Every term,
in plain English.
The words a verdict uses. Each term links to the ones it depends on.
- Backtest
- A simulation of a strategy's rules run over historical price data, rather than a record of real trading.
- Balance drawdown
- The largest drop in an account's balance from a prior peak, including every deposit and withdrawal.
- Basket close
- Several open positions closed within seconds of each other, so their combined result is decided at one moment.
- Copy trading
- Automatically mirroring another account's trades in your own account, usually through a signal or copy service.
- Curve fitting
- Tuning a strategy's rules until they fit a particular stretch of historical data unusually well, at the cost of working on new data.
- Deposit load
- How much of an account's margin is committed at its heaviest point, shown as a percentage of the deposit.
- Equity curve fit
- How closely an account's equity curve follows a straight line, measured with an R-squared value.
- Equity drawdown
- The largest drop in an account's equity (balance plus the floating result of open positions) from a prior peak.
- Expectancy
- The average amount an account makes or loses per trade, combining win rate and payoff.
- Forward test
- Running a strategy on data or an account that came after the rules were fixed, so nothing about it was tuned to that data.
- Grid depth
- How many positions are open on the same symbol and direction at once, counted as a level: the first position is level 1, the next add is level 2, and so on.
- Grid trading
- Opening more positions on the same symbol and direction as price moves against the first one, spaced at fixed intervals.
- Holding time
- How long a position stays open, from entry to close.
- Lot escalation
- Increasing the size of a position after a loss, rather than keeping size steady or reducing it.
- Margin call
- The point at which an account no longer has enough free margin to hold its open positions, and the broker closes them.
- Martingale
- Increasing position size after a loss so the next win recovers everything lost so far, plus a profit.
- Maximum concurrent lots
- The largest total position size open on an account at any one moment.
- Monte Carlo simulation
- Reshuffling or resampling a strategy's trade history many times to see the range of outcomes chance alone could have produced.
- Payoff ratio
- The average winning trade divided by the average losing trade.
- Profit factor
- Gross profit divided by gross loss; above 1 means the account made more than it lost.
- Recovery factor
- Net profit divided by the maximum drawdown; how much return a strategy produced for the worst dip it went through.
- Risk of ruin
- The estimated probability that a strategy, run long enough at its historical parameters, eventually loses the account.
- Rollover hour
- The hour each trading day when open positions are charged or credited swap, and spreads typically widen.
- Sharpe ratio
- Average return divided by the standard deviation of returns; a measure of return per unit of volatility.
- Slippage
- The difference between the price a trade was meant to fill at and the price it actually filled at.
- Spread
- The gap between the price a broker will buy at and the price it will sell at; the base cost of every trade.
- Survivorship bias
- The distortion that appears when only the accounts or strategies that are still running get seen, and the ones that failed disappear.
- Symbol concentration
- How much of an account's result comes from a single traded instrument.
- Time-weighted return (TWR)
- A growth measure that removes the effect of deposits and withdrawals, so it reflects trading performance alone.
- Win rate
- The share of trades that closed in profit.