The AI Trading Glossary That Will Level You Up Overnight

Half of why retail traders struggle with “AI trading” products isn’t the trading — it’s the vocabulary. Vendors throw around terms like VWAP, walk-forward, iceberg, RVOL and expectancy as though they were common knowledge, and the honest user is left nodding politely. This glossary is the one we wish we’d had when we started. Bookmark it; refer back to it whenever the dashboard uses a word you don’t quite own yet.

Core concepts

Signal

A structured suggestion by the engine that a trade might be worth considering right now. It is never an instruction and never a guarantee. A good signal carries a direction, a probability band, a reasoning strip and a pre-mortem.

Pre-mortem

A short note, written at signal time, describing what would prove the signal wrong. The pre-mortem exists so that confirmation bias has a visible counter-weight when you decide whether to activate.

Reasoning strip

One plain-English sentence or two explaining why the signal exists. The strip is produced by a dedicated explanation model; it never invents facts beyond what the signal object contains.

Risk governor

The subsystem that enforces loss thresholds, position sizing and pre-flight checks. It can refuse to send an order and can halt the whole agent if conditions warrant.

Pause ladder

A four-step scale (50% / 75% / 100% / 115% of threshold) that the risk governor uses to adjust position sizing before an eventual full halt.

Audit trail

The hash-chained log of every signal, every click, every order and every pause. Exportable as CSV or PDF. The thing that lets you argue with your own past self.

Order-flow & market-structure terms

Order flow

The real-time stream of buy and sell intentions arriving at a venue. Watching order flow is like reading intent before it becomes price.

Level-2 data

The depth-of-book view: not just the best bid and ask, but every visible order further down the queue. Level-2 is what the signal engine actually ingests.

Order-book imbalance

A score — usually normalised between -1 and +1 — that captures whether more size is sitting on the bid side (positive) or the ask side (negative). Extreme values are often meaningful; mid-range values are usually noise.

VWAP (Volume-Weighted Average Price)

The average price traded over a period, weighted by volume. The daily VWAP is a classic magnet for mean-reversion trades.

POC (Point of Control)

In volume-profile terms, the price at which the most volume was transacted in a given session. Often behaves as a structural support or resistance level.

Overnight range

The high-to-low range of the overnight session. The next session’s early trade often tests one edge of this range.

Risk & sizing terms

High-water-mark (HWM)

The highest value a pool has reached. Drawdown thresholds are measured from the HWM, not the starting value.

Drawdown

The decline from the HWM to the current value, usually in percentage terms.

Max drawdown

The largest drawdown ever observed in a strategy or account during a period. Important for sizing decisions.

Position sizing

How much of your pool is committed to a single trade. Expressed as a percentage, not an absolute amount, in RaptorBit AI.

Correlation guard

The pre-flight check that refuses to open a new position if it would create concentrated exposure to the same underlying driver as an existing position.

Slippage

The difference between the expected price and the actual filled price. Small for liquid instruments at calm times; large for illiquid instruments at volatile times.

Execution terms

Market order

An instruction to trade at whatever price is currently available. Fastest; worst-case price.

Limit order

An instruction to trade only at a specific price or better. May never fill; best-case price when it does.

Iceberg order

A large order split into smaller visible chunks to avoid signalling intent to the market. Each chunk fills, then the next appears on the book.

FIX protocol

The industry-standard messaging protocol used for direct connectivity to brokers and venues. Lower-level and faster than REST APIs.

Partial fill

Only part of an order was executed; the rest remains open or is cancelled, depending on instructions.

Reconciliation

The process of comparing the broker’s view of your account to our internal view, and resolving any mismatch.

Modelling & testing terms

Backtest

Running a strategy on historical data to estimate how it would have performed. Great for ideas; terrible when used as a performance promise.

Walk-forward testing

A tougher cousin of backtesting: the strategy is trained on data from one window, tested on the next window, re-trained on an updated window, retested on the following one, and so on. Walk-forward catches overfitting that single-window backtests hide.

Expectancy

The average amount a strategy is expected to make per trade, after factoring in win rate, average win and average loss. A strategy with 40% win rate and 3:1 average win:loss can still have positive expectancy.

Regime

A broad market condition classification — trending vs mean-reverting, high vs low volatility, and similar. A strategy that works in one regime often fails in another.

Sharpe ratio

A classic risk-adjusted return measure. Higher is better. Useful but not holy — look at drawdown too.

Overfitting

Tuning a strategy so tightly to historical data that it will almost certainly underperform in live markets. The number-one failure mode of retail quantitative trading.

AI-specific terms

Probability band

A high / mid / low classification of how confident the signal engine is in the current signal. Chosen deliberately over fake-precise percentages.

Explain pass

The post-trade summary generated by the explanation model, attached to each trade. The pass highlights slippage, order-shape choice, pool impact and anything unusual.

Consensus depth

How many of the four observation layers (order flow, structural, volatility, news) agree with each other for a signal to fire.

Veto check

A hard filter — if the check fails, the signal is suppressed, regardless of what the other layers say.

Model drift

The slow degradation of a model’s predictive power as the market evolves. Detected by continuous out-of-sample monitoring.

Operations terms

Pool

In RaptorBit AI, one of the two accounting lanes: deposited capital or realised profit. Each pool has its own thresholds.

Threshold

A percentage drawdown from HWM that triggers an action on the pause ladder.

Restart gate

The explicit human click required to resume trading after a red pause.

Weekly digest

The email summary we send on Sunday nights (local time) containing your pool state, your audit highlights and the explain-pass summaries for the week’s trades.

Keep the glossary close

If a dashboard tooltip ever uses a term that isn’t in this glossary, we consider that a bug — write to [email protected] and we’ll add it. The whole point of a glossary is that nobody has to feel stupid for not knowing a word.

How RaptorBit AI reads the market is probably the best next read if you want to see these terms in context.

Educational material only. Not investment advice. Trading involves risk of partial or total loss of capital.