Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
Showing 5 terms
The proportion of trades that finish profitable.
Meaningless without the payoff ratio. A 78% win rate with losses five times the size of wins is a losing system that feels like a winning one.
Average profit per trade, calculated as (win rate × average win) − (loss rate × average loss).
Positive expectancy is what "edge" means. A high win rate is neither necessary nor sufficient.
A consecutive run of losing trades, whose length follows from the system’s win rate.
A 45% win rate will hand you eight losses in a row. Plan for it before it happens, not during.
An additional condition required before a trading signal is acted on.
Every filter removes good trades along with bad. Judge it on expectancy, never on win rate.
The risk of a rare, very large loss well outside normal expectations.
What mean reversion trades away its high win rate for. The one position that never comes back is the whole risk in that style.