Glossary
Quick definitions of terms used throughout Vertex Street and these docs.
Backtesting
| Term | Definition |
|---|
| Backtest | Simulating a trading strategy against historical data to see how it would have performed |
| Timespan | The date range a backtest runs over (e.g. 2020-01-01 to 2025-01-01) |
| Bar | A single time period's data — one day, week, or month of price/volume |
| Trade | A completed buy + sell cycle. Counted when the position is closed |
| Win Rate | Percentage of trades that were profitable |
| Total Return | Cumulative portfolio growth, compounded across all trades |
| Max Drawdown | The worst peak-to-trough decline during the backtest. Measures risk |
| Buy & Hold | What you'd earn just holding the asset — the benchmark to beat |
| Equity Curve | Your portfolio value over time, plotted as a line |
| Sharpe Ratio | Return earned per unit of volatility, annualised. Roughly: below 1 is weak, above 2 is strong |
| Calmar Ratio | Annualised return divided by max drawdown. Rewards steady growth over big swings |
| Profit Factor | Total gains divided by total losses. Above 1 means the winners outweigh the losers |
| Kelly Criterion | Suggested position size as a fraction of capital, from your win rate and average win/loss. 0 means no edge — don't bet |
| Exposure Time | Share of the backtest spent holding a position rather than in cash |
| Drawdown Duration | How long the portfolio stayed below its previous peak, in bars |
Technical Analysis
| Term | Definition |
|---|
| RSI (Relative Strength Index) | Momentum oscillator (0-100). Below 30 = oversold, above 70 = overbought |
| SMA (Simple Moving Average) | Average closing price over N days. Smooths noise to show trend |
| EMA (Exponential Moving Average) | Like SMA but gives more weight to recent prices |
| MACD | Moving Average Convergence Divergence — shows momentum shifts via line crossovers |
| Bollinger Bands | Price envelope that expands with volatility (SMA ± 2 standard deviations) |
| ATR (Average True Range) | Average daily price range in dollars. Measures volatility |
| Stochastic | Compares closing price to recent high-low range (0-100) |
| Golden Cross | 50-day SMA crosses above 200-day SMA — bullish signal |
| Death Cross | 50-day SMA crosses below 200-day SMA — bearish signal |
| Crossover | When one line crosses another (e.g. MACD crosses signal line) |
| Overbought | Price has risen too fast relative to recent history (RSI > 70) |
| Oversold | Price has fallen too fast relative to recent history (RSI < 30) |
Candlestick Patterns
| Term | Definition |
|---|
| OHLC | Open, High, Low, Close — the four prices that define each bar |
| Green candle | Close > Open — price went up during the bar |
| Red candle | Close < Open — price went down during the bar |
| Shadow/Wick | The thin line above/below the body showing the high and low |
| Body | The thick part of the candle between open and close |
| Doji | Open ≈ Close — indecision, potential reversal |
| Engulfing | Current bar's body completely covers the previous bar's body |
| Hammer | Small body at top, long lower shadow — bullish reversal |
Portfolio & Orders
| Term | Definition |
|---|
| Position | Shares you currently hold in a stock |
| Entry | The price/date when you bought |
| Exit | The price/date when you sold |
| Hold Days | Number of days between entry and exit |
| Position Sizing | How much capital to allocate per trade |
| Scale In | Adding to an existing position (buying more at a lower price) |
| Scale Out | Selling a portion of your position at different levels |
| Short Selling | Betting against a stock — profiting when price falls |
| Cover | Buying back shares to close a short position |
| Stop Loss | Automatic exit when price drops to a set level |
| Cooldown | Minimum bars between repeated trades to prevent overtrading |
Fundamental Analysis
| Term | Definition |
|---|
| Revenue | Total sales — the top line of the income statement |
| Net Income | Profit after all expenses — the bottom line |
| EPS (Earnings Per Share) | Net income divided by shares outstanding |
| P/E Ratio | Price divided by earnings — how much you pay per $1 of profit |
| Market Cap | Total value of all shares (price × shares outstanding) |
| Enterprise Value | Market cap + debt - cash — what it would cost to acquire the company |
| Free Cash Flow | Cash from operations minus capital expenditures — cash available to shareholders |
| ROE (Return on Equity) | Net income divided by shareholder equity — profitability measure |
| Gross Margin | Percentage of revenue remaining after cost of goods |
| Debt-to-Equity | Total debt divided by shareholder equity — leverage measure |
| Dividend Yield | Annual dividend divided by stock price — income return |
Economic Data
| Term | Definition |
|---|
| Federal Funds Rate | The interest rate banks charge each other overnight — set by the Fed |
| CPI (Consumer Price Index) | Measures inflation by tracking the price of a basket of goods |
| Yield Curve | Plot of treasury yields across maturities — inverted = recession signal |
| GDP | Gross Domestic Product — total economic output of a country |
| Unemployment Rate | Percentage of the labor force without jobs |
Reading the ratio stats: 999 and 9999 are placeholders, not measurementsSharpe, Calmar, Profit Factor, and Kelly are all divisions, and a strategy can drive the bottom of any of them to zero — a run with no losing trades has nothing to divide by. Rather than report an infinite result (which cannot be stored or charted), these stats saturate at a fixed placeholder:
Profit Factor of 999 means the strategy had gains and no losses at all. Sharpe of 9999 (or −9999) means the equity curve moved with effectively zero volatility — usually a very short backtest or one with almost no trades.
Treat either as “undefined, not excellent”. They almost always mean the sample is too small to judge, so lengthen the timespan or loosen the conditions until the strategy produces enough trades to measure. A Kelly Criterion of 0 is the same signal from the other direction: no measurable edge, so no position size is recommended.
