Trading glossary

26 terms, each in plain English: what it is, how it is calculated, what it cannot tell you and, where Tickfloor has tested a rule built on it, what the backtest found. Every test charges modelled trading costs, and most are compared against an equal-weight benchmark of the same assets.

RSI (Relative Strength Index): The Relative Strength Index (RSI) is a momentum oscillator from 0 to 100 that compares the size of recent up-moves with recent down-moves, usually over 14 periods.
MACD (Moving Average Convergence Divergence): MACD (Moving Average Convergence Divergence) is the difference between a fast and a slow exponential moving average, usually 12 and 26 periods, plotted against a 9-period average of itself called the signal line.
Moving Average (SMA and EMA): A moving average is the average of the last N prices, recalculated on every new bar, which smooths price into a single line that shows the direction of the trend.
VWAP (Volume-Weighted Average Price): VWAP (volume-weighted average price) is the average price of an asset over a period, with each price weighted by the volume traded at it.
Bollinger Bands: Bollinger Bands are a volatility envelope: a 20-period simple moving average with a line two standard deviations above it and another two below.
Stochastic RSI (StochRSI): The Stochastic RSI (StochRSI) is an oscillator that applies the stochastic formula to RSI values instead of to price, so it shows where RSI sits within its own recent range.
ADX (Average Directional Index): The Average Directional Index (ADX) measures how strong a trend is on a scale of 0 to 100, without saying whether the trend is up or down.
Parabolic SAR: Parabolic SAR (stop and reverse) plots a trailing dot below price in an uptrend and above price in a downtrend, and the dot flips sides when price crosses it.
ATR (Average True Range): The Average True Range (ATR) is the average size of a price bar over a period, usually 14, including any gap from the previous close.
Candlestick Chart: A candlestick shows four prices for one period: the open, the high, the low and the close, drawn as a body between open and close with thin wicks out to the high and low.
Fibonacci Retracement: Fibonacci retracement draws horizontal levels at set fractions of a prior price swing, most often 23.6%, 38.2%, 50%, 61.8% and 78.6%, to mark where a pullback might stop.
Funding Rate (Crypto Perpetual Futures): The funding rate is a periodic payment between long and short traders on a perpetual futures contract, set to keep the contract price close to the spot price.
Open Interest: Open interest is the total number of derivative contracts, such as futures or options, that have been opened and not yet closed or settled.
Fear and Greed Index: The Fear and Greed Index is a single 0 to 100 reading of market sentiment, where low numbers mean fear and high numbers mean greed.
Liquidity Sweep: A liquidity sweep is a brief move beyond an obvious prior high or low, where stop orders tend to cluster, followed by a reversal back into the range.
Fair Value Gap (FVG): A fair value gap (FVG) is a three-candle pattern in which the wicks of the first and third candles do not overlap, leaving a gap inside the middle candle's range.
Backtest: A backtest runs a trading rule over historical price data to see what it would have returned, as a check before any money is risked.
Overfitting (Backtest Overfitting): Overfitting is tuning a trading rule so closely to past data that it captures that period's noise instead of a repeatable pattern, so it fails on new data.
Survivorship Bias: Survivorship bias is the error of testing a strategy only on assets that still exist today, which leaves out the ones that failed or were delisted along the way.
Slippage: Slippage is the difference between the price a trader expected when placing an order and the price at which it actually filled.
Drawdown (Maximum Drawdown): Drawdown is the percentage fall in value from a peak to the following low, and the maximum drawdown is the largest such fall over a period.
Sharpe Ratio: The Sharpe ratio is a strategy's average return above the risk-free rate divided by the standard deviation of its returns, so it measures return per unit of volatility.
Stop Loss: A stop loss is an order placed in advance to close a position if price reaches a set level, which sets the planned loss on that trade at the stop price. The loss actually realised can be larger.
Risk-Reward Ratio: The risk-reward ratio compares the distance from entry to target (the potential reward) with the distance from entry to stop (the potential loss).
Paper Trading: Paper trading is practising trades with simulated money at real or replayed market prices, so mistakes cost nothing.
Leverage: Leverage is using borrowed money or margin to control a position larger than your own cash, which magnifies both gains and losses by the same factor.

Tickfloor's research desk has backtested 517 strategies, most against an equal-weight benchmark of the same assets rebalanced daily that pays no costs (the strategies pay theirs). After correcting for the 598 tests run (Benjamini-Hochberg), 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.

General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.

What is this glossary for?

It defines the 26 terms that come up most in Tickfloor's course, charts and research, in plain English, and says where a rule built on the term was backtested.

Are the definitions trading advice?

No. They are general information. A definition says what a term means, not whether to trade on it.