Glossary & Formulas
Available Trade Range
A metric used in trading to measure the price movement experienced by a trade from its Maximum Adverse Price to its Maximum Favourable Price.
Available Trade Range = Maximum Favourbale Price - Maximum Adverse Price
Break Even Trade
A trade that results in neither a profit nor a loss. In other words, the trade's outcome is exactly at the breakeven point, where the selling price of a currency pair is equal to the purchase price plus any transaction costs, such as commissions or spreads.
Close Date
The date on which a trade is closed, either manually or automatically
Close Price
The final price at which a trade is closed. The Close Price is the price at which the trader exits their position in the market, either manually or automatically.
Commission
A fee charged by a broker or a financial institution for facilitating a trade on behalf of a trader. The commission is typically calculated as a percentage of the total trade value, and it is deducted from the trader's account balance when the trade is executed.
Dividend
a distribution of a portion of a company's profits to its shareholders. When a trader buys shares of a stock, they become a shareholder of the company and are entitled to receive a dividend if the company declares one.
Drawdown
The reduction in a trader's account balance from its peak value, as a result of a series of losing trades. The extent of a drawdown is measured as a percentage of the trader's account balance and can be calculated using the formula:
Drawdown percentage = (Peak account value - Lowest account value) / Peak account value * 100
End Trade Drawdown
The maximum drawdown experienced during the lifespan of a single trade.
Entry Efficiency
A trading metric that measures how efficiently a trader enters a trade at the optimal price level. It is calculated as the difference between the entry price and the optimal price level divided by the total possible price movement. A higher entry efficiency score indicates a better trade entry, while a lower score suggests that the trader entered the trade too late, too early, or at a sub-optimal price level.
Exit Efficiency
A trading metric used to measure how well a trader has exited a position. It is a calculation of the ratio between the price at which the position was exited and the maximum favorable price of the position. A higher exit efficiency means the trader was able to capture a larger portion of the price movement, while a lower exit efficiency indicates that the trader exited the position too early and missed out on potential profits.
Financial Risk
The monetary value that is exposed to the potential for loss resulting from an trade. This represents the capital that are put at risk in the trade, and is a key consideration for investors when assessing the potential risk and reward of an investment opportunity.
Gain to Pain Ratio
A risk-adjusted performance metric that measures the ratio of investment gains to losses. It is used to evaluate the effectiveness of an investment strategy or portfolio by assessing the amount of profit earned relative to the amount of pain, or loss, experienced. A higher Gain to Pain Ratio indicates that an investment strategy or portfolio is generating more profits relative to the amount of losses incurred. This suggests that the strategy or portfolio is more effective and efficient in generating returns while managing risk.
Gain to Pain Ratio = (Total gains / Total losses)
Gross Profit
The profit or loss made by a trader before deducting all expenses associated with trading, including transaction fees.
Lot Size
The standardized amount of a currency that is traded in a single transaction.
Maximum Adverse Excursion (MAE)
A metric used in trading to measure the largest negative price movement experienced by a trade from its entry point to its ultimate low before it is closed out. In other words, MAE calculates the maximum drawdown that occurred during the lifespan of a trade. This metric is used to evaluate the effectiveness of a trading strategy and to determine the maximum potential loss that can be incurred on a particular trade.
Maximum Adverse Price (MAP)
The most unfavorable price point attained during a trade. If the trade is long, MAP represents the lowest price point achieved, while in a short trade, MAP represents the highest price point achieved.
Maximum Favourable Excursion (MFE)
A metric used in trading to measure the largest positive price movement experienced by a trade from its entry point to its ultimate high before it is closed out. In other words, MFE calculates the maximum profit that could have been achieved during the lifespan of a trade. This metric is used to evaluate the effectiveness of a trading strategy and to determine the potential profit that could be gained on a particular trade.
Maximum Favourable Price (MFP)
The most advantageous price point attained during a trade. If the trade is long, MFP represents the highest price point achieved, while in a short trade, MFP represents the lowest price point achieved.
Profit Percentage (%)
A trading metric that measures the percentage of net profit/loss gained from a trade in relation to the account balance at the time of entering the trade. Profit % provides traders with an indication of the profitability of their trades relative to their account size, allowing them to assess the effectiveness of their trading strategy and risk management approach.
Profit Percentage = (Net Profit / account balance at the time of entry) x 100
Net Profit
The profit or loss made by a trader after deducting all expenses associated with the trade, including transaction fees.
Open Price
The price at which a trade is entered. The Open Price is the price at which the trader enters their position in the market, either manually or automatically. Also known as entry price.
Pip Size
Also known as tick size, is the smallest increment by which the price of a currency pair or other financial instrument can move. In forex trading, a pip is typically the fourth decimal place of the price quote, such as 0.0001 for EUR/USD. However, some currency pairs are quoted to the second decimal place, in which case a pip would be 0.01. The pip size can vary depending on the financial instrument being traded and the exchange or broker used for trading.
Pipette
A term used to refer to a fractional pip, which is equal to one-tenth of a pip. It represents a smaller increment of price movement compared to a pip. For instance, if a currency pair moves from 1.2000 to 1.2001, it has moved by one pip. However, if it moves from 1.20000 to 1.20001, it has moved by one pipette. Pipettes are sometimes used by brokers to offer tighter spreads and more precise pricing to traders.
Profit Factor Ratio
A performance metric used in trading to measure the profitability of a trading system or strategy. It is calculated by dividing the total profit of winning trades by the total loss of losing trades. The ratio measures how much profit is generated for each unit of loss incurred, with higher values indicating greater profitability. For example, a profit factor of 2 means that the strategy generates $2 of profit for every $1 of loss.
Profit Factor Ratio = total profit generated by winning trades / total loss incurred by losing trades
Remaining Distance To Stop
The distance between the current price of a financial instrument and the stop loss order that has been placed to limit potential losses. It is the distance that the price of the instrument must move before reaching the stop loss level.
Return Over Maximum Drawdown (RoMaD)
A performance metric used in trading and investing to evaluate the profitability of a strategy relative to its maximum drawdown. The RoMaD measures the amount of return earned for every unit of maximum drawdown risked. This means that for every $1 of drawdown risked, the strategy earned $x of profit. A higher RoMaD indicates a more profitable and efficient trading strategy.
RoMaD = Total Return / Maximum Drawdown
Reward-to-Risk Ratio
Reward-to-Risk Ratio (R:R) is a term used in forex trading to describe the ratio of potential profit to potential loss for a given trade. It is calculated by dividing the expected profit from a trade by the potential loss if the trade is unsuccessful. For example, if a trader expects to make a profit of $100 on a trade and sets a stop-loss order at $50, the RRR would be 2:1
R:R = (Target Price - Entry Price) / (Entry Price - Stop Loss Price)
Risk Currency
The currency that is used to measure the financial risk of a trade.
Risk Percentage (%)
The percentage of the trading account that a trader risks on any given trade. It is also known as risk per trade.
Risk Percentage = (Amount of money willing to risk on a trade / Total trading capital) x 100%
Roll
The interest that is earned or paid by traders for holding a position overnight. When a trader holds a position overnight, they are essentially borrowing one currency to buy another, and they may earn or pay interest on the borrowed currency, depending on the prevailing interest rates in the market.
Scale-in
Also known as scaling in or pyramiding, is a trading strategy where a trader gradually adds to their position in a particular market as the trade moves in their favor.
Scale-out
A trading strategy where a trader gradually closes out portions of their position as the trade moves in their favor. The goal of scaling out is to take profits along the way while still holding onto a portion of the position to potentially capture more gains if the trade continues in the desired direction.
Size
The number of shares, contracts, or units that a trader is buying or selling in a trade. The size of a trade can vary depending on a trader's account size, risk tolerance, and trading strategy. It is an important factor to consider when managing risk and calculating potential profits or losses.
Standard Deviation
A statistical measure that represents the amount of variation or dispersion in a set of data values. It provides information about how spread out the data is from the average or mean value. In finance, standard deviation is often used as a measure of risk in investments. A higher standard deviation indicates a greater degree of fluctuation or volatility in the prices of a security or portfolio of securities, and therefore a higher level of risk. Conversely, a lower standard deviation indicates a lower level of risk.
Stop Price
The price at which an trader has decided to sell a security in order to limit potential losses on a trade. It is the price at which a stop order will be executed, resulting in an automatic sale of the security. The stop price is typically set below the current market price for a long position and above the current market price for a short position. When the stop price is reached, the stop order becomes a market order and the security is sold at the next available price.
Strategy
A well-defined approach or plan of action for executing a trade. It outlines the rules and guidelines for entering and exiting trades and often takes into account factors such as risk tolerance, investment goals, and market conditions. A trading strategy can be based on various factors such as technical analysis, fundamental analysis, or a combination of both. The goal of a strategy is to increase the chances of achieving successful outcomes by reducing the impact of emotions and minimizing the potential for impulsive or irrational decision-making.
Strike Rate
The percentage of trades that are successful or profitable out of the total number of trades executed over a given period of time. It is also known as the success rate, win rate, or hit rate.
Strike Rate = (Number of Winning Trades / Total Number of Trades) x 100%
Symbol
A unique combination of characters (typically letters and numbers) that represents a specific financial instrument, such as a stock, commodity, or currency, on an exchange or trading platform. Symbols are used to identify and distinguish between different financial instruments and are typically assigned by the exchange or trading platform. For example, the symbol for Apple Inc. stock on the NASDAQ exchange is "AAPL," while the symbol for the currency pair Australian Dollar and United States Dollar is "AUDUSD".
Target Price
The price level at which a trader or investor aims to close their position in a trade to lock in a profit or limit losses. It is the price that a trader sets as their goal for a specific trade. The target price is typically based on technical or fundamental analysis, or a combination of both. Traders can use target prices to help them make informed decisions about when to enter or exit a trade.
Target Reward-to-Risk Ratio
A predetermined ratio used to set profit targets and stop-loss orders for a trade. It represents the ratio between the potential profit of a trade and the potential loss. Traders use this ratio to determine their profit targets, which are typically set at a multiple of the risk taken on the trade. For example, if the trader's risk on the trade is $100, and the target reward-to-risk ratio is 2:1, then the profit target would be set at $200. The target reward-to-risk ratio is a key component of a trader's risk management plan and helps to ensure that they have a positive expectancy over the long term.
Time Period
The duration or length of time for which a particular trade or investment is being held or analyzed. It could be a short-term time period, such as minutes, hours or days, or a long-term time period, such as weeks, months, or even years. Time periods are important because they can be used to measure performance, analyze trends, and identify potential trading opportunities. Different trading strategies may require different time periods, depending on the goals and objectives of the trader.
Total Efficiency
A trading metric that measures the effectiveness of both the entry and exit points of a trade. It is a calculation of the ratio between the Net Pips on a trade and its Available Trade Range.
Total Efficiency = ((Close Price - Open Price) / (Maximum Favourbale Price - Maximum Adverse Price)) * 100
Trade Account
A record-keeping mechanism used in Trading Vault to assign every trade to a specific account. Usually, a Trade Account corresponds to an actual brokerage account, encompassing all trades, deposits, and withdrawals of funds, matching its account balance. However, Trade Accounts can also be created for paper trading, backtesting, or recording missed trades. By associating each trade with a specific Trade Account, traders can easily track their performance, manage their risk, and optimize their trading strategies.
Trade Direction
The direction in which a trader decides to open a trade. It can be either long or short, depending on whether a trader expects the asset's price to increase or decrease. A long trade direction is taken when the trader expects the asset's price to rise, while a short trade direction is taken when the trader expects the asset's price to fall.
Trade snapshots
Screenshots that capture the current state of a trade at a particular point in time. They typically include important details about the trade, such as technical analysis, entry and exit prices. Trade snapshots are useful for reviewing and analyzing past trades.
Updraw
The increase in a trader's account balance from a trough to a peak as a result of a series of winning trades.