FAQ Section | Frequently Asked Questions

Exposure describes the overall economic risk to which a trading account is exposed to one or more markets. It takes into account position sizes, direction (long/short) and correlations between positions. High exposure means a strong dependence on the market development. 

Example / Association: A trader holds several long positions in technology-heavy stock indices. → Although there are several trades, the exposure is heavily concentrated on one market sector. If the technology sector falls, the losses have a cumulative effect on the equity.

Risk per trade refers to the maximum acceptable loss that a trader incurs on a single trade. It is usually defined as a percentage of equity and is a key parameter for limiting drawdowns and ensuring account stability.

Example / association: An account has an equity of €20,000. The trader limits his risk to 1% per trade. → The maximum permissible loss per trade is €200, regardless of position size or leverage.

The R multiple sets the actual profit or loss of a trade in relation to the previously defined risk (risk per trade). It allows a standardized evaluation of trades - regardless of account size or instrument. 

Example / Association: A trade risks €100 (1R) and is closed with a profit of €300. → The result corresponds to +3R. A loss of €100 would correspond to -1R.

The risk/reward ratio describes the relationship between the potential profit and possible loss of a trade. It is defined before the trade is opened and is a measure of the efficiency of a trading idea, not of its probability of occurrence.

Example / association: A trade risks €200 with a profit target of €600. → The risk/reward ratio is 1:3. The trade can be profitable in the long term even with a low hit rate.

Expectancy measures the average expected profit or loss per trade based on historical results. It combines hit rate and average profit/loss ratio and is one of the most meaningful key figures for assessing a trading strategy.

Example / association: A trader wins 40% of his trades with an average of +€300 and loses 60% with -€150. → The expectancy is positive, although more trades are lost than won.

Overtrading describes taking too many or unnecessary trades, often without a clear setup advantage. It often arises from impatience, boredom or the desire to recover losses quickly. Overtrading increases transaction costs, psychological pressure and overall risk - without improving expected values. 

Example / association: A trader has a clear trading plan with 2-3 setups per week, but opens several spontaneous trades every day. → The number of trades increases, the quality decreases - the account suffers despite "activity".

Loss aversion describes the psychological tendency to weight losses more heavily than gains of the same amount. In trading, this often leads to letting losses run too long and realizing gains too early - a structural disadvantage for performance.

Example / association: A trader closes a profit of € +150 immediately, but holds a loss of € -300 in the hope of a reversal. → Rationally, the opposite would be true - psychologically, the fear of "locking in" the loss dominates.

Tilt refers to an emotional state of emergency in which rational decision-making is replaced by frustration, anger or euphoria. Trades are made impulsively, rules are ignored and risks are increased. Tilt is not a market problem, but a state problem of the trader. 

Example / Association: After two quick losses, a trader spontaneously increases the position size to "get it back". → The decision is not based on analysis, but on emotion - classic tilt.

Confirmation bias describes the tendency to prefer information that confirms one's own opinion, while contradictory signals are ignored or devalued. In trading, this leads to one-sided analysis and overlooked risk signals. 

Example / association: A trader is bullish and specifically looks for positive market opinions, but ignores clear technical signals of weakness. → The decision appears well-founded, but is selectively biased.

The spread is the difference between the purchase price (ask) and sale price (bid) of an instrument. It represents an implicit transaction cost factor and has a direct impact on the trading result - especially for short-term strategies or high trading frequency.

Example / association: An instrument has a bid of €99.80 and an ask of €100.00. → The spread is €0.20. A trade therefore always starts "in the red", as the spread must first be overcome

Slippage refers to the deviation between the expected execution price and the price actually executed. It often occurs in the case of high volatility, low liquidity or market orders and can be both positive and negative.

Example / association: A trader places a stop order at €50.00, but the position is only executed at €49.70. → The difference of €0.30 is negative slippage and increases the actual loss.

Liquidity describes how easily an instrument can be traded without significantly influencing the price. High liquidity leads to narrow spreads and stable execution, while low liquidity increases the risk of slippage and erratic price movements.

Example / association: A heavily traded index future can be traded at fair prices at almost any time. A second-line stock, on the other hand, shows erratic price movements even with small orders - a sign of low liquidity.

A gap is an abrupt price change where no trading has taken place between two price positions. Gaps are often caused by news, events outside trading hours or strong order imbalances.

Example / association: A share closes at €100 on Friday and opens at €92 on Monday. → The difference of €8 is a gap against which stop-loss orders could offer no protection.

A market order is an unconditional buy or sell order that is executed immediately at the currently available market price. It guarantees execution, but not the price. Slippage can occur in volatile or illiquid markets.

Example / association: A trader wants to close a position immediately and places a market order. → Execution is immediate, possibly at a slightly worse price than expected - speed before price precision.

A limit order specifies a maximum purchase price or minimum selling price. The order is only executed if the market reaches or improves this price level. It offers price control, but no guarantee of execution.

Example / association: A share is quoted at €102. A trader sets a buy limit order at €100. → The order is only executed if the price falls to €100 or below.