Trading-system terms, defined plainly
Short, jargon-free definitions for the words used across this build log.
Trading system
A complete, written set of rules that takes a trade from signal to exit with no judgement calls in between, so it can be handed to a stranger and tested.
Rules-based
Describing a system whose every decision is pre-committed in writing, as opposed to discretionary trading, where decisions are made in the moment.
Edge
The repeatable reason a system expects to make money over many trades - for a mean-reversion system, the tendency of stretched prices to pull back.
Mean reversion
The tendency of a price stretched far from a typical level to drift back toward it; the engine behind the system this site builds toward.
Entry rule
The exact, pre-decided level or condition at which the system opens a position, rather than a vague 'around here'.
Stop
The pre-decided level that declares the idea wrong and closes the trade to cap the loss, set before any emotion is attached to it.
Target
The pre-decided level at which the expected move is judged complete and profit is banked on the plan rather than on nerve.
Position sizing
The rule fixing how much of the account a single trade may risk, so no one position can do outsized damage to the whole.
Conviction grade
An A-to-D label marking how strong a call is relative to its own model's measured return distribution; there is no E grade.
Drawdown
The deepest peak-to-trough fall in an account or system over a period - a more honest read on risk than the headline return.
Backtest
Replaying a system's rules over historical data to estimate how it would have behaved; useful, but never proof on its own, because the past can be over-fitted.
Ledger
The honest running record of every call the system made, wins and losses together, kept before each outcome rather than reconstructed after.
Cryptographic timestamp
A hash of a call written to a public ledger at publication, proving the entry, target, stop and grade existed in that exact form before the outcome was known.