27 Definitions · Updated April 2026

Prop Trading Glossary

Every term you'll encounter as a funded trader. From profit splits to trailing drawdowns to wash trading — defined honestly, in plain English.

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1-Step Evaluation

Process

A single-phase evaluation challenge. Faster than 2-step but with stricter risk rules (6% trailing drawdown, 3% daily loss). Aimed at experienced traders who want quicker funding.

2-Step Evaluation

Process

The classic prop firm evaluation: Phase 1 (Challenge, 10% target) → Phase 2 (Verification, 5% target) → funded account. Lower risk for the firm, slightly slower for the trader.

24-Hour Payout

Payouts

A guarantee that any approved payout request will be sent to the trader's account within 24 hours. Dolvero hits this 98.4% of the time, with a 4.3-hour average and a 10% bonus on breach.

Consistency Rule

Rules

A constraint that prevents a single day from accounting for too much of total profit. Dolvero does not enforce a strict consistency rule but tracks the metric for risk analysis.

Daily Loss Limit

Rules

The maximum loss permitted in a single trading day, measured from the day's starting equity. Dolvero's 2-step daily loss limit is 5%; the 1-step is 3%.

Evaluation

Process

A simulated trading challenge that traders must pass to qualify for a funded account. Typically requires hitting a profit target without breaching daily loss or maximum drawdown limits.

Funded Account

Industry

A live trading account capitalized by a prop firm after the trader passes the evaluation. Profits are split between the trader and the firm; losses up to the drawdown limit are absorbed by the firm.

Instant Funding

Process

A path that skips the evaluation entirely. The trader pays a higher upfront fee and immediately receives a funded account. Dolvero offers Instant Funding from $3K to $100K.

Latency Arbitrage

Risk

Exploiting tiny delays in price feeds between the prop firm's broker and external venues to lock in risk-free profit. Detected and blocked by anti-cheat systems at Dolvero.

Leverage

Trading

A multiplier applied to a trader's margin to control a larger position. Dolvero offers up to 50× leverage on crypto pairs via Bybit demo and standard forex leverage on MT5.

Lot Size

Trading

The unit of trade volume in forex. A standard lot = 100,000 units of the base currency; mini lot = 10,000; micro lot = 1,000.

Maximum Drawdown

Rules

The total loss limit on an account, expressed as a percentage of the starting balance. Dolvero's 2-step max drawdown is 10% (static); the 1-step uses a 6% trailing drawdown.

MetaTrader 5 (MT5)

Trading

The industry-standard trading platform used by most prop firms. Supports forex, indices, commodities, and limited crypto.

Payout Cycle

Payouts

The interval between trader payouts. Dolvero pays bi-weekly (every 14 days) by default, processed within 24 hours of request.

Phase 1 (Challenge)

Process

The first stage of a 2-step evaluation. Traders must reach a 10% profit target while staying within a 5% daily loss limit and 10% maximum drawdown. No time limit at Dolvero.

Phase 2 (Verification)

Process

The second stage of a 2-step evaluation. Traders must reach a 5% profit target with the same risk rules as Phase 1. Confirms the trader can perform consistently.

Pip

Trading

The smallest price move in a forex pair, typically 0.0001 (or 0.01 for JPY pairs). Used to measure profit/loss and stop distance.

Profit Split

Payouts

The percentage of profits the trader keeps after a successful payout cycle. Dolvero's base profit split is 80%, scalable up to 90% with the optional add-on.

Profit Target

Rules

The minimum profit percentage a trader must reach to pass an evaluation phase. Dolvero uses 10% in Phase 1 and 5% in Phase 2.

Prop Firm

Industry

A proprietary trading firm that funds traders with the firm's own capital in exchange for a share of the profits. Traders typically pass an evaluation challenge before accessing real funds.

Risk-Reward Ratio

Trading

The ratio between the potential loss (risk) and potential gain (reward) of a trade. A 1:3 R:R means risking $1 to make $3. Higher R:R = lower required win rate to be profitable.

SLA (Service Level Agreement)

Payouts

Dolvero's commitment to process every payout within 24 hours of request. SLA breaches trigger an automatic 10% bonus on the affected payout.

Scaling Plan

Process

A performance-based mechanism that increases a funded trader's account size after meeting consistency milestones. Dolvero scales from $25K → $50K → $100K → $200K based on consecutive profitable payouts.

Stop Loss

Trading

A protective order that automatically closes a position when the price reaches a predefined loss threshold. Dolvero allows but does not require stop losses on all trades.

Take Profit

Trading

An order that automatically closes a position once it reaches a target profit level.

Trailing Drawdown

Rules

A maximum loss limit that moves up with the highest equity peak. Once the peak rises, the floor rises with it — locking in profits but tightening the leash.

Wash Trading

Risk

A prohibited practice where a trader manufactures artificial profit/loss flows by buying and selling the same instrument across paired accounts. Dolvero's Risk Engine v2 detects and blocks wash trading.

Missing a term?

Email transparency@dolvero.com and we'll add it next month.

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