Prop Firm Glossary: Funded Trading Terms Explained
New to funded trading? This glossary explains the prop firm terms you will meet at River Valley Capital, grouped by topic and written in plain English. Where a term has its own guide, we link to it so you can go deeper.
- Plain-English definitions
- Grouped by topic
- Links to deeper guides
- No jargon left unexplained
Last updated
Accounts and Evaluation Terms
Prop firm
A proprietary trading firm that lets traders prove their skill on a simulated account and then trade a funded account, sharing the profits. River Valley Capital is a prop firm.
Funded account
The account you trade after passing an evaluation (or buying Instant Funding). You keep a share of the profit, subject to the rules.
Evaluation (challenge)
The test you pass to earn a funded account, by hitting a profit target without breaking the risk rules. See the challenge comparison.
1-Step
An evaluation with a single phase. See the 1-Step Challenge.
2-Step
An evaluation with two phases and softer per-phase targets. See the 2-Step Challenge.
Instant Funding
A funded account with no evaluation to pass. See Instant Funding.
Notional funding
Your account size sets your trading level; it may not match the capital held with the liquidity provider. It does not change your trading conditions.
Scaling
Growing your funded account size over time as you meet performance conditions.
Targets and Rule Terms
Profit target
The percentage gain you must reach to pass an evaluation phase (for example 10% on the 1-Step). Funded accounts have no profit target.
Daily loss limit
The most you can lose in one trading day, 5% at River Valley Capital, measured as the greater of the prior day's closing balance or equity at the 5:00 PM New York reset.
Maximum drawdown
The lowest your account may fall before it is breached. See static and trailing drawdown below.
Static drawdown
A maximum-drawdown floor set from your starting balance that never moves up, so profit widens your cushion. Used on the 1-Step and 2-Step.
Trailing drawdown
A floor that follows your closed balance up to new highs until it locks at your starting balance. Used on Instant Funding. The calculator works it out. Read the trailing drawdown guide.
Consistency rule
A requirement to spread profit evenly across days. River Valley Capital has none.
Minimum trading days
A required number of active days. River Valley Capital has none.
Hard breach
Breaking a core risk rule (daily loss limit or maximum drawdown), which ends the account.
Soft breach
A lesser rule break, such as trading in the news window: the trade is closed and its result removed, and you keep trading.
Risk and Market Terms
Leverage
How much market exposure you control per dollar of margin. River Valley Capital sets it per market (for example 50:1 on forex). See the trading rules.
Margin
The amount set aside to open a position.
Balance
Your starting balance plus closed profit and loss.
Equity
Your balance plus the profit or loss on open positions.
Drawdown
A fall from a peak in your balance or equity. Read what drawdown is.
Pip
The smallest standard price move in a forex pair.
Lot
A standard position size in forex.
Spread
The difference between the buy and sell price, set by the liquidity provider.
Swap
The financing charge for holding a position overnight.
Payout and Platform Terms
Profit split
The share of profit you keep, 80% by default or up to 90% with the add-on.
Payout
A withdrawal of your share of profit. The first can be requested any time, then once every 30 days. Try the payout calculator.
KYC
Identity verification (Know Your Customer), needed before your first payout.
Add-on
An optional extra bought at checkout, such as the 90% split, Remove Lock on Payout, Payout Protector, BoGo or Hold Weekends.
Expert advisor (EA)
An automated trading program. Your own EAs are allowed within the prohibited-trading rules; EAs that copy trades are not.
Copy trading
Mirroring trades between accounts. Allowed only between accounts you own yourself.
Platforms
River Valley Capital runs on cTrader, DXtrade, MatchTrader and PropX (formerly GooeyPro). See Platforms.
Quick Questions on the Terms
What does a prop firm actually do?
A prop firm lets you prove your trading on a simulated evaluation, then trade a funded account and keep a share of the profit. River Valley Capital offers 1-Step, 2-Step and Instant Funding routes.
What is the difference between balance and equity?
Balance is your starting balance plus closed profit and loss. Equity is your balance plus the profit or loss on any open positions. With no open positions they are the same. The daily loss limit uses the greater of the two at the 5 PM New York reset.
What is the difference between static and trailing drawdown?
A static floor is set from your starting balance and never moves, so profit widens your cushion (1-Step and 2-Step). A trailing floor follows your closed balance up until it locks at your starting balance (Instant Funding).
What is a hard breach?
Breaking a core risk rule, the daily loss limit or the maximum drawdown, which ends the account. A soft breach, such as trading in the news window, just closes the trade and removes its result.
Put the Terms into Practice
Now you know the language, compare the programmes or model a payout.