Trading glossary: definitions with practical examples
Use consistent words when comparing a trade, an account and a prop-firm programme.
Price and execution terms
Bid is the available buying quote from the counterparty; ask is the selling quote. Their difference is the spread. Slippage is the difference between the intended or reference execution price and the actual fill. Liquidity describes the ability to transact at available prices and sizes; a tight visible spread does not guarantee depth for a large order. A limit order sets a price constraint, while a market order seeks execution at available prices.
Size, leverage and margin
Quantity is the number of units or contracts. A lot is a contract convention that must be checked for the instrument. Pip and point are price-step conventions, not universal money amounts. Leverage compares exposure with collateral; margin is the collateral requirement. A $20,000 position using $200 margin still has $20,000 of underlying price exposure in the simplified model.
Risk and performance
Planned risk is the intended loss if the trade reaches its invalidation, before unexpected execution differences. R is a unit based on that original planned risk. Drawdown measures decline from a chosen peak. Expectancy combines average outcomes and their probabilities; historical estimates can be unreliable. Win rate alone excludes the size of wins, losses and costs.
Worked example: win rate versus expectancy
Assume 40% wins averaging 2R and 60% losses averaging 1R. Gross expectancy is 0.40 × 2 − 0.60 × 1 = 0.20R per trade. If average costs are 0.10R, net expectancy is 0.10R under those assumptions. This average does not forecast the next trade, the order of outcomes or the maximum future losing streak.
Account and programme terms
Balance commonly excludes open-position profit/loss; equity usually includes it under the account’s definition. Withdrawable balance can differ because of settlement and holds. A static drawdown floor is tied to a specified fixed reference; a trailing floor moves under a rule. Profit split is the eligible reward percentage allocated to the trader, not a guarantee that every displayed profit qualifies for payment.
Evidence vocabulary
Provider-published means the company states the fact. Regulator-matched means a particular identity or permission was found in the cited official record, within its stated scope. Independently tested requires an actual documented test; a quoted withdrawal time is not such a test. Unverified means sufficient evidence has not been established. Check dates and entity names whenever these labels appear in a comparison.
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Sources and scope
Official educational reference. The numerical examples and exercises are BestBRKR teaching scenarios, not historical results or personal investment advice. Account terms can change; verify the selected product and jurisdiction.
Affiliate disclosure: eligible partner buttons may earn BestBRKR a commission. This does not change the cost calculations or evidence findings. A review link is not a recommendation to open an account.