Trading signal terms, in plain English
Every term used across this primer, defined simply. Where a term has a lesson behind it, the entry points there.
Trading signal
A published instruction to consider a specific trade, naming the instrument and direction with an entry, a target, a stop and usually a conviction grade.
Entry
The price at which a signal says the position should be opened. See: entry, target and stop explained.
Target
The price at which a signal plans to take profit and close the position if the call is right.
Stop
The price at which a signal plans to cut the loss and close the position if the call is wrong; the field that caps the downside.
Conviction grade
An A-to-D label marking how strongly the model rates a call relative to its own measured returns; A is highest and D is lowest, and there is no E grade. See: conviction grades explained.
Track record
The full history of past calls, winners and losers together, which only informs a decision when the losing calls are left in and the period is continuous.
Win rate
The share of calls that closed in profit; trustworthy only when shown beside the total number of calls. See: how to read a win rate.
Drawdown
The deepest peak-to-trough fall in a record over a period, a more honest read on risk than the headline return.
Cryptographic timestamp
A fingerprint of a call written to a public ledger when it is sent, proving the call existed in exactly that form at that moment and was not altered afterwards. See: verifying a track record.
Mean reversion
A strategy that trades a price which has stretched unusually far from a typical level and tends to move back toward it.
Backtest
A simulation of how a strategy would have performed on past data; useful for design, but never the same as a live, real-money record.
Curve fitting
Tuning a strategy so tightly to past data that it looks excellent in a backtest but fails on new data; a common way fake-looking results are produced. See: spotting fake results.