- versopropfirm
- Trading Foundations
Perfect for traders who know the basics and seek to boost their performance. The Intermediate Glossary delves into technical Prop Firm terms and professional risk management. Here you will find detailed definitions for Drawdown, Execution Methodologies, and advanced Trading Strategies. This vocabulary is crucial for passing the Trader Challenge (Evaluation) and operating in the Forex market with precision, preparing you for a funded account.
A strategy that takes advantage of price differences for the same asset across different markets or brokers. Traders buy in one market where the price is lower and simultaneously sell in another where it’s higher.
Prop Firm Impact: Timing and execution speed are crucial; firms with low latency offer better conditions for potential arbitrage profits.
The process of testing a trading strategy using historical data to evaluate its performance and reliability before applying it in live markets.
A volatility indicator composed of a moving average and two standard deviations, creating a band that price typically stays within.
Prop Firm Impact: Allows you to adapt to changing market volatility, helping you adjust your position size and avoid getting stopped out during erratic moves.
A situation where price moves strongly above resistance or below support, often signaling the start of a new trend.
The total amount of money a trader allocates to trading activities, representing their investment or account size.
Prop Firm Impact: In a prop environment, your capital is company-funded protecting it is key to keeping your funded status.
Recognizable formations on a price chart (e.g., Head and Shoulders, Triangles) that can signal potential future price movements.
Prop Firm Impact: Identifying these patterns improves your ability to find high-probability trade setups, a key skill for consistent performance.
A statistical relationship between two assets showing how their prices move relative to each other positively, negatively, or independently.
A period of sideways price movement where the market lacks a clear trend, often preceding a breakout.
A weighted average of a currency’s value against a basket of other major currencies, used to gauge overall strength or weakness.
A signal that occurs when the price of an asset moves in the opposite direction of an indicator, suggesting potential reversals.
The speed or frequency at which an account experiences equity declines over time.
A schedule of upcoming economic releases (e.g., GDP, CPI, interest rate decisions) that can impact financial markets.
Prop Firm Impact: Many firms restrict trading during high-impact news; knowing event times helps prevent violations and slippage.
A marketplace where financial instruments like stocks, commodities, and derivatives are traded, such as the NYSE or NASDAQ.
The time it takes for a trade to be processed and confirmed by a broker after an order is placed.
The total risk or amount of capital at stake in open positions relative to account equity.
Prop Firm Impact: Managing exposure ensures compliance with max open lot or percentage risk rules imposed by firms.
A tool used by technical traders to identify potential support and resistance levels based on key ratios.
Prop Firm Impact: Helps you pinpoint strategic areas to place your entries, take-profit orders, or stop-losses more effectively.
A method of evaluating assets by analyzing economic, financial, and geopolitical factors that influence value.
A strategy that involves opening offsetting positions to reduce potential losses from market volatility.
Prop Firm Impact: Some firms restrict hedging across correlated pairs or accounts understanding the rules avoids disqualification.
A mathematical calculation based on price or volume data used to identify trading signals or trends (e.g., RSI, MACD, Moving Average).
The rate at which the general level of prices for goods and services is rising, eroding purchasing power.
The cost of borrowing money, set by central banks, which influences currency values and market sentiment.
A financial institution that supplies buy and sell orders to the market, ensuring smooth trade execution and narrow spreads.
Prop Firm Impact: Firms work with top-tier liquidity providers to guarantee stable fills even during volatility critical for fairness in challenges.
The volume of a trade, determining how much of an asset is being bought or sold; affects both risk and profit potential.
Prop Firm Impact: Oversized lots increase risk many firms cap lot size per position to maintain risk discipline.
A trend-following momentum indicator showing the relationship between two moving averages of an asset’s price.
A broker’s demand for an investor to deposit additional funds or close positions to maintain minimum margin requirements.
The overall attitude of traders toward a market or asset, often reflected in price trends and volatility.
A technical indicator that smooths price data over a set period, helping traders identify trends and potential reversals.
The total number of outstanding derivative contracts, such as options or futures, that have not been settled.
A real-time electronic list showing all buy and sell orders for a particular asset at various price levels.
A market condition indicating an asset has risen too quickly and may be due for a correction or pullback.
A market condition indicating an asset has fallen too sharply and could rebound soon.
The highest point of an account’s equity before any decline or drawdown occurs. It represents the maximum balance achieved before losses begin.
Prop Firm Impact: Used to calculate drawdown limits; falling too far below the peak may result in breaching firm rules.
An instruction to execute a trade when specific market conditions are met (e.g., Buy Stop, Sell Limit).
The allocation of capital across multiple asset types or markets to reduce total risk.
Determining the correct trade volume relative to account size and risk tolerance.
Prop Firm Impact: Proper sizing prevents breaching risk rules many prop traders fail challenges due to oversized positions.
The study of raw market movement and patterns without relying on indicators.
A price level where selling pressure historically halts upward movement, acting as a “ceiling” for prices.
A change in the direction of price movement, marking the end of a trend and the beginning of a new one.
A structured approach outlining how to limit potential losses and protect capital across trades.
Prop Firm Impact: A detailed risk plan aligned with firm rules (daily loss, max drawdown) increases chances of long-term funding.
A momentum oscillator that measures the speed and change of price movements, indicating overbought or oversold conditions.
A short-term trading strategy aiming to make small profits from quick market moves, often within seconds or minutes.
Prop Firm Impact: Some firms limit scalping due to execution latency; verify allowed strategies before use.
The difference between the intended and actual trade execution price, often due to volatility or low liquidity.
The margin level at which the broker automatically closes losing trades to prevent further losses.
Prop Firm Impact: In prop accounts, reaching stop out equates to challenge failure risk control is essential.
A price level where buying pressure historically prevents further decline, often seen as a “floor” for prices.
A trading style that aims to capture medium-term moves lasting from several days to weeks.
A predefined instruction to close a position when it reaches a certain price level to secure gains.
Prop Firm Impact: Used to lock in profits, moving you closer to the firm’s required Profit Target.
A detailed record of trades, including reasons for entry/exit, results, and lessons learned.
Prop Firm Impact: Many successful prop traders use journals to identify mistakes and improve discipline a major factor in scaling capital.
A written framework defining a trader’s strategy, risk rules, and performance objectives.
Prop Firm Impact: A clear plan aligned with firm metrics (profit targets, risk ratios) increases approval and consistency across phases.
Defines the duration and frequency of trades. Scalping is extremely short-term, Day Trading is within a single day, and Swing Trading lasts for days or weeks.
Prop Firm Impact: Your chosen style must align with the firm’s rules on trade duration or holding positions overnight.
A line drawn on a chart connecting significant highs or lows to visualize market direction.
A measure of market expectations for near-term volatility, often referred to as the “fear index.”
The total number of shares, contracts, or lots traded in a given period, reflecting market activity and strength.
Prop Firm Impact: Understanding volume helps confirm trade setups low volume moves can cause fakeouts leading to unnecessary losses.
At Verso Prop Firm, everything we do is built around you. We provide the capital, tools, and support so you can focus on what really matters: trading your way to success.
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