Crypto prop firm glossary
Every term you will meet in a challenge rulebook, defined in plain language. If a firm uses a word that is not here and will not explain it, treat that as information.
| Term | What it means |
|---|---|
| Allocation | The notional capital a firm assigns to your funded account. Not money you own or can withdraw — the base on which your profit share is calculated. |
| Challenge | The paid evaluation you must pass to be funded. Also called an evaluation or assessment. |
| Closed-balance drawdown | A loss limit measured only on realised profit and loss. Open positions cannot breach it. The forgiving version. |
| Consistency rule | A cap on how much of total profit may come from a single day or trade, typically 20–40%. |
| Daily loss limit | Maximum permitted loss within one trading day, usually 4–5%. Check when the day resets and whether it is measured on balance or equity. |
| Direct funding | Buying a funded account outright without passing an evaluation. Higher up-front cost, no challenge. |
| Drawdown | The decline from a peak to a trough in account value. The rule governing it is the single most important clause in any prop firm agreement. |
| Equity drawdown | A loss limit measured on account equity including open positions. Unrealised moves count against you. |
| Evaluation phase | A stage of the challenge with its own profit target and rules. One-step and two-step structures are both common. |
| Funding rate | The periodic payment exchanged between long and short holders of a perpetual future. A real cost of carry on held positions. |
| Instant funding | A funded account issued without an evaluation, usually with a lower profit split or tighter drawdown as the trade-off. |
| Leverage | The multiple of allocation you may control. Crypto prop accounts commonly offer 2:1 to 10:1, well below retail exchange maximums. |
| Payout | A withdrawal of your profit share. The window is the time between request and receipt. |
| Payout cycle | A fixed schedule on which withdrawals are processed, e.g. bi-weekly. The alternative is on-demand. |
| Perpetual future (perp) | A derivative tracking an asset's price with no expiry, held in balance by funding payments. The dominant instrument in crypto prop trading. |
| Profit split | The percentage of profit you keep. Typically 75–90%, occasionally 100% on specific routes. |
| Profit target | The gain required to pass an evaluation phase, commonly 8–10%. |
| Prop firm | Proprietary trading firm: a company that trades its own capital, here through externally recruited traders. |
| Reset | Restarting a failed challenge for a fee, usually discounted against the original price. |
| Scaling plan | The schedule by which a firm increases your allocation after sustained profitability. |
| Simulated account | An account in which trades are not mirrored on a live exchange. Common, and not inherently a problem — provided the firm pays and pricing tracks the real market. |
| Slippage | The difference between expected and executed price. Worse on synthetic feeds than on exchange-native routing. |
| Static drawdown | A loss limit fixed at account opening that never moves. The most trader-friendly structure. |
| Sub-account | A segregated account on a real exchange. Firms routing to sub-accounts give you genuine exchange execution. |
| Trailing drawdown | A loss limit that rises with your equity or balance peak. Check carefully whether it trails on equity or on closed balance. |
| Verification | The second evaluation phase in a two-step challenge, usually with a lower profit target. |
The two definitions worth rereading are trailing drawdown and consistency rule. Between them they account for most failed funded accounts. Our guide to the rules that fail most traders works through both in detail.
Affiliate disclosure
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Risk warning
Trading leveraged crypto derivatives carries a high risk of loss. Challenge fees are generally non-refundable and most participants never reach a payout. Nothing on this site is financial advice, and we are not a licensed adviser, broker or prop firm.