Glossary of Terms

Expected Payoff
An estimate of the amount that will be gained in forex trading or any game of chance, calculated by multiplying the probability of winning by the number of points won each time. In MT4 report, this is calculated as follows:
Expected Payoff = (ProfitTrades ÷ TotalTrades) × (GrossProfit ÷ ProfitTrades) - (LossTrades ÷ TotalTrades) × (GrossLoss ÷ LossTrades)

Maximum Draw Down
A historical or simulated statistic that measures the largest percentage “Peak to Valley” decline experienced by a mechanical trading strategy. It is one way to measure the riskiness of such strategy or system. MDD percentage can be applied directly to the size of a portfolio and get an estimate of how much money one could lose at some intermediate point in time during the life of the investment strategy.

MQL4
MetaQuotes Language version 4, a powerful, easy to learn programming language used in MT4. Using this language and the MT4 platform, you can create custom indicators, automated trading systems called Expert Advisors and scripts.

MT4
MT4 stands for MetaTrader version 4, one of the few “open” server-based automated trading software platforms developed by MetaQuotes Software Corp.

PIP
Pip stands for percentage in point. It is the smallest price unit of a currency or commodity. In the forex market prices are usually quoted to the fourth decimal point except for certain currency pairs such as USDJPY, EURJPY, GBPJPY which are quoted to the second decimal point.

Profit Factor
An average profit or loss per trade. It can be calculated as follows:
ProfitFactor = (Number of Profit Trades × Average Profit) ÷ (Number of Loss Trades × Average Loss)

Trailing Stop
A complex stop loss order in which the stop loss price is set at a fixed distance or percentage below or above the market price. If the market price moves in favor of the position, the stop loss price follows in the same direction, but if the market price moves in the negative direction, the stop loss price doesn’t change. This technique allows a trader to set a limit on the maximum possible loss without setting a limit on the maximum possible gain, and without requiring paying attention to the investment on an ongoing basis.