Stepping into the world of prop trading can sometimes feel like landing in a foreign country where you don’t speak the language. You log into the dashboard, open the charts, and suddenly you are bombarded with terms like "drawdown," "pips," and "consolidation."

If you're new to prop trading, this language barrier is often the first hurdle. Misunderstanding a term isn't just a matter of semantics—in the markets, it can lead to calculation errors or a breach of rules that costs you your evaluation.

The goal of this guide is to cut through the noise. We are breaking down the essential vocabulary you need to navigate the BrightFunded platform and the markets with absolute confidence.

Core Market Mechanics

Before we look at the specific rules of our firm, we need to understand the engine that drives the market. These terms define how price moves and how you interact with it.

Pips and Points

If you hear a trader say, "I caught a 20 pip move," they are talking about the distance the price traveled.

• Pip: This stands for "Percentage in Point" or "Price Interest Point." For most currency pairs, a pip is the fourth decimal place (0.0001). If EUR/USD moves from 1.1050 to 1.1051, that is a one-pip movement.

• Point (Pipette): This is often the fifth decimal place. It is a fractional pip (1/10th of a pip). It is crucial not to confuse the two when calculating your risk—mistaking points for pips can lead to setting your position size ten times larger than intended.

Bid, Ask, and Spread

You will always see two prices for any asset.

• Bid: The price at which the market is willing to buy from you (the price you sell at).

• Ask: The price at which the market is willing to sell to you (the price you buy at).

• Spread: The difference between the Bid and the Ask. This is essentially the cost of doing business. During times of high volatility or major news releases, the spread can "widen," meaning the cost to enter or exit a trade increases.

Long vs. Short

Trading provides the unique ability to capitalize on market movements in both directions.

• Long: You buy an asset with the expectation that its value will rise.

• Short: You sell an asset with the expectation that its value will fall. This allows prop traders to find opportunities regardless of the economic climate.

Prop Trading Essentials

These terms are specific to your journey with BrightFunded. Understanding these definitions is vital for passing the assessment and managing your account effectively.

The Evaluation (Phase 1 & 2)

This is the gateway to becoming a funded trader. The Evaluation is a structured assessment designed to test your discipline and profitability.

• Phase 1 (The Challenge): The initial stage where you must reach a specific Profit Target while adhering to strict risk rules.

• Phase 2 (The Verification): A secondary stage, usually with a slightly lower profit target, to confirm that your initial success wasn't just luck.

Drawdown (The Safety Net)

In prop trading, protecting capital is just as important as generating returns. "Drawdown" refers to the reduction of your account balance from a peak.

• Max Drawdown: The maximum total loss allowed on the account. If your equity falls below this fixed limit, the account is breached.

• Daily Drawdown: This is a floating limit that resets every day. It caps the amount you can lose in a single 24-hour trading period.

Note: Respecting drawdown limits is the primary indicator of a professional trader. Focus on risk defense first, and the profit targets will follow.

Profit Split

This is the ultimate goal. The Profit Split is the payout structure that determines your share of the earnings. Once you have successfully navigated the evaluation phases and generated profits on your BrightFunded account, you are eligible to request a payout based on the agreed-upon percentage.

Position & Risk Management

These concepts determine how long you survive in the markets. They are the tools you use to protect your account longevity.

Leverage

Leverage is essentially "buying power." It allows you to control a large position with a relatively small amount of capital.

While leverage allows for significant growth, it is a double-edged sword. High leverage amplifies your wins, but it also amplifies your losses. In a prop trading setting, using excessive leverage is the fastest way to hit your Daily Drawdown limit.

Lot Size

This is the volume of your trade.

• Standard Lot: 100,000 units of currency.

• Mini Lot: 10,000 units.

• Micro Lot: 1,000 units.

Your lot size should always be calculated based on your Stop Loss distance and your account balance. Never guess your lot size; calculate it.

Stop Loss (SL) and Take Profit (TP)

You should never enter a trade without an exit plan.

• Stop Loss (SL): An automatic order to close your trade if the price moves against you. It prevents a bad trade from becoming a catastrophic one.

• Take Profit (TP): An automatic order to close your trade once it reaches your desired profit level, securing your gains before the market reverses.

Technical Analysis Buzzwords

Finally, here are a few terms you will encounter frequently in trading education and community discussions.

Support and Resistance

Think of these as the "floor" and "ceiling" of price action.

• Support: A price level where a falling market tends to stop and bounce back up (buying pressure).

• Resistance: A price level where a rising market tends to stop and reverse down (selling pressure).

Consolidation vs. Breakout

Markets do not move in straight lines forever; they cycle between two states.

• Consolidation: The market is ranging sideways, neither going up nor down significantly. It is "deciding" where to go next.

• Breakout: The moment price forcefully moves through a support or resistance level, often leading to a strong trend.

Conclusion

Mastering the lingo is the first step to mastering the markets. When you understand exactly what "Daily Drawdown" means or how "Spread" affects your entry, you remove uncertainty from your trading day.

Don't be intimidated by the jargon. Treat these terms as tools in your professional toolkit. The more fluent you become in the language of trading, the clearer the charts will become.