Risk and position size
- Risk per trade
- The percentage of the account you lose if the stop is hit. Usually 0.5–2%. Learn more →
- R (R-multiple)
- A trade result in units of risk: a 2 R profit is twice the risk to the stop, a stopped-out loss is −1 R. Without a stop, R cannot be calculated. Learn more →
- Stop loss
- An order that closes a position at a loss at a set price. Risk, position size and R are calculated from it.
- Take profit
- An order that closes a position at a profit at a set price.
- Reward-to-risk ratio (RR)
- The distance to the target divided by the distance to the stop. RR 2 means the target is twice as far as the stop. Learn more →
- Lot
- The unit of volume in MetaTrader. In forex a standard lot is usually 100,000 units of the base currency; size is calculated from risk and stop distance. Learn more →
- Pip
- The standard price step: 0.0001 for most currency pairs and 0.01 for yen pairs. Learn more →
- Pip value
- How much money a one-pip price move makes at a given volume. Learn more →
- Leverage
- How many times a position can exceed your own funds. Leverage changes the required margin, not the trade risk at the same size and stop.
- Margin
- The collateral a broker locks for an open position.
- Margin level
- Equity divided by margin, in percent. When it falls to the broker's thresholds, a margin call and stop out follow.
- Stop out
- Forced closing of positions by the broker when the margin level falls to a set threshold.
- Swap
- A charge or credit for holding a position overnight.
Trading statistics
- Win rate
- The share of winning trades. Without the ratio of average win to average loss it says nothing about the result. Learn more →
- Payoff
- Average win divided by average loss.
- Profit factor
- Gross profit divided by gross loss in absolute terms. Above 1 the strategy makes money. Learn more →
- Expectancy
- The average result per trade in money or R: win rate × average win − (1 − win rate) × average loss. Learn more →
- Drawdown
- The fall of an account from a peak to a subsequent low, in percent or money. Learn more →
- Maximum drawdown
- The largest drawdown over a period — the main measure of what had to be endured for the return. Learn more →
- Equity drawdown
- Drawdown including the floating result of open positions. It is deeper than balance drawdown, which sees only closed trades.
- Drawdown recovery
- The gain needed to return to the peak: +25% after −20%, +100% after −50%. Learn more →
- Losing streak
- Several losing trades in a row. At a 50% win rate, a streak of 5 losses happens at least once in 100 trades with a probability of about 81%.
- Sortino ratio
- Like the Sharpe ratio, but the denominator is the variability of losing periods only.
- Z-score
- A runs test: shows whether winning and losing trades alternate randomly or cluster. Learn more →
- AHPR and GHPR
- The arithmetic and geometric average return per trade relative to the balance before it. Learn more →
- Risk of ruin
- The probability that drawdown reaches a set threshold within a chosen number of trades. Learn more →
Returns and portfolio
- TWR
- Time-weighted return: the returns of the periods between deposits and withdrawals are chained, so the result does not depend on when money was added. Learn more →
- XIRR (MWR)
- Money-weighted return: the annual rate at which all contributions add up to the final portfolio value. Learn more →
- Benchmark
- An index or asset the portfolio return is compared with.
- Rebalancing
- Bringing portfolio shares back to target: selling what grew above its share and buying what lags. Learn more →
- Cost basis: average cost and FIFO
- The price at which bought assets are booked: the average of all purchases, or in purchase order — first bought is sold first. Learn more →
- Realized and floating P/L
- Realized — from closed trades and sales; floating — from open positions at the current price.
Prop trading
- Prop firm
- A company that, after an evaluation, lets a trader trade its capital and shares the profit. Learn more →
- Challenge
- An evaluation phase: reach a profit target without breaking the loss limits. There can be one, two or three phases. Learn more →
- Funded account
- The account after passing the evaluation; its profit is split between the trader and the firm.
- Daily loss limit
- The maximum loss per day. Firms calculate it differently: from balance or equity, by server time. Learn more →
- Static drawdown
- A loss limit measured from the starting balance; it does not move. Learn more →
- Trailing drawdown
- A loss limit that moves up with the account peak — at some firms only up to a certain level. Learn more →
- Profit target
- The profit needed to pass an evaluation phase.
MetaTrader and connection
- MetaTrader 5
- The MetaQuotes trading terminal brokers use to offer forex, CFDs, stocks and futures.
- Expert Advisor (EA)
- An MQL5 program that runs in the terminal on a chart: it trades, manages positions or sends data. Learn more →
- Investor password
- A password for view-only access to an account, without the right to trade. Learn more →
- Master password
- The password with full trading access to the account; never share it. Learn more →
- WebRequest
- The list of addresses in the terminal settings that EAs are allowed to reach over the network. Learn more →
- AutoTrading (Algo Trading)
- The terminal-wide switch for trading by EAs. When off, it blocks trading operations, not the EA itself. Learn more →
- Magic number
- A number an EA tags its orders with to tell them apart from other EAs' and manual ones.
- VPS
- A remote server where the terminal runs around the clock while your computer is off.
Crypto
- Spot
- Buying and selling the coin itself, credited to your balance.
- Perpetual futures
- A contract on the coin price with no expiry; funding keeps it close to the spot price.
- USDT-M and COIN-M
- Futures margined and settled in USDT and in the coin itself, respectively.
- Funding rate
- A periodic payment between holders of long and short perpetual futures positions. Learn more →
- Liquidation
- Forced closing of a position by the exchange when the margin is not enough to maintain it.
- Read-only API key
- A key that lets a service read trades and balances without the right to trade or withdraw. Learn more →
- Closed P&L
- The result of a closed position on an exchange net of fees and funding. Learn more →
Plan and discipline
- Trading plan
- Written rules: what you trade, entry and exit conditions, risk and when you do not trade. Learn more →
- Checklist
- A list of conditions checked before the trading day and before every trade. Learn more →
- Setup
- A recurring market situation with defined entry, stop and target conditions.
- Trading journal
- A record of every trade with the entry reason, result and mistake review. Learn more →
- Tilt
- A state where, after losses, emotion makes the decisions instead of the system. Learn more →
- Overtrading
- Taking more trades than your strategy gives. Learn more →
- Revenge trading
- Trying to win a loss back right away, usually with a bigger size. Learn more →
- FOMO
- Fear of missing out: entering without a signal because the price is «getting away».