Trading Glossary
Clear, practical definitions of every trading term — written for Indian traders, not textbooks.
Trading Journal
A trading journal is a systematic record of all your trades, including entry/exit prices, reasoning, emotions, and outcomes, used to identify patterns and improve performance.
Risk-Reward Ratio
The risk-reward ratio (R:R) compares the potential loss of a trade (risk) to its potential profit (reward), expressed as a ratio like 1:2 or 1:3.
Win Rate
Win rate is the percentage of trades that result in a profit, calculated as (winning trades ÷ total trades) × 100.
Profit Factor
Profit factor is the ratio of gross profit to gross loss over a set of trades. A profit factor above 1.0 means the trading strategy is profitable.
Position Sizing
Position sizing is the process of determining how many shares, contracts, or lots to trade on each position based on your account size and risk tolerance.
Revenge Trading
Revenge trading is the act of placing impulsive trades after a loss in an attempt to quickly recover the lost money, typically leading to larger losses.
Drawdown
Drawdown is the peak-to-trough decline in a trading account's value, expressed as a percentage. It measures how much an account has fallen from its highest point.
Trading Edge
A trading edge is a statistically proven advantage in a specific trading strategy — a pattern or approach that consistently generates positive returns over many trades.
Overtrading
Overtrading is taking too many trades, often beyond what your strategy specifies, typically driven by boredom, FOMO, or the compulsion to stay active in the market.
Stop Loss
A stop loss is a pre-defined price level at which a losing trade is automatically exited to limit the maximum loss on that position.