Catalogue
Glossary
Rigorous one-paragraph definitions for the terms used across this catalogue. Cross-linked from EA, broker, strategy, pair, and guide pages.
A
- Average Directional Index
- A technical indicator measuring trend strength on a 0-100 scale without indicating direction. Values above 20-25 indicate trending conditions; below 20 suggests a range-bound market.
- Average True Range
- A volatility indicator measuring the average range of price movement over a given period, commonly used to set stop-loss distances and position sizes that adapt to current market conditions.
B
- Backtest
- A simulation of an EA's trading rules applied to historical price data to estimate how the strategy would have performed in the past.
C
- Compound annual growth rate
- The annualised rate of return over a multi-year period that accounts for compounding, normalising returns across different time horizons for comparison.
E
- ECN broker
- A broker that connects traders directly to an Electronic Communications Network, routing orders to multiple liquidity providers for transparent best-execution pricing.
- Execution model
- The mechanism by which a broker processes customer orders — either acting as the counterparty (market maker) or routing orders to external liquidity providers (STP or ECN).
- Expectancy
- The average amount expected to win or lose per trade, calculated as win rate times average win minus loss rate times average loss. Positive expectancy is required for a profitable strategy.
- Expert Advisor
- An automated trading program written in MQL5 that runs inside MetaTrader 5 and executes trades according to programmed rules without manual intervention.
- Exponential Moving Average
- A moving average that gives more weight to recent prices than older prices, making it more responsive to recent market changes than a simple moving average.
G
- Grid trading
- A strategy that places buy and sell orders at regular price intervals above and below current price, profiting from oscillating price movement within a defined range.
I
- Introducing Broker programme
- A referral arrangement in which an individual or website earns commission from a broker for introducing new depositing clients, typically as a percentage of the spread or a fixed amount per traded lot.
L
- Leverage
- A multiplier that allows trading a larger notional position than the deposited margin, expressed as a ratio such as 1:30 or 1:500.
- Lot size
- A standardised unit of trade size in FX. A standard lot equals 100,000 units of the base currency; a mini lot equals 10,000 units; a micro lot equals 1,000 units (0.01 lots).
M
- Magic number
- A unique integer identifier assigned to each Expert Advisor orders in MetaTrader, allowing multiple EAs on the same account to distinguish their own trades from others.
- Margin call
- A broker notification or automatic position closure triggered when account equity falls below the required margin level, typically 50-100% of used margin.
- Martingale
- A position sizing method that doubles or multiplies the lot size after each losing trade, based on the premise that a winning trade will eventually occur and recover all prior losses plus profit.
- Maximum drawdown
- The largest peak-to-trough decline in account equity over a measurement period, expressed as a percentage of the previous peak.
- Modelling quality
- A percentage reported by the MT5 strategy tester indicating how accurately simulated price data reflects actual tick-by-tick price movements. 99% using real tick data is the standard.
N
- Negative balance protection
- A broker policy that prevents a customer account balance from falling below zero, ensuring the maximum loss is limited to the deposited amount even during extreme market movements.
O
- Overfitting
- Tuning EA parameters too precisely to historical data, producing a strategy that backtests well but performs poorly on unseen data because it exploits noise rather than real market patterns.
P
- Position sizing
- The method used to determine how many lots to trade on each position, typically as a fixed lot, fixed percent of equity, or risk-per-trade calculation.
- Profit factor
- Total gross profit divided by total gross loss over a given period. A profit factor above 1.5 indicates a profitable strategy; above 2.0 is strong.
R
- Recovery factor
- Total net profit divided by maximum drawdown, indicating how many times the strategy has earned back its worst loss. Higher is better.
- Restricted jurisdiction
- A country or territory in which a financial services provider is prohibited from offering services, due to regulatory requirements, licensing restrictions, or compliance risk.
- Risk/reward ratio
- The ratio of potential profit to potential loss on a single trade, calculated as take-profit distance divided by stop-loss distance.
S
- Sharpe ratio
- A risk-adjusted return metric calculated as annualised excess return divided by annualised standard deviation. Above 1.0 is acceptable; above 2.0 is excellent for EA strategies.
- Slippage
- The difference between the requested order price and the actual execution price, typically occurring during fast markets or when broker liquidity is insufficient at the requested price.
- Sortino ratio
- A risk-adjusted return metric similar to Sharpe but dividing by downside deviation only, ignoring upside volatility. Better suited to asymmetric return distributions.
- Spread
- The difference between the bid price and the ask price, representing the broker transaction cost on each trade. Tighter spreads reduce the cost of high-frequency EA strategies.
- Stop-loss
- A pending order that automatically closes a trade at a specified price to limit the loss if the market moves against the position.
- Swap
- The overnight interest rate charged or credited when a position is held past the daily rollover time, based on the interest rate differential between the two currencies in a pair.
T
- Take-profit
- A pending order that automatically closes a trade at a specified price to realise a profit when the market moves in the desired direction.
- Tick data
- The most granular level of price data, recording every individual price change with exact timestamps, used as the highest-quality input for MT5 backtests.
- Trailing stop
- A dynamic stop-loss that moves automatically in the direction of a profitable trade, locking in gains as price advances while still allowing further upside.
V
- Value at risk
- A statistical measure of the maximum expected loss over a given time horizon at a specified confidence level — for example, 95% probability of not losing more than 2% in one day.
- Virtual Private Server
- A remote computer rented to run MetaTrader continuously with low latency to the broker servers, ensuring EA execution is not interrupted by local internet issues or computer downtime.
- Volatility
- The degree of price variation over time, commonly measured as standard deviation of returns or as Average True Range in the context of trading EAs.
W
- Walk-forward analysis
- A validation method that repeatedly optimises EA parameters on a training window and tests on the immediately following unseen data window, mimicking real-world deployment conditions.
- Win rate
- The percentage of trades that close at a profit, calculated as winning trades divided by total closed trades. Must be evaluated alongside risk/reward ratio to be meaningful.
- Worst losing streak
- The longest consecutive series of losing trades or the largest cumulative loss within a contiguous run of losing trades in a backtest or live record.