Definition. Running a trading strategy across historical price data to estimate how it would have performed.
In a trading plan. Backtests reveal whether a strategy has positive expectancy in principle, but they don't reveal whether the trader can actually execute it under live pressure. The gap between backtest and live results is almost always execution, not strategy. Read more →
Definition. Two currencies quoted against each other in the forex market (e.g. EUR/USD).
In a trading plan. Forex trading plans define which currency pairs the trader takes setups on. Sticking to a small set of pairs is usually better than trading every available instrument — focus compounds skill. Read more →
Definition. A pre-defined maximum loss for any single trading day, after which the trader stops trading.
In a trading plan. The daily loss limit is one of the three structural protections that make catastrophic days impossible. Typical values are 2-3% of account equity. When you hit it, you stop — no exceptions, no recovery attempts. Read more →
Definition. A trading style where all positions are opened and closed within a single trading session.
In a trading plan. Day trading demands full-time attention, higher capital (especially under US PDT rules), and faster decision-making. It's the hardest style to start with — beginners usually do better with swing or position trading. Read more →
Definition. A simulated trading account funded with virtual money, used to learn platform mechanics without real risk.
In a trading plan. Demo accounts teach mechanics but lie about discipline — without real money at stake, none of the emotional pressures that cause real losses are present. Useful first step, but live trading reveals the actual skill gap. Read more →
Definition. The peak-to-trough decline in account equity, usually expressed as a percentage.
In a trading plan. Every profitable strategy has drawdown periods. The trader's job during drawdown is to keep executing — not to question the system. A 10% drawdown is normal during learning; it becomes catastrophic only when the trader breaks risk rules trying to recover. Read more →
Definition. A repeatable pattern in market behaviour you can recognise and act on with positive expectancy over time.
In a trading plan. An edge has to be specific enough to articulate to another trader — "I'm good at reading charts" isn't an edge. Building a trading plan starts with defining your edge clearly enough to encode it as binary rules. Read more →
Definition. The distance between knowing what to do as a trader and actually doing it under pressure.
In a trading plan. The execution gap is the single biggest reason most traders lose money. They have access to good strategies; they just don't follow them when emotion is high. Closing this gap is what disciplined tools like TradingPlan exist to do. Read more →
Definition. The average outcome of a strategy over many trades, calculated as (win rate × average win) − (loss rate × average loss).
In a trading plan. Expectancy is the truest measure of whether a strategy works. A 30% win rate strategy can be profitable if average wins are 3x average losses. Beginners often confuse high win rate with profitability — expectancy is the honest number. Read more →
Definition. Fear Of Missing Out — the emotional pressure that pushes traders into chasing trades they didn't enter cleanly.
In a trading plan. FOMO trading happens when the brain treats a missed profitable move as a real loss. The fix isn't willpower — it's defining your entry trigger so specifically that 'too late' is binary, and the missed trade no longer exists. Read more →
Definition. Testing a strategy in live or simulated markets in real time, rather than against historical data.
In a trading plan. Forward testing exposes execution issues that backtesting can't reveal. Most strategies survive backtesting; many fail forward testing because the trader hasn't built the discipline to actually run them. Read more →
Definition. A prop firm evaluation requiring the trader to hit a profit target while respecting daily loss limits and drawdown rules.
In a trading plan. FTMO challenges punish rule-breaking specifically. Most failures aren't from bad strategies — they're from breaking the daily loss limit or moving stops under challenge pressure. Passing typically requires demonstrating discipline, not aggression. Read more →
Definition. A trading account capitalised by a prop firm after the trader passes a challenge or evaluation.
In a trading plan. Funded accounts let skilled traders trade larger capital than they personally own, in exchange for a profit split. They impose continuing risk rules — discipline matters more than ever, since rule violations end the account. Read more →
Definition. Opening a buy position that profits if price rises.
In a trading plan. Most beginner trading plans focus on long-side trades because the bias is intuitive. Mature plans handle both long and short with separate rules for each direction.
Definition. Opening a sell position that profits if price falls.
In a trading plan. Short selling requires a clear bearish setup and good risk management — markets can squeeze higher unexpectedly. Many beginner plans skip shorts initially; experienced traders treat shorts as a separate, equally-valid setup type.
Definition. Trading larger positions than your account balance using borrowed capital from the broker.
In a trading plan. Leverage isn't inherently dangerous — improper sizing is. With fixed per-trade risk, leverage just means less margin tied up. The risk per trade stays the same. Beginners get hurt by leverage when they size by lots instead of by risk.
Definition. An order to buy or sell at a specified price or better. Executes only at the limit price or more favourable.
In a trading plan. Limit orders give you control over your entry price but no guarantee of execution. Many disciplined traders use buy/sell limits at planned setup levels — if the price doesn't reach them, the trade simply doesn't happen.
Definition. A trading account funded with real money, where wins and losses are real.
In a trading plan. The transition from demo to live is where most traders discover their execution gap. The same setups, the same rules — but with real money, hesitation, moved stops, and revenge trades suddenly appear. Bridge this gap deliberately. Read more →
Definition. The psychological tendency to feel losses roughly twice as intensely as equivalent gains.
In a trading plan. Loss aversion is the root of nearly every destructive trading habit — moving stops, cutting winners early, holding losers, revenge trading. The fix isn't to feel less; it's to build structure that doesn't depend on what you feel. Read more →
Definition. The deposit required to open a leveraged position, expressed as a percentage of the trade's total value.
In a trading plan. Margin requirements vary by instrument and broker. Margin calls happen when account equity drops below required margin — at which point the broker forces liquidation. Disciplined risk management prevents margin calls from ever becoming an issue.
Definition. An order to buy or sell immediately at the best available current price.
In a trading plan. Market orders guarantee execution but not price — slippage can move your fill against you, especially in fast or thin markets. Use market orders sparingly; limit orders are usually better for disciplined entries.
Definition. The biggest unrealised loss a trade reaches before it ultimately closes — used to evaluate stop placement.
In a trading plan. Tracking maximum adverse excursion (MAE) over a sample of trades reveals whether your stops are too tight (frequent stop-outs followed by reversals) or too loose (giving up too much before reversal).
Definition. A strategy that profits from price returning toward its average after a significant deviation.
In a trading plan. Mean reversion strategies typically have higher win rates but smaller R-multiples than trend strategies. They work well in ranging markets and fail badly in strong trends. Know which regime you're trading in. Read more →
Definition. A line on a chart that plots the average price over a defined number of periods.
In a trading plan. Moving averages are widely used as dynamic support/resistance levels and trend filters. Common settings: 20 EMA (short-term), 50 SMA (medium), 200 SMA (long-term trend).
Definition. Adjusting a stop loss against your position to give a trade 'more room' — the single most expensive bad habit in trading.
In a trading plan. Moving stops feels like saving the trade — it's actually multiplying the loss. The fix is making the rule absolute: stops never move against the position. Place them with the broker as live orders. Read more →
Definition. A price area on a chart where large orders are believed to have been placed, often defended by traders expecting institutional activity.
In a trading plan. Order blocks are part of the ICT (Inner Circle Trader) methodology. Like all setups, they need clear rules and binary criteria to be tradeable — vague pattern recognition leads to drift.
Definition. The smallest standardised price move in a forex pair, typically 0.0001 (or 0.01 for JPY pairs).
In a trading plan. Pips are the unit of measurement for forex risk and reward. Position sizing calculations multiply pip distance by pip value to convert stop distance into currency risk. Read more →
Definition. The percentage of trades where the trader followed their written plan exactly.
In a trading plan. Plan adherence is the leading indicator of trading success. P&L is the lagging indicator. Traders with 90%+ adherence over 100 trades can fairly evaluate their strategy; below that, they're not really running it. Read more →
Definition. Calculating how large a trade should be based on account equity, risk percentage, and stop distance.
In a trading plan. Position size is a calculation, not a guess: risk amount ÷ stop distance × value per unit. Sizing by feel produces variable risk per trade — and catastrophic losses when normal losing trades hit the oversized positions. Read more →
Definition. The gradual increase in position size that happens after a winning streak — usually catastrophic when the next normal loss arrives.
In a trading plan. Size creep is invisible until it's not. The fix is making per-trade risk a formula applied to account equity — never a feeling. The size scales with the account, not the streak. Read more →
Definition. A trading style where positions are held for weeks to months, capturing major price moves.
In a trading plan. Position trading has the lowest time commitment but slowest feedback loop — 100 trades takes years. Best suited to patient personalities and those trading alongside a busy career. Read more →
Definition. A structured sequence of pre-trading steps — mental check, market overview, watchlist review, risk reset — completed before any trades.
In a trading plan. The pre-market routine is the highest-leverage habit in trading. Skipping it means making every decision fresh under pressure; running it front-loads decisions while you're calm. 7-10 minutes daily. Read more →
Definition. A proprietary trading firm that provides trading capital to traders who pass an evaluation, taking a profit split in return.
In a trading plan. Prop firms have changed the retail trading landscape — capable traders can trade significant capital without owning it. FTMO, The 5%ers, Funding Pips and similar all use evaluation-based funding models. Read more →
Definition. A way of measuring trade outcomes in units of risk — a 2R win means you made twice your initial risk amount.
In a trading plan. R-multiples normalise trade outcomes across different position sizes and stop distances. They make expectancy easier to calculate and let you compare strategies on level ground.
Definition. Taking emotional follow-up trades after a loss in an attempt to recover quickly — almost always destructive.
In a trading plan. Revenge trading is your brain trying to neutralise loss pain immediately. The fix is structural: mandatory 20-minute pause after every losing trade. The pause breaks the emotional loop before the next decision. Read more →
Definition. The percentage of account equity at risk on any single trade — the foundation of survival risk management.
In a trading plan. Standard is 0.5-1% per trade. Higher percentages expose you to catastrophic drawdowns. Lower percentages make the math too slow to feel meaningful. The percentage stays constant; position size scales with stop distance. Read more →
Definition. The ratio of potential profit to potential loss on a trade — e.g. 1:2 means you risk 1 unit to potentially make 2.
In a trading plan. Higher R:R lets you be profitable at lower win rates. A 2:1 setup needs only ~33% win rate to break even. Setups with R:R below 1:1 are statistically hard to make work over the long run.
Definition. The gradual loosening of setup criteria over time — taking 'close enough' trades that don't fully match your defined strategy.
In a trading plan. Rule drift converts profitable strategies into break-even strategies invisibly. The fix is making every rule binary (yes/no, no interpretation) and surfacing them at the moment of trade rather than relying on memory. Read more →
Definition. A trading style where positions are held for seconds to minutes, capturing small price moves with high frequency.
In a trading plan. Scalping demands fast execution, tight spreads, and emotional control under intense pressure. Most beginners shouldn't start with scalping — the speed punishes inexperience harder than slower styles. Read more →
Definition. A specific market condition that meets your trading strategy's entry criteria.
In a trading plan. A real setup is binary — either the conditions are met or they aren't. Vague setups invite rule drift. The clearest setups can be described to another trader who can then identify them independently. Read more →
Definition. The difference between the expected and actual fill price on a market order.
In a trading plan. Slippage is worst in fast or thin markets — particularly around news releases. Disciplined trading plans skip the windows where slippage risk is high; chasing fast-moving prices usually costs more than it pays.
Definition. The difference between the bid (sell) and ask (buy) prices for an instrument.
In a trading plan. Spread is a transaction cost — every trade starts in the red by the spread amount. Scalpers care intensely about spread; position traders barely notice it. Always factor spread into your strategy's expectancy.
Definition. An order to close a trade at a defined price if the market moves against you, capping the loss.
In a trading plan. Stop losses are placed in the market before the trade is entered and never moved against your position. Mental stops get moved under pressure; live stops with the broker don't. The single biggest survival rule in trading. Read more →
Definition. TradingPlan's core feature — a step-by-step pre-trade checklist that walks you through every rule of your strategy.
In a trading plan. Strategy Flow turns a written strategy into an active system. Each rule becomes a binary check you complete in 30 seconds before clicking buy or sell. It's the structural fix for the execution gap. Read more →
Definition. Repeatedly switching trading strategies after short stretches of losses — usually before any strategy has been given enough trades to evaluate.
In a trading plan. Strategy hopping is the silent account killer. Most strategies need 100+ trades to express their edge; quitting at 15 means never knowing whether it works. The fix is committing to a sample size before committing to a strategy. Read more →
Definition. Price areas where buying or selling has historically clustered, creating reaction zones.
In a trading plan. Support and resistance levels work because many traders watch them — they become self-reinforcing. Use them as setup confluence, not as standalone signals. Combine with another criterion before entering trades.
Definition. A trading style where positions are held for days to weeks, capturing intermediate-term price moves.
In a trading plan. Swing trading fits around a day job — review charts in the morning and evening, manage trades during the week. Slower than day trading, more forgiving for beginners. Most retail traders should start here. Read more →
Definition. An order to close a profitable trade at a defined target price.
In a trading plan. Take-profit orders prevent you from cutting winners short out of nervousness. Place them with the broker when you enter the trade — the same way you place stops. Discretionary exits usually invert your strategy's math. Read more →
Definition. A record of every trade taken, including setup, outcome, emotional state, and plan adherence — used for review.
In a trading plan. Journals analyse what already happened. TradingPlan and similar discipline tools work on what's about to happen. Most serious traders eventually use both — the journal for end-of-week review, the discipline tool for in-session execution. Read more →
Definition. A structured document covering strategy, risk management, routine, and psychology — the foundation of disciplined trading.
In a trading plan. A trading plan is the set of rules that defines how you'll trade, written down before you trade. Most losing traders have plans they don't follow; most consistent traders have plans they actually execute. The difference is structural, not psychological. Read more →
Definition. The mental and emotional dimension of trading — how you respond to wins, losses, pressure, and uncertainty.
In a trading plan. Psychology is widely considered the single biggest factor in trading success. The traders who develop strong psychology don't have unusual willpower — they've built structural systems that work regardless of emotional state. Read more →
Definition. A structured sequence of pre-market and post-trade habits that prepare you to trade well.
In a trading plan. Routine determines whether you trade prepared or reactive. A trading routine app turns the intention into a daily habit — mental check-in, market overview, watchlist review, risk reset. 7-10 minutes daily. Read more →
Definition. A stop loss that automatically moves in the direction of your trade as it goes in your favour, locking in profit.
In a trading plan. Trailing stops are planned movements, defined in your strategy in advance — not reactive adjustments. Moving stops against your position is the bad habit; trailing them with the trade is part of good trade management.
Definition. The dominant direction of price movement over a chosen timeframe — up, down, or sideways.
In a trading plan. Trend determines which kinds of strategies have edge. Trend-following strategies fail in ranges; mean-reversion strategies fail in trends. Identifying market regime first prevents you from applying the wrong tool.
Definition. The magnitude of price movement over a given period, often measured by ATR (Average True Range) or standard deviation.
In a trading plan. Volatility affects position sizing — higher volatility means wider stops, which means smaller position sizes for the same percentage risk. Many setups also work better in specific volatility regimes.
Definition. The percentage of trades that close as winners.
In a trading plan. Win rate alone doesn't tell you whether a strategy works. A 70% win rate with 1:0.5 R:R loses money; a 35% win rate with 1:3 R:R makes money. Combine win rate with average win/loss to get expectancy.
TradingPlan turns your strategy rules, risk framework, and routine into a live checklist you actually run before every trade. Free on iPhone, iPad and Mac.
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