The Prop Trader's Dictionary

From drawdown rules to payout splits — every term you need to understand, master, and pass your challenge.

B

Backtesting

Backtesting is the process of testing a trading strategy using historical market data to evaluate how it would have performed in the past. It helps traders assess the effectiveness of a strategy before applying it in live trading. By analyzing past results, traders can identify strengths, weaknesses, and potential risks within their approach.

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Breakout Trading

Breakout trading is a strategy where traders enter a trade when the price moves beyond a defined support or resistance level. The idea is that once price “breaks out” of a range, it can continue moving strongly in that direction. Breakout trading is commonly used to capture momentum in trending markets.

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Bonds

A bond is a fixed-income financial instrument that represents a loan made by an investor to a borrower, typically a government or corporation. In exchange for the loan, the borrower agrees to pay periodic interest and return the principal at a set maturity date. Bonds are commonly used as lower-risk investments compared to stocks.

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Explore all glossary terms currently grouped under the letter "B".