- Algorithmic trading
- Executing trades according to predefined, coded rules rather than manual decisions.
- Ask / Bid
- The price at which you can buy (ask) and sell (bid). The difference is the spread.
- Backtest
- A simulation of a strategy on historical data.
- Curve fitting
- Tuning a strategy so closely to past data that it captures noise rather than a lasting pattern.
- Drawdown
- A decline from a peak in account balance or equity, usually shown as a percentage.
- Equity
- Account balance plus or minus the floating result of open positions.
- Expert Advisor (EA)
- An automated trading program for MetaTrader 4 or 5.
- Grid strategy
- Placing orders at regular price intervals; exposure can accumulate in a trending market.
- Leverage
- Using borrowed capacity to control a position larger than the deposit.
- Lot
- Standardised trade size: standard 100,000, mini 10,000, micro 1,000 units of base currency.
- Margin call / stop-out
- Broker warnings and forced closure of positions when account equity falls below required margin.
- Martingale
- Increasing trade size after losses to recover them; risks rapid, large losses.
- MQL4 / MQL5
- Programming languages used to write EAs and indicators for MetaTrader 4 and 5.
- Out-of-sample data
- Data kept aside and not used while designing a strategy, used once to test it.
- Overfitting
- See curve fitting; a model that fits the past well but generalises poorly.
- Pip
- Standard unit of price change, usually 0.0001 (0.01 for JPY pairs).
- Profit factor
- Gross profit divided by gross loss over a set of trades.
- Slippage
- Difference between the requested and the executed price.
- Spread
- Gap between bid and ask prices; a cost of every trade.
- Swap
- Overnight financing charge or credit for holding a position.
- VPS
- Virtual private server used to keep a trading terminal online continuously.
- Walk-forward analysis
- Repeated optimise-then-test cycles on rolling windows of history.
Risk reminder. Trading foreign exchange and CFDs on margin carries a high level of risk and may not be suitable for every investor. You can lose more than your initial deposit. Past or simulated performance of any trading system, including automated Expert Advisors, does not guarantee future results.