Trading Glossary

Backtesting

Backtesting simulates a trading strategy on historical price data. What it can prove, what it cannot, and why live broker-synced results almost always differ.

Drawdown

Drawdown is the peak-to-trough fall in an account's value, in percent. Here is the formula, why it is cumulative, and what thousands of real trading accounts show.

Leverage

Leverage is the ratio between position size and the capital backing it. Here is the margin formula, a worked example, and drawdown data from thousands of accounts.

Maximum Drawdown

Maximum drawdown is the deepest peak-to-trough fall an account ever recorded. The formula, the recovery table, and the real spread across thousands of accounts.

Position Sizing

Position sizing turns a risk percentage into a lot size using your stop distance and pip value. The formula, the three common methods, and what bad sizing costs.

Profit Factor

Profit factor is gross profit divided by gross loss. Below 1.0 an account loses by construction. Here are the bands and the 1.28 median across thousands of accounts.

Spread

A spread is the gap between the bid and ask price, the cost you pay to enter a trade. Here is how it works, what it costs per lot, and why brokers differ.

Verified Track Record

A verified track record is performance data pulled straight from the broker through a read-only link, continuously, with nothing the publisher can edit.