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Trading glossary
81 terms, defined the way we'd explain them to a friend — with links to strategies that put each concept to work.
RSI (Relative Strength Index)A momentum oscillator that scores the speed of recent price changes on…RSI(2)The Relative Strength Index computed over just two periods, popularize…SMA (Simple Moving Average)The arithmetic average of the last N closing prices, recalculated each…EMA (Exponential Moving Average)A moving average that weights recent prices more heavily, using an exp…MACDMoving Average Convergence Divergence: the difference between a 12-per…Golden CrossThe moment a 50-day moving average crosses above a 200-day moving aver…Death CrossThe bearish counterpart of the golden cross: a 50-day moving average c…Moving Average CrossoverA signal generated when a faster moving average crosses a slower one —…MomentumThe empirical tendency of assets that have recently performed well to …Mean ReversionThe tendency of a price stretched far from its recent average to snap …OversoldA condition where a price has fallen hard and fast enough that an osci…OverboughtThe high extreme of an oscillator — conventionally RSI above 70 — indi…DrawdownThe percentage decline from a portfolio's (or asset's) peak value to a…Maximum DrawdownThe largest peak-to-trough loss a strategy experienced over a test win…VolatilityThe dispersion of an asset's returns, usually measured as the annualiz…VIXThe Cboe Volatility Index: a measure of the S&P 500's expected 30-day …Trend FollowingA strategy family that buys assets in established uptrends and steps a…WhipsawA quick false signal: a strategy enters on a crossover or breakout, th…BreakoutA price move through a defined boundary — a prior high, a range top, o…SeasonalityCalendar-linked return patterns: the turn-of-the-month effect, 'sell i…Market OrderAn instruction to buy or sell immediately at the best available price.…Limit OrderAn order that executes only at a specified price or better: a buy limi…Stop-Loss OrderA resting order that triggers a sale when price falls to a set level, …Trailing StopA stop-loss that follows the position up: it sits a fixed percentage b…Take-Profit OrderA resting sell order at a level above the entry price that locks in a …Bracket OrderAn entry order packaged with both of its exits: a take-profit above an…OCO (One-Cancels-Other)A pair of linked orders where the execution of one automatically cance…GTC (Good-Til-Canceled) OrderAn order that stays working at the broker across sessions until it fil…Day OrderAn order that expires automatically at the end of the trading session …MOC (Market-on-Close) OrderA market order designated to execute in the closing auction at the off…Closing AuctionThe end-of-day matching event where exchanges cross accumulated buy an…SlippageThe difference between the price a strategy expected and the price it …Bid-Ask SpreadThe gap between the highest price buyers will pay (bid) and the lowest…LiquidityHow much of an asset can be traded quickly without moving its price. D…FillThe execution of an order — the moment shares actually change hands at…Position SizingThe decision of how much to buy when a signal fires — as a fraction of…Fractional SharesBroker-supported ownership of less than one share, letting dollar-base…BacktestingSimulating a strategy's rules against historical market data to estima…Paper TradingRunning a strategy against live market data with simulated money — rea…Live TradingA strategy executing with real money in a real brokerage account. The …CAGR (Compound Annual Growth Rate)The constant yearly growth rate that would turn the starting value int…Sharpe RatioAverage excess return divided by the volatility of returns — return pe…Win RateThe fraction of closed trades that ended profitable. Alone it says lit…ExpectancyThe average profit or loss per trade: (win rate × average win) − (loss…Equity CurveThe plot of portfolio value over time — the single most information-de…OverfittingTuning a strategy until it fits the historical data's noise rather tha…Out-of-Sample TestingEvaluating a strategy on data it was not developed or tuned on — the l…Walk-Forward AnalysisRepeatedly optimizing a strategy on one window of history and testing …Lookahead BiasA backtest accidentally using information that wasn't available at dec…Survivorship BiasTesting only on assets that still exist today, silently excluding the …BenchmarkThe passive alternative a strategy must beat to justify its existence …Buy and HoldPurchasing an asset and holding it through everything — the zero-effor…Time-Weighted ReturnA return measure that neutralizes the effect of deposits and withdrawa…Algorithmic TradingExecuting trades by predefined rules rather than discretionary judgmen…No-Code TradingBuilding and deploying automated strategies through visual blocks or p…Trading BotSoftware that watches markets and places orders automatically accordin…Strategy SleeveAn isolated slice of a brokerage account dedicated to one strategy: it…OMS (Order Management System)The software layer between strategies and the broker: it tags each ord…Strategy IR (Intermediate Representation)A strategy expressed as structured data — triggers, conditions, action…Kill SwitchA single control that halts all automated trading immediately — per st…Dry-Run ModeExecuting a strategy's full order pipeline — signal, sizing, validatio…Price Band (Order Guardrail)A validation rule that refuses orders priced too far from the current …Risk ManagementEverything that bounds what a strategy can lose: position sizing, stop…DiversificationSpreading capital across positions whose risks don't move together. Fo…CorrelationA statistical measure (−1 to +1) of how two return streams move togeth…RebalancingRestoring a portfolio to its target weights by trimming what grew and …Rotation StrategyA system that periodically ranks a menu of assets — sectors, countries…Dollar-Cost Averaging (DCA)Investing a fixed dollar amount on a fixed schedule regardless of pric…Regime FilterA coarse market-state check that gates other signals — most commonly '…LeverageControlling more exposure than your capital: through margin borrowing …MarginBorrowing from your broker against your holdings to buy more than your…Leveraged ETFA fund engineered to deliver a multiple (2x, 3x) of its index's daily …Inverse ETFA fund that delivers the opposite of its index's daily return (−1x, −2…Volatility DragThe gap between an asset's average return and its compound return, cau…ContangoA futures curve where later contracts cost more than near ones. Funds …Consolidated Market DataThe combined stream of quotes and trades from all US exchanges (the co…Minute BarsPrice history summarized per minute: open, high, low, close, volume fo…Brokerage APIThe programmatic interface a broker exposes for placing orders, readin…BYOB (Bring Your Own Broker)A platform model where automation connects to the user's existing brok…Decision JournalA per-decision log of what a strategy saw and did: the rule evaluated,…Verified BacktestA backtest executed by a neutral platform on standardized data, window…
Backtests are hypothetical, computed by DeployQuant's engine on minute-resolution consolidated US market data (2021-01-04 to 2026-07-17, $10,000 starting capital, no margin, fees and slippage not modeled) and do not guarantee future results. Nothing on this page is investment advice. Live trading involves risk of loss.