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Trading & Backtesting Glossary

Plain-language definitions for terms commonly found in backtests, strategy reports, and historical performance reviews.

Average Profit per Trade

The average result across the trades included in the calculation.

Also called:

Average Trade; Average P&L; average trade result

Related terms:

Net Profit; Trade Count; Commission

Backtest

A historical simulation that applies defined trading rules to past market data to generate hypothetical trades and results.

Also called:

Historical test; strategy backtest

Related terms:

Historical Data; Hypothetical Performance; Test Period

Break-Even Trade

A trade classified as having neither a positive nor a negative result under the report’s calculation method.

Also called:

Even trade; flat trade; breakeven trade

Related terms:

Winning Trade; Losing Trade; Win Rate

Closed Trade

A trade whose position has been fully exited and whose result has been realized under the report’s calculation method.

Also called:

Completed trade; realized trade

Related terms:

Open Trade; Winning Trade; Losing Trade

Commission

A charge associated with executing trades.

Also called:

Trading commission; broker commission

Related terms:

Fees; Slippage; Net Profit

Equity Curve

A chart showing how cumulative profit and loss or account equity changes across trades or over time.

Also called:

Performance curve; cumulative P&L curve

Related terms:

Maximum Drawdown; Closed Trade; Open Trade

Fees

Costs associated with trading or maintaining positions that may extend beyond standard commissions.

Also called:

Trading fees; transaction fees; exchange fees

Related terms:

Commission; Slippage; Net Profit

Gross Loss

The combined negative result from all trades classified as losers during the measured period.

Also called:

Total losing-trade loss; gross losses

Related terms:

Gross Profit; Net Profit; Losing Trade

Gross Profit

The combined positive result from all trades classified as winners during the measured period, before it is offset by gross loss.

Also called:

Total winning-trade profit; gross gains

Related terms:

Gross Loss; Net Profit; Winning Trade

Historical Data

Recorded information from an earlier period, such as prices, volume, timestamps, and other market observations.

Also called:

Past market data; historical market data

Related terms:

Backtest; Test Period; Sample Size

Hypothetical Performance

Results produced by simulated trades rather than trades actually executed in a live account.

Also called:

Simulated performance; backtested performance; hypothetical results

Related terms:

Backtest; Historical Data; Slippage

Long Trade

A trade structured to benefit from a rise in the price of the instrument being tested.

Also called:

Long position; buy trade

Related terms:

Short Trade; Closed Trade; Slippage

Losing Trade

A closed trade with a negative result under the report’s calculation method.

Also called:

Unprofitable trade; loser

Related terms:

Winning Trade; Break-Even Trade; Gross Loss

Maximum Drawdown

The largest measured decline from a previous equity peak to a later low during the test period.

Also called:

Max Drawdown; MDD; maximum equity decline

Related terms:

Equity Curve; Profit-to-Drawdown Ratio; Test Period

Net Profit

The combined result after profitable and losing trades are added together for the measured period.

Also called:

Net P&L; total net profit; net result

Related terms:

Gross Profit; Gross Loss; Commission

Open Trade

A trade with an active position that has not yet been fully exited.

Also called:

Open position; active trade

Related terms:

Closed Trade; Equity Curve; Net Profit

Profit Factor

A comparison of gross profit with gross loss across the measured closed trades.

Also called:

PF; gross-profit-to-gross-loss ratio

Related terms:

Gross Profit; Gross Loss; Trade Count

Profit-to-Drawdown Ratio

A comparison between a reported profit or return measurement and maximum drawdown.

Also called:

Profit/Drawdown; return-to-drawdown ratio; return over max drawdown

Related terms:

Net Profit; Maximum Drawdown; Test Period

Sample Size

The number of observations included in an analysis. In a backtest, this often refers to the number of completed trades.

Also called:

Number of observations; trade sample

Related terms:

Trade Count; Test Period; Historical Data

Short Trade

A trade structured to benefit from a decline in the price of the instrument being tested.

Also called:

Short position; sell-short trade

Related terms:

Long Trade; Fees; Hypothetical Performance

Slippage

The difference between the price assumed or expected for a trade and the price at which it is actually executed.

Also called:

Execution slippage; price slippage

Related terms:

Commission; Fees; Hypothetical Performance

Test Period

The range of dates included in a backtest or performance report.

Also called:

Date range; backtest period; testing period

Related terms:

Historical Data; Trade Count; Sample Size

Trade Count

The number of trades included in the reported results.

Also called:

Total Trades; number of trades

Related terms:

Sample Size; Closed Trade; Open Trade

Win Rate

The percentage of measured trades classified as winners.

Also called:

Percent Profitable; winning percentage; win percentage

Related terms:

Winning Trade; Losing Trade; Break-Even Trade

Winning Trade

A closed trade with a positive result under the report’s calculation method.

Also called:

Profitable trade; winner

Related terms:

Losing Trade; Break-Even Trade; Gross Profit

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