Risk Management

Observable evidence, defined in advance, that a setup is doing what you expected before you commit.

Drawdown is the fall from an account's peak value to its subsequent low, expressed in money or as a percentage. It measures the pain of a losing run rather than the final result. A 20% drawdown needs a 25% gain to recover, and the deeper it goes the harder recovery becomes, which is why controlling drawdown matters more than chasing returns.

The point at which you open a position — chosen in advance, with a defined trigger and invalidation.

The average amount you can expect to win or lose per trade over a large sample.

The largest peak-to-trough fall in account balance over a period.

Total gross profit divided by total gross loss.

A plan where the loss on every trade, and for the day as a whole, is decided before the market opens.

The comparison of what you stand to lose against what you stand to gain on a trade, calculated before entry.

A pre-set order that closes a position once price proves the idea wrong, capping the loss.

A pre-set order that closes a position at a chosen objective, taking the gain automatically.

Everything you do to a trade after it is open — moving the stop, taking part of the position off, or closing early.

The percentage of your trades that finish in profit.