Trading glossary
Risk & Money Management
22 plain-English Risk & Money Management terms — each with a worked example, related terms, and risk notes. Educational only — no advice or signals.
Correlation
A statistical measure (from -1 to +1) of how closely two assets' prices tend to move in the same or opposite direction.
Daily Loss Limit
The most you are allowed to lose in a single trading day before failing.
Diversification
Spreading capital across different assets, markets, or strategies so that no single position can dominate the outcome of a portfolio.
Exchange & Custody Risk
The risk that an exchange or custodian fails, freezes, or loses the crypto holding it for you.
Exposure
Exposure is the amount of money a trader has at risk in the market through open positions, showing how much could be gained or lost if prices move.
Free Margin
The part of your account equity that isn't tied up backing open trades — funds available to open new positions or absorb floating losses.
Hedging
Opening an offsetting position to reduce the risk of an existing one.
Leverage
Borrowed buying power that magnifies both gains and losses on your capital.
Liquidation
Forced closure of a leveraged position when losses eat through your margin.
Lot Size
The standardised quantity of a trade — standard, mini, or micro lots.
Margin
The deposit your broker locks up as collateral to open a leveraged position.
Margin Call
A warning that your equity has fallen too low to support your open positions.
Margin Level
A percentage comparing account equity to the margin tied up in open trades, signalling how close you are to a margin call or stop-out.
Monte Carlo Simulation
A technique that re-runs your trading results many times in different random orders (or by resampling them) to show a range of possible equity outcomes — used to understand risk and dispersion, not to predict the future.
Position Sizing
The process of deciding how much capital or how many units to commit to a single trade, usually based on account size and a predefined level of acceptable risk.
Risk Management
The rules that decide how much of your account is exposed on each trade and overall.
Risk of Ruin
The probability that a trader loses enough capital to be unable to keep trading, driven by edge, position size, and account size.
Risk Per Trade
The amount of capital a trader is prepared to lose on a single trade, usually set as a fixed percentage of the total account.
Risk/Reward Ratio
The ratio between a trade’s potential loss and its target profit, e.g. RR 1:2.
Rule Breach
Breaking any firm rule, which can fail a challenge or close a funded account.
Stop-Out Level
The margin level at which the broker automatically force-closes your positions.
Trailing Drawdown
A max-loss floor that rises with your profits instead of staying fixed.
Educational content only. Map.Trade does not provide financial advice or trading signals.