Glossary
The language of performance.
Every term a serious journal-keeper runs into — defined in plain English, direct answer first, no fluff. Education only, never advice.
[01]
Trading journal
A trading journal is a structured record of every trade you take — entry, exit, size, and result — plus the context behind it: the chart, your reasoning, and your emotional state. Traders use journals to review performance objectively, find repeatable edges, and eliminate recurring mistakes that raw broker statements never reveal.
[02]
Trade review
A trade review is the practice of replaying past trades against the context you had at entry — the chart, the plan, and your emotions — to judge the quality of the decision, not just the outcome. Reviews done daily or weekly turn trading history into concrete lessons and are widely considered the fastest driver of trader improvement.
[03]
Win rate
Win rate is the percentage of your trades that close profitable: winning trades divided by total trades. A 55% win rate means 55 of every 100 trades made money. On its own it says nothing about profitability — a high win rate with occasional huge losses can still lose money, which is why it must be read alongside the win/loss ratio.
[04]
Profit factor
Profit factor is gross profit divided by gross loss over a set of trades. A profit factor of 1.5 means you made $1.50 for every $1 you lost; below 1.0 means the strategy lost money overall. It is one of the cleanest single measures of whether winning trades are actually paying for the losing ones.
[05]
Expectancy
Expectancy is the average amount you can expect to make or lose per trade, combining win rate and average win/loss size: (win rate × average win) − (loss rate × average loss). Positive expectancy means the system makes money over many trades even though individual results vary. It is the single number that says whether an edge exists.
[06]
Drawdown
Drawdown is the decline in account equity from a peak to a subsequent low, usually expressed as a percentage. If an account grows to $10,000 and falls to $8,500 before recovering, that is a 15% drawdown. Maximum drawdown — the deepest such fall — is the standard measure of how much pain a strategy inflicts on the way to its returns.
[07]
Equity curve
An equity curve is a chart of your account balance over time, plotted trade by trade. Its shape reveals the character of your trading at a glance: steady stair-steps suggest consistency, jagged spikes suggest oversized bets, and long flat or falling stretches expose periods where the edge disappeared. It is the fastest visual health-check a trader has.
[08]
R-multiple
An R-multiple expresses a trade’s result as a multiple of the amount risked. If you risk $100 and make $250, the trade is +2.5R; if the stop is hit, it is −1R. Measuring in R normalizes results across position sizes and account sizes, making performance comparable and keeping the focus on risk discipline rather than raw dollars.
[09]
Risk/reward ratio
The risk/reward ratio compares what a trade risks against what it targets: risking 50 pips to make 150 is a 1:3 risk/reward. Together with win rate, it determines profitability — a 1:3 ratio is profitable even winning only a third of the time. Neither number means anything alone; the pair defines the math of the strategy.
[10]
Revenge trading
Revenge trading is re-entering the market impulsively after a loss to "win the money back," usually with larger size, looser criteria, and no plan. It converts one routine loss into a losing streak and is among the most destructive behavior patterns in trading. The reliable countermeasure is recognizing the state early and enforcing a hard stop-trading rule.
[11]
Trading psychology
Trading psychology is the study and management of the mental states that drive trading decisions — fear, greed, overconfidence, FOMO, and tilt. Since most strategies fail in execution rather than design, managing these states is often the difference between a profitable system on paper and a profitable trader in practice.
[12]
Prop firm evaluation
A prop firm evaluation (or "challenge") is a test traders pass to receive a funded account: hit a profit target while staying inside strict rules, typically a maximum overall drawdown, a daily loss limit, and sometimes consistency requirements. Most failures are rule breaches driven by risk and discipline errors, not by unprofitable strategies.
[13]
Position sizing
Position sizing is deciding how much to risk on each trade, usually as a fixed percentage of account equity — commonly between 0.5% and 2%. It is the primary lever of risk control: sizing determines whether a normal losing streak is a survivable dip or a blown account, regardless of how good the strategy is.
[14]
Trading edge
A trading edge is any repeatable condition that makes a strategy profitable over many trades — a positive expectancy that persists after costs. Edges come from setups, timing, instrument selection, or superior execution and discipline. An edge is proven statistically in your own trade history, not claimed from a backtest or borrowed from someone else.
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