Prop firm glossary: the 28 terms to know

The terms, from A to W

28 definitions in alphabetical order, written the way I wish I had read them before my first failed challenge. The figures quoted (80% splits, Hypernova reserve of $1,001,060.62, caps of $200,000 and $300,000) are dated August 15-16, 2026, the reserve as of 18 August 2026, and come from our public grid, not from brochures.

A-book / B-book

In A-book, the firm actually copies your trades onto a real market; in B-book, it keeps them in-house and your gain is its loss. Most prop firms are mostly B-book — it is the standard model, not a scandal, but it is better to know.

Challenge

A prop firm's paid entrance exam. You trade a simulated account with a profit target and loss limits; if you pass, you get a funded account. The challenge fee is your only possible loss.

Consistency rule

A rule that forbids you from making the bulk of your profit on a single trade or a single day (for example: no day may exceed 40% of total profit). It aims to filter out lucky streaks. Neither Propr nor Hypernova imposes one (rulebooks read as of August 16, 2026), but many traditional firms do.

Cross margin

A mode where all your positions share the same margin pool: a losing position can drain the margin of the others. More flexible, but a single big mistake can hit the whole account.

Daily drawdown (daily loss limit)

The maximum loss allowed in a single day, often tighter than the total drawdown. It reloads every day. It is the rule that eliminates accounts in one bad session — your own daily stop rule should trigger well before it.

Drawdown

The decline of your account from its highest point. In a challenge, the maximum drawdown is the limit that eliminates you: touching it, even for a second, ends the account. It is the most important rule of all.

Funded account

The account you get after passing the challenge. You trade the firm's capital, with the same loss rules, and you keep your share of the profits (80% at Propr and up to 80% at Hypernova as of August 16, 2026). The account remains technically simulated at most firms: it is the payout that is real.

Isolated margin

A mode where each position has its own capped margin. If the trade goes wrong, you only lose the margin allocated to that position. It is the simplest mode to reason about when starting out with perps.

KYC

"Know Your Customer": identity verification (passport, selfie). Some firms require it before the first payout, others never. Check this point before paying if anonymity matters to you — our comparison lists it per firm.

Leverage

Trading with more money than you commit: at 10x leverage, a $10,000 position only ties up $1,000 of margin. Leverage multiplies gains AND losses — over-leverage is the number one cause of failed challenges.

Liquidation

The forced closing of a leveraged position when your margin no longer covers the loss. On a personal account, you lose your stake; in a challenge, a liquidation slams you toward the drawdown. A stop-loss you place yourself always beats a liquidation you suffer.

On-chain

Said of anything recorded on a public blockchain, and therefore verifiable by anyone. An on-chain payout reserve can be read without asking the firm's permission — Hypernova's showed $1,001,060.62 at our reading of 18 August 2026.

Payout

The payment of your share of the funded account's profits. At on-chain firms, it arrives in USDC in your wallet — within seconds via smart contract at Hypernova, in ~5 h on average at Propr (24 h max) as of August 16, 2026. At traditional firms, expect a 24 to 72 h bank transfer.

Perps (perpetual contracts)

The king derivative of crypto trading: a contract that tracks an asset's price, with no expiry date, with leverage. It is what you trade in nearly every crypto challenge — you never hold the coins themselves.

Profit split

The division of gains between you and the firm. "80% split": you keep 80, the firm keeps 20. Beware of spectacular splits: the firm that displayed the best split in the category (up to 92%) disappeared in June 2026 without paying anyone.

Profit target

The percentage gain you must reach to pass the challenge, often +8 to +10%. With no time limit, nothing forces you to reach it fast: it is a threshold, not a race.

Prop firm

A company that hands its capital to traders selected through a paid test, and shares the profits with them. The model largely lives on the challenge fees of the candidates who fail — hence the importance of reading the rules before paying.

Rulebook

The document listing every rule of the challenge and the funded account. A good rulebook is public, versioned and dated (Propr's is at v1.0.5 with a changelog). If the rules are only visible after payment, walk away.

Scaling

The gradual increase of your funded capital when you perform. At Propr, cumulative funding can climb to $300,000; at Hypernova up to $200,000 (as of August 16, 2026). Each firm has its own tiers and conditions.

Slippage

The difference between the price you wanted and the price actually executed, common when the market moves fast or lacks liquidity. On an economic announcement, slippage can turn a small calculated risk into a big real loss.

Smart contract

A program deployed on a blockchain that executes rules automatically, without human intervention. Applied to prop firms: a payout via smart contract does not depend on an employee's goodwill — the code pays, and anyone can verify it.

Spread

The gap between the buy price and the sell price at a given moment. It is an invisible cost paid on every trade: the more often you trade, the more the spread weighs on your challenge result.

Static drawdown

A fixed elimination floor, calculated on the starting capital. 25K account with 10% static drawdown: eliminated below $22,500, whatever your previous gains. It is the most readable version for a beginner.

Stop-loss

An order that automatically closes your position at a loss level decided in advance. It is the number one survival tool in a challenge: it turns a potentially unlimited loss into a chosen one. Trading without a stop in a challenge is flipping a coin with your ticket.

Time limit

The deadline some firms impose to finish a challenge (30 days, for example). Propr and Hypernova have none (verified as of August 16, 2026) — a real beginner advantage. Careful: some firms display "no time limit" on their homepage and 30 days in their docs.

Trailing drawdown

An elimination floor that rises with your equity high-water mark. If your 25K account climbs to $26,000, the floor climbs by the same amount: giving back your gains can eliminate you while you are still above your starting capital. Always check which of the two your firm applies.

USDC

A dollar-backed stablecoin: 1 USDC is worth roughly 1 dollar. It is the currency in which on-chain prop firms pay out. Our first Propr payout — 119.79 USDC — arrived in that format.

Wallet

Your crypto wallet (MetaMask, Rabby…), identified by a public address. It is where on-chain payouts arrive. Keep your recovery phrase offline: whoever holds it owns the wallet.

FAQ — the vocabulary