AcademyGlossary
Every term the lessons lean on, defined in plain English. Search as you type, and follow the cross links to build the full picture.
31 terms
A stop loss placed a multiple of Average True Range away from entry.
ATR measures a market's typical bar range, so an ATR stop adapts to volatility (wider in wild markets, tighter in calm ones) instead of a fixed percentage that ignores conditions.
Entering when price closes beyond a recent high or low.
A close above the previous 20 days' high says price just made a one month high: a simple momentum entry. The engine reads 'breakout' three ways (the N day high, a Donchian band, or a confirmed swing high), so it stops and asks you to pick rather than guessing. Breakouts pair naturally with trailing stops to let the resulting trend run.
The rule that decides which asset gets the cash when several signal at once.
In a shared capital portfolio, two assets can want to enter on the same bar with only enough cash for one. Contention resolves it: 'rank' lets priority order win, 'prorata' splits the cash proportionally, and 'strength' fills the strongest signal first. Any signal left unfunded is logged in the skip ledger, not dropped silently.
Mirroring another trader's live strategy on your own account, sized to your own budget.
A follower sets an allocation and limits, and every trade the leader's strategy makes is placed on the follower's own exchange account, scaled to that allocation and bounded by the follower's caps. Trading capital never leaves the follower's own account, the only money that reaches the leader is a profit share on new profit, and the follower can pause or stop at any time.
A Sharpe ratio discounted for how many strategies you tried.
Test 100 variations and keep the best, and its Sharpe is inflated by selection alone. DSR estimates the probability the edge is real after accounting for that search. A big drop from the raw Sharpe means the result was mostly luck.
A backtested strategy running forward on live market data, in paper, signal only or live mode.
A deployment binds one strategy to a market, a timeframe, a sizing rule and a set of risk limits, and evaluates it on every new bar. In paper mode it simulates fills, in signal only mode it sends alerts, and in live mode it places real orders on a connected exchange account. It makes the same entry and exit decisions as the backtest on the same candles.
The periodic payment between longs and shorts that keeps a perpetual future near the spot price.
Perpetual futures never expire, so exchanges charge funding, typically every eight hours. When funding is positive, longs pay shorts; when negative, shorts pay longs. On TextToQuant funding paid or received is folded into a trade's realized P&L when it closes.
The highest value an account or a profit total has reached, used as the reference for drawdown and fees.
A drawdown is measured from the high water mark, so a breaker can trip when equity falls a set percentage below it. In copy trading, a leader's profit share is charged only on profit above the follower's high water mark, so a loss must be earned back before any new fee is due.
An emergency control that blocks every new order that adds risk, at once.
Activating a kill switch blocks strategy entries, copied entries and risk adding manual orders, and cancels the working orders of the strategy deployments it covers. It does not close positions: open positions keep their stops, and closing orders still work. To be flat, activate the kill switch first, then close positions.
Trading a position larger than the margin that backs it.
At 10× leverage, $1,000 of margin controls a $10,000 position, so a 1% price move changes your equity by 1% of $10,000, or 10% of the margin. Leverage multiplies gains and losses alike, and it brings the liquidation price closer to the entry.
The forced close of a leveraged position when its margin can no longer cover the loss.
Each leveraged futures position has a liquidation price, roughly entry × (1 − 1/leverage + maintenance margin) for a long. If the mark price reaches it, the exchange closes the position and the margin is lost. A stop loss well inside the liquidation price is what keeps a loss bounded.
The gap between a fast and a slow moving average, plus a signal line.
A MACD line crossing above its signal line reads as momentum turning up; a cross below reads as momentum turning down. It is a smoother, slower cousin of a raw MA crossover.
The largest peak to trough drop in the equity curve.
The pain metric: the worst losing streak you'd have had to sit through. A strategy you can't hold through its drawdown is one you won't actually earn, no matter how good the final number looks.
Reshuffling or resampling trades thousands of times to see a range of outcomes.
One equity curve is a single path through history. Monte Carlo shows how much of your result came from the specific order of trades versus a repeatable edge, and how deep a drawdown you should expect.
The average price over the last N bars, recomputed each bar.
A basic trend filter. A rising MA means recent prices sit above older ones. The cross of a fast MA above a slow one is the classic 'hello world' trend following signal.
Using a higher timeframe's trend to filter a lower timeframe's signals.
For example, only take 1 hour longs when the daily trend is up. TextToQuant reads only the last completed higher timeframe bar, so a multi timeframe filter never peeks at data from the future.
Data held out of the fitting process, used only to judge the finished strategy.
If a strategy holds up on data it 'never saw', the edge is more likely real than lucky. In sample performance is a hypothesis; out of sample is the test.
Tuning a strategy so tightly to past data that it captures noise, not a real edge.
An overfit strategy looks brilliant in the backtest and falls apart live. The more parameter combinations you try, the easier it is to find one that fit the past by pure luck.
Running a strategy on live prices with simulated money and simulated fills.
Paper trading uses the same engine and risk checks as live trading, but fills orders against the market itself, with modelled slippage, fees, funding and liquidation. It is accurate about a strategy's decisions and usually slightly optimistic about fills, because it cannot model order book depth, queue position or exchange rejections.
Several assets traded from one shared pool of capital, each with its own strategy.
Also called the 'book'. Unlike a single backtest, where one symbol has its own balance, a portfolio is a roster of assets competing for one capital pool. It has a shared equity curve, per asset attribution, and a skip ledger of signals that could not be funded. A contention rule decides who gets the cash when assets signal together.
How much to buy, often set so a stop out loses a fixed % of equity.
Risk based sizing ties position size to your stop distance, so every trade risks the same fraction of the account regardless of the asset's volatility. It is usually the single biggest driver of the equity curve's shape.
A trade's result expressed in units of the risk taken (R).
Risk 1% and make 2% and that's +2R. Thinking in R makes wins and losses comparable across trades regardless of position size, and turns 'win rate' into 'expectancy per R'.
An order flag that lets the order shrink or close a position, never open or grow one.
A reduce only order can only reduce an existing position. If there is nothing to reduce, or the order would flip the position to the other side, the exchange cancels it. On futures, platform closes and protective stops are sent reduce only, so they can never accidentally open a new position. Spot orders have no reduce only flag.
A 0 to 100 momentum oscillator measuring the speed of recent gains vs losses.
Readings under ~30 are often called 'oversold' and over ~70 'overbought'. But in a strong trend RSI can stay pinned at an extreme for a long time, so it works best paired with a trend filter.
Entry conditions that must happen in order, not all on the same bar.
Written with 'then' (crosses above the 21 EMA, then retests it), a sequential entry fires only when each step occurs after the previous one. Each step has a timeout: if the next condition doesn't arrive within a set number of bars (50 by default, or 'within N bars'), the sequence resets. It models setups that unfold over time (a signal followed by a confirmation), where plain AND would miss the ordering.
Return per unit of total volatility: a risk adjusted return.
Higher is better: it rewards smooth returns and penalizes wild swings. Its blind spot is that it treats big upside moves as 'risk' the same as downside ones.
The gap between the price you expected and the price you actually got.
Real fills are worse than backtest fills, especially on large orders or thin markets. TextToQuant applies slippage against the trade direction so a backtest never assumes a better price than a live order would get.
Like Sharpe, but it only penalizes downside volatility.
Useful when you don't want to punish a strategy for large upside moves. It measures return relative to the risk of losing, not the risk of winning big.
A price at which the trade closes in profit.
Often set as a multiple of the risk: a 3:1 target risks one unit to make three. Fixed targets cap upside but raise win rate; trailing exits do the opposite.
A stop that ratchets in the trade's favor, locking in open gains.
A 10% trailing stop exits if price falls 10% from its highest point since entry, letting winners run while capping how much profit you give back.
Refitting parameters on rolling in sample windows, scored only on the next forward window.
The strictest out of sample test. It mimics retuning a live strategy over time and only ever grades it on data that came after the fit.