What do prop trading terms like drawdown and equity mean?

• Balance: the account value from closed trades and booked adjustments. It does not move while a trade is open.
• Equity: balance plus or minus the profit and loss of open positions. A $10,000 balance with a $300 open loss is $9,700 equity.
• Drawdown: how far equity has fallen from a reference point, such as the starting balance or yesterday’s close. A $10,000 account at $9,600 equity is in a $400 drawdown from its start.

Rules usually set the floor from a balance and test it against equity, so you need both numbers in view while a trade is open.

• Daily loss limit: the most equity may fall in one trading day, measured from the previous day’s closing balance. It is 5% on the 1-Step and resets at 17:00 New York time. On MFC Stocks it is a daily pause: trading stops for the day, the account stays open.
• Maximum loss: the lowest equity may ever reach. A static floor stays where it started (2-Step); a trailing floor rises with your best balance (1-Step, Instant Funded, MFC Stocks, Prediction Markets).
• Hard breach: a rule break that ends the account, such as equity touching a floor or no trade for 30 days.

• Phase: one stage of an evaluation. The 2-Step has 2, the 1-Step 1, Instant Funded none.
• Profit target: the gain that completes a phase, for example 10% on the 1-Step, or $1,000 on $10,000.
• Profit split: your share of eligible profit on a funded account, 80% at the start on the 1-Step.
• Payout cycle: the interval between payout requests, such as every 14 days on the 2-Step. The first request has its own waiting period, counted from the first funded trade.
• Consistency rule: on funded accounts, no single day may make up more than 35% of total profit. With $5,000 of total profit, the best day may be at most $1,750.
• Add-on: an option chosen at checkout that changes one condition, such as a higher split, news trading or weekend holding. It does not widen the loss limits.

• Lot: the unit of order size. A standard lot is 1.00, a mini lot 0.10, a micro lot 0.01. The instrument details in the Terminal show the contract size behind one lot.
• Pip: the standard price step on a forex pair, 0.0001 on EURUSD. One standard lot of EURUSD moves about $10 per pip.
• Leverage: how much position a given margin controls, for example 1:50 on 1-Step forex. It changes the margin a trade needs, not what you lose when the stop is hit.

Put three of these together and you can size any trade: risk in dollars ÷ (stop in pips × value per pip) = lots. With $50 of risk and a 25-pip stop on EURUSD, that is 0.20 lots.