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When a prop firm loss limit is touched while a trade is open, the breach usually counts at that moment, not at the close. This article explains equity-based limits, soft and hard breaches at FTMO and Topstep, a worked example with slippage, and a pre-trade sizing check.
When a prop firm loss limit is touched while a trade is open, the breach usually counts at that moment, not at the close. This article explains equity-based limits, soft and hard breaches at FTMO and Topstep, a worked example with slippage, and a pre-trade sizing check.
A losing trade review works when facts come before explanations and the result comes last. This article lays out a five-step order borrowed from the after action review, four buckets for classifying a loss, a worked example that splits a -1.7R loss into plan and execution costs, and a table that turns common excuses into questions the journal can answer.
The Kelly criterion gives the fraction of capital to risk per trade that maximizes long-run growth: f = W − (1 − W) / R. This glossary entry covers where it comes from, worked examples, why full Kelly sizes of 10-20% are too aggressive, how sample size makes the inputs uncertain, and how traders use it as a ceiling rather than a target.
A winning streak feels like proof of skill, but at a 50% win rate a run of five winners shows up in most 100-trade stretches by chance. This article covers what research on self-attribution and overconfidence shows, how overconfidence appears in a trading journal, what a size increase after a streak can cost, and a four-step protocol for the winning side.
The Sortino ratio divides return above a target by downside deviation, so large winning periods are not counted as risk. This article walks through the formula on six months of journal data, shows how the most common calculation mistake nearly triples the result, and compares three strategies with the same average return that Sharpe and Sortino rank differently.
On a funded prop account, risk is measured against a fixed loss allowance, not the account size on screen, so the same 1% rule means something very different than on a personal account. This article compares the two side by side, works through an illustrative example with FTMO's published limits, and shows how to size, set a daily stop, and journal both account types.
A trading journal records each trade in fixed fields so results can be filtered and counted, while a trading diary is dated free text that explains each session: the plan, market context, skipped trades, and lessons. This article compares the two side by side, shows where traders blur them, and outlines a short daily routine that keeps both without doubling the work.
Value at Risk estimates the loss an account should not exceed over a set period at a chosen confidence level. This glossary entry shows how to calculate it from a trading journal, how the historical and parametric methods differ, and why VaR marks the start of the tail rather than the worst case.
A losing streak rarely does its real damage through the losses themselves. The damage comes when the streak changes size, standards, and trade frequency. This article covers how to triage a streak, set a protocol before it starts, and return to full size safely.
The Sharpe ratio measures return per unit of risk, but calculating it correctly requires periodic returns, the right risk-free rate, and proper annualizing. This article walks through the formula, a worked example from a trading journal, and what the ratio misses.
A prop firm consistency rule caps how much of your total profit may come from your best trading day. This article explains how the ratio is calculated, compares the official Topstep and FTMO versions, walks through a worked example, and lists habits that keep you under the limit.
A multi-timeframe trade should be journaled as one record with three separate roles: the higher timeframe that set the bias, the middle timeframe that framed the setup, and the lower timeframe that triggered entry. This article covers a three-layer log structure, recording which chart defined the stop and target, taking snapshots at entry to avoid hindsight, and reviewing results by timeframe combination.
