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.