TRADING PERFORMANCE GLOSSARY
GLOSSARY ENTRY
Trading expectancy estimates the average outcome per trade across a defined sample. A positive historical expectancy means the entered sample produced a positive average result; it is descriptive, not a guarantee about the next trade.
Expectancy = (win probability × average win) − (loss probability × average loss)Read definition GLOSSARY ENTRY
Profit factor is the total value of winning trades divided by the absolute total value of losing trades. It summarizes the balance between gains and losses but does not describe timing, drawdown, or the number of trades.
Profit factor = gross profit ÷ gross lossRead definition GLOSSARY ENTRY
Win rate measures how frequently trades finish profitably in a defined sample. It says nothing by itself about the size of wins, losses, fees, or risk taken.
Win rate = winning trades ÷ total closed trades × 100Read definition GLOSSARY ENTRY
Average win is total winning value divided by winning trades. Average loss is the absolute total losing value divided by losing trades. Their relationship is often called the payoff ratio.
Payoff ratio = average win ÷ average lossRead definition GLOSSARY ENTRY
Maximum drawdown describes the worst peak-to-trough decline in an equity sequence. It is path-dependent: the order of values matters, and deposits or withdrawals should be separated from trading performance when possible.
Drawdown % = (peak equity − later trough equity) ÷ peak equity × 100Read definition GLOSSARY ENTRY
The reward-to-risk ratio compares potential reward per unit with planned risk per unit between an entry, stop, and target. It describes payoff geometry, not the probability that either level will be reached.
Reward-to-risk ratio = potential reward per unit ÷ risk per unitRead definition CALCULATE, THEN REVIEW
A number becomes useful when its denominator, cost convention, sample, and limitations are explicit. Use the glossary alongside the methodology and your complete journal history.