Glossary
Definitions for every term used across the docs.
ATR stop
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.
Breakout
Entering when price closes beyond a recent high or low.
A close above the 20 day high says price just made a one month high, a simple momentum entry. Breakouts pair naturally with trailing stops to let the resulting trend run.
Contention
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.
Deflated Sharpe Ratio (DSR)
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.
MACD
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.
Maximum drawdown (MDD)
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.
Monte Carlo simulation
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.
Moving average (MA)
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.
Multi timeframe (MTF)
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.
Out of sample (OOS)
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.
Overfitting (curve fitting)
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.
Portfolio (book)
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.
Position sizing
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.
R multiple
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'.
RSI (Relative Strength Index)
A 0–100 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.
Sequential entry
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.
Slippage
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.
Sortino ratio
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.
Take profit (target)
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.
Trailing stop
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.
Walk forward optimization
Re fitting parameters on rolling in sample windows, scored only on the next forward window.
The strictest out of sample test. It mimics re tuning a live strategy over time and only ever grades it on data that came after the fit.