Quantzee Glossary
Trading Glossary — Key Terms for Algo & Options Traders
Clear, practitioner-focused definitions of the concepts behind AI-powered TradingView indicators — from backtesting and Pine Script to options Greeks, risk metrics, and market microstructure.
Quant & Algo Trading Core
Algorithmic Trading
Algorithmic trading uses computer programs to execute trades on predefined rules — removing emotion and enabling systematic, repeatable strategy execution.
Alpha (Trading)
Alpha is the excess return above a benchmark after adjusting for market risk — the measure of genuine trading skill versus simply riding the market.
Backtesting
Backtesting is the process of testing a trading strategy on historical price data to measure how it would have performed before risking real capital.
Mean Reversion
Mean reversion is the tendency of prices to return to a historical average after extreme moves — the basis of range trading and options selling.
Momentum Trading
Momentum trading buys rising assets and sells falling ones — based on the observation that price trends tend to persist in the short to medium term.
Overfitting in Trading
Overfitting is when a strategy is tuned so tightly to historical data it captures noise instead of real edge — causing it to fail in live markets.
Walk-Forward Testing
Walk-forward testing optimizes on a rolling in-sample window then tests the next out-of-sample period — simulating real strategy development conditions.
Options Trading
Implied Volatility
Implied volatility is the market's expectation of future price movement embedded in options prices — high IV = expensive options; low IV = cheap options.
Iron Condor
An iron condor sells an OTM call spread and put spread simultaneously, generating income when the underlying stays within a range until expiry. Defined risk.
Open Interest
Open interest is the count of outstanding options or futures contracts not yet settled — it measures participation and liquidity at each strike and expiry date.
Options Greeks
Options Greeks (Delta, Gamma, Theta, Vega, Rho) measure how an option's price responds to changes in underlying price, time decay, and volatility.
Put-Call Ratio
The put-call ratio compares put and call volumes — a high ratio signals bearish sentiment before bounces; a low ratio signals bullishness before drops.
Straddle vs Strangle
A straddle uses one strike for the call and put; a strangle uses different strikes. Both profit from volatility — premium cost vs probability of profit.
Theta Decay
Theta decay is the daily erosion of an option's time value as it approaches expiry — a benefit to options sellers and a cost to options buyers.
Python for Trading
Backtrader
Backtrader is an open-source Python framework for backtesting and live trading — event-driven simulation, multiple data feeds, flexible strategies.
Pine Script
Pine Script is TradingView's proprietary scripting language for creating custom indicators, strategies, and alerts directly on the platform's charts.
Sharpe Ratio
The Sharpe Ratio measures a strategy's return per unit of risk — the universal benchmark for comparing trading systems on a risk-adjusted basis.
Vectorbt
Vectorbt is a Python backtesting library using NumPy vectorization to test thousands of parameter combinations at once — faster than loop-based tools.
Risk Management
Kelly Criterion
The Kelly Criterion calculates the optimal fraction of capital per trade to maximize long-run growth — based on your win rate and payoff ratio.
Max Drawdown
Max drawdown is the largest peak-to-trough decline in a strategy's equity curve, expressed as a percentage — the definitive measure of worst historical loss.
Position Sizing
Position sizing calculates how many units to trade per signal — controlling capital at risk to protect the account from large drawdowns.
Risk-Reward Ratio
The risk-reward ratio compares capital at risk to potential gain on a trade — a 1:2 ratio means risking $1 to earn $2. A core metric for every trading plan.
Stop Loss
A stop loss is a pre-set price at which you exit a losing trade to cap losses — the risk tool that separates disciplined traders from gamblers.
Market Microstructure & Data
Liquidity in Markets
Market liquidity is how easily an asset trades at a stable price. High liquidity = tight spreads. Low liquidity = high slippage and volatile fills.
Market Depth
Market depth (Level 2) shows all pending orders at every price level — revealing supply/demand imbalances before they appear in price action.
OHLCV Data
OHLCV (Open, High, Low, Close, Volume) is the standard price history format — the raw input for every technical indicator and backtesting system.
Order Flow
Order flow is the stream of buy/sell orders entering the market — it shows where institutions are positioned and where support or resistance forms.
Slippage
Slippage is the gap between expected and actual fill price — a hidden execution cost that overstates backtested performance when not modeled correctly.
Tick Data vs Bar Data
Tick data records every transaction with exact price and volume; bar data aggregates into OHLCV periods. The tradeoff is granularity vs manageability.
Strategy & Indicators
ATR (Average True Range)
ATR (Average True Range) measures average price range over N periods — used to set stops, size positions, and filter out low-volatility signals on any chart.
Bollinger Bands
Bollinger Bands wrap price in volatility-based bands around a moving average. Learn the squeeze, %B, band walks, and how to avoid the classic reversal trap.
CPR (Central Pivot Range)
CPR (Central Pivot Range) is a three-level framework — Pivot, Top CPR, Bottom CPR — defining the key price zone where market direction is decided each session.
MACD (Moving Average Convergence Divergence)
MACD measures momentum as the gap between two EMAs. Learn the MACD line, signal line and histogram, how crossovers and divergence work, and common pitfalls.
Moving Averages
Moving averages smooth price into a single trend line. Learn how SMA, EMA, WMA and HMA differ, how crossovers signal trend, and how to avoid lag traps.
RSI (Relative Strength Index)
The RSI is a momentum oscillator measuring recent price change speed on a 0–100 scale — overbought above 70, oversold below 30. Used in all markets.
Supertrend Indicator
The Supertrend indicator plots ATR-based bands that signal trend direction with a color flip — a simple, widely used trend-following overlay for all timeframes.
Support and Resistance
Support and resistance are price zones where buying or selling pressure has paused or reversed trends — the foundational framework of technical analysis.
VWAP
VWAP is the average asset price weighted by trading volume — the institutional benchmark for execution quality and a key intraday support/resistance level.
From Theory to Live Signals
Quantzee's AI-powered indicators turn these concepts into non-repainting signals and real-time alerts on TradingView.
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