What Is a Trade?

A trade represents a complete investment cycle—entering and exiting a position in the market. In the context of algorithmic trading and trading bots, a trade consists of a single buy order paired with one or more corresponding sell orders that close the position.

Understanding Trades

When a trading bot identifies an opportunity, it opens a position by placing a buy order. This position remains "open" until the bot decides to exit, at which point it places one or more sell orders to close the position. The complete cycle from entry to exit constitutes a single trade.

Trade Anatomy

┌─────────────────────────────────────────────────────────────────┐
│                         TRADE                                    │
├─────────────────────────────────────────────────────────────────┤
│                                                                  │
│   BUY ORDER                    SELL ORDER(S)                    │
│   ───────────                  ─────────────                    │
│   • Entry point                • Exit point(s)                  │
│   • Purchase price             • Selling price(s)               │
│   • Quantity                   • Partial or full close          │
│   • Timestamp                  • Timestamp(s)                   │
│                                                                  │
│   ════════════════════════════════════════════════════════════  │
│                         POSITION                                 │
│              (Open while holding the asset)                      │
└─────────────────────────────────────────────────────────────────┘

Trade Lifecycle

1. Opening a Trade

A trade begins when the algorithm executes a buy order:

• The algorithm identifies a trading signal based on its strategy
• A buy order is placed at the current market price (or a limit price)
• Once the order is filled, the trade is considered "open"
• The entry price and timestamp are recorded

2. Holding the Position

While the trade is open:

• The algorithm monitors price movements
• Unrealized profit/loss fluctuates with market price
• Risk management rules (stop-loss, take-profit) are active
• The position may be partially closed if the strategy allows

3. Closing a Trade

A trade closes when the position is fully exited:

• Single sell order: The entire position is closed at once
• Multiple sell orders: The position is closed in stages (scaling out)
• Stop-loss triggered: Automatic exit to limit losses
• Take-profit triggered: Automatic exit to secure gains

Trade vs. Order vs. Position

Understanding the distinction between these terms is essential:

Key Differences

• Orders are atomic—they either execute or don't
• Positions represent current exposure to an asset
• Trades encompass the full investment journey from entry to exit

Types of Trades

By Duration

By Outcome

Trade Metrics

When evaluating trading performance, several metrics apply to individual trades:

Profit Metrics

• Gross Profit: (Sell Price - Buy Price) × Quantity
• Net Profit: Gross Profit - Fees and Commissions
• Profit Percentage: (Net Profit / Investment) × 100

Timing Metrics

• Trade Duration: Time between opening and closing
• Time to Profit: How quickly the trade became profitable
• Holding Period: Total time the position was held

Risk Metrics

• Maximum Drawdown: Largest unrealized loss during the trade
• Risk/Reward Ratio: Potential profit vs. potential loss
• Slippage: Difference between expected and actual execution price

Example Trade

Here's a complete trade example:

Asset: BTC/EUR
Strategy: Trend Following

ENTRY (Buy Order)
─────────────────
Date:     2026-01-10 09:30:00
Price:    €42,500
Quantity: 0.5 BTC
Value:    €21,250

EXIT (Sell Orders)
──────────────────
Sell #1: 0.25 BTC @ €43,200 (Jan 11) = €10,800
Sell #2: 0.25 BTC @ €44,100 (Jan 12) = €11,025

TRADE SUMMARY
─────────────
Total Sold:    €21,825
Total Bought:  €21,250
Gross Profit:  €575
Net Profit:    €560 (after €15 fees)
Return:        2.64%
Duration:      2 days

Why Trades Matter

Understanding trades is fundamental to evaluating algorithmic trading performance:

1. Win Rate: Percentage of trades that are profitable
2. Average Trade: Mean profit/loss per trade
3. Expectancy: Expected value of each trade
4. Trade Frequency: How often the algorithm executes trades

These metrics help you assess whether a trading bot's strategy is effective and sustainable over time.

Trades on Finterion

On Finterion, you can view all trades executed by a trading algorithm:

• Trade History: Complete list of closed trades with entry/exit details
• Trade Analysis: Profit, duration, and performance for each trade
• Open Trades: Currently active positions awaiting exit
• Trade Statistics: Win rate, average profit, and other aggregate metrics

Understanding what constitutes a trade helps you better interpret algorithm performance and make informed decisions about which trading bots align with your investment goals.

Related Concepts

• Win Rate - Percentage of winning trades
• Profit - Total earnings from trades
• What Is a Trading Bot? - Learn how bots execute trades
• How to Evaluate a Trading Bot - Assess trading performance