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
What is backtesting? Definition, the 5-step process, a worked win-rate example, and the overfitting and lookahead-bias traps to avoid.
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 — WFE formula, NIFTY expiry-day example, mistakes.
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 — measuring participation and liquidity at each strike and expiry.
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
Straddle vs strangle explained with a side-by-side comparison, worked cost/breakeven examples, and when to choose one over the other.
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 tutorial: install, write your first strategy, add indicators, and simulate realistic commissions and slippage — with working Python code examples.
Pine Script
Pine Script tutorial covering v6 syntax, indicator vs strategy scripts, and working code examples — for traders writing custom indicators and backtests on TradingView.
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 guide: the vectorized Python backtesting library that tests thousands of parameter combos in seconds — setup, NIFTY example, and when to use it.
Risk Management
Kelly Criterion
The Kelly Criterion formula explained: f* = (bp − q) / b, a worked bankroll example, and why most traders use half-Kelly instead of full-Kelly.
Max Drawdown
What is max drawdown? Formula, a worked equity-curve example, how it differs from drawdown duration, and how prop firm max drawdown rules work.
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
How to calculate the risk-reward ratio and use it as a pre-trade filter — formula, break-even win-rate table, and a worked example. 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. NIFTY/Bank Nifty options spreads, bid-ask, slippage, and low-liquidity mistakes.
Market Depth
What is market depth? Level 2 order book explained with a worked bid/ask ladder example and how traders use it to read liquidity.
OHLCV Data
OHLCV data explained: what Open, High, Low, Close & Volume mean, where to source clean historical data, and how every indicator & backtest uses it.
Order Flow
What is order flow in trading? Definition, how footprint/delta charts work, a worked bid/ask imbalance example, and how it differs from volume.
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; bar data aggregates into OHLCV periods. NIFTY/Bank Nifty examples, tradeoffs, and when each matters for backtesting.
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 indicator explained: Central Pivot Range formula, TC/BC for NIFTY & Bank Nifty, narrow vs wide CPR, intraday setups, and expiry-day trading strategy.
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.
Support and Resistance
Support and resistance explained: why levels form, how to identify swing-high/low levels, and the difference between a breakout and a rejection.
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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