Common Trading Terms Explained for Beginners

Entering prop firm trading means encountering a lot of new terminology. This glossary covers essential terms every beginner should know.

Account Types

Demo Account: Practice account with virtual money.
Live Account: Real trading with real money or funded capital.

Orders and Positions

Market Order: Immediate buy or sell at current price.
Limit Order: Buy or sell at a specified price or better.
Stop Loss: Order to exit to limit losses.
Position Size: Number of contracts or lots traded.

Risk and Profit

Drawdown: Peak-to-trough decline in account equity.
Leverage: Using borrowed funds to increase position size.
Profit Target: Desired gain set in challenge rules.

Miscellaneous

Scaling Plan: Rules for increasing account size.
Trailing Stop: Stop loss that moves with price.
Evaluation: Testing phase to qualify for funding.