opening the same position in the next contract month. Rollovers typically occur a few days before expiration when volume shifts to the new front month.

Related: Front Month, Futures Contract

S

Scalping

A high-frequency trading style that aims to profit from very small price movements, typically holding positions for seconds to minutes. Scalpers rely on tight spreads, fast execution, and high win rates to accumulate many small gains.

Settlement

The process by which a futures contract is resolved at expiration — either by physical delivery of the underlying asset or by cash settlement. Most retail futures traders close positions before settlement.

Slippage

The difference between the expected price of a trade and the actual price at which it executes. Slippage occurs most often with market orders during volatile conditions or in low-liquidity instruments.

Stop Loss

An order placed to automatically close a position at a specified price to limit losses. Stop losses are the most fundamental risk management tool and should be used on every trade in a funded account.

Support & Resistance

Price levels where buying pressure (support) or selling pressure (resistance) has historically caused the market to reverse or stall. These levels are the foundation of most technical analysis approaches.

Related: VWAP, Order Flow

T

Three-Day Pass

An evaluation structure that requires traders to trade a minimum of 3 days before passing. This ensures traders demonstrate consistent trading behavior rather than a single lucky trade.

At Day Trader Funding: Day Trader Funding uses a 3-Day Pass — trade at least 3 days, hit your profit target, and you're funded. No consistency rule or daily profit caps.

Take Profit

An order to automatically close a position at a specified profit level. Take-profit orders lock in gains and remove the temptation to hold too long. Combined with stop losses, they create a defined risk-reward framework.

Tape Reading

The skill of reading time & sales data and the order book (DOM) to understand real-time buying and selling pressure. Modern tape readers use electronic tools, but the concept dates back to literal ticker tape in the early 1900s.

Related: Order Flow, Volume, Scalping

Tick

The minimum price movement of a futures contract. Each instrument has a defined tick size — for example, one tick on ES is 0.25 points. Understanding tick size is essential for calculating risk and reward.

Related: Tick Value, Futures Contract

Tick Value

The dollar value of one tick of movement per contract. ES has a tick value of $12.50 (0.25 × $50). Knowing tick values lets you instantly calculate P&L for any given price movement.

Related: Tick, Position Sizing

Trailing Drawdown

A drawdown limit that increases (trails) as your account reaches new equity highs. Unlike a static drawdown measured from starting balance, a trailing drawdown follows your high-water mark — meaning your floor rises as you profit.

At Day Trader Funding: Day Trader Funding uses EOD trailing drawdown, which only updates at the end of each session — not tick-by-tick.

V

VWAP

Volume-Weighted Average Price — a technical indicator that shows the average price of an instrument weighted by volume throughout the trading session. Institutional traders use VWAP as a benchmark; price above VWAP is considered bullish, below is bearish.

Volume

The total number of contracts traded during a given period. High volume confirms price moves and ensures tight spreads. Low volume means wider spreads, more slippage, and less reliable price action.

W

Win Rate

The percentage of trades that are profitable. A 60% win rate means 6 out of 10 trades are winners. Win rate alone doesn't determine profitability — a trader with 40% win rate can be highly profitable with a strong risk-reward ratio.

Related: Risk-Reward Ratio, Green Day

Frequently Asked Questions

What is a prop firm?

A proprietary trading firm (prop firm) provides traders with capital to trade in exchange for a share of the profits. Traders pass an evaluation to prove their skill, then receive a funded account with real capital.

What is trailing drawdown in prop trading?

Trailing drawdown is a risk limit that increases as your account reaches new equity highs. Day Trader Funding uses EOD trailing drawdown, which only updates at the end of each trading session — not in real-time.

What does EOD trailing drawdown mean?

EOD (End of Day) trailing drawdown means your drawdown floor only moves up based on your closing balance at the end of each session, not based on intraday equity highs. This is more forgiving than real-time trailing drawdowns.

What is a profit split in prop trading?

A profit split is the percentage of trading profits that the trader keeps versus what the firm retains. Day Trader Funding offers an 80/20 profit split (up to payout caps), meaning traders keep 80 cents of every dollar they earn.

Know the Terms. Trade the Markets.

Now that you speak the language, put it into practice. Get funded in as little as one day with Day Trader Funding.

Get Funded Now →

Prop Firm & Futures TradingGlossary

A