Glossary
Investing terms in plain English
Short explanations of the technical terms used across Momentum's insights. Start here when a phrase sounds familiar but not yet useful.
12-1 Momentum
Momentum measured from 12 months ago to 1 month ago.
Alpha
Return that comes from a strategy's edge, not just from broad market exposure.
API
A software interface that lets systems talk to each other.
Artificial Intelligence
Software that can help reason, write code, analyze data, and automate tasks.
Average Daily Volume
The typical amount of a security traded each day.
Backtest
A historical simulation of how a strategy would have behaved.
Balance Sheet
A snapshot of a company's assets, liabilities, and equity.
Basis Point
One hundredth of one percent.
Beta
Sensitivity to the broad market.
Bid-Ask Spread
The gap between the best buying price and best selling price.
Bootstrap Confidence Interval
An uncertainty range estimated by resampling the data.
Break of Structure
A move beyond a prior confirmed swing high or swing low.
Broker
A financial service that lets investors buy and sell securities.
Buyback
When a company repurchases its own shares.
Capacity
How much money a strategy can manage before returns degrade.
Capital Allocation
How management chooses to use the company's money.
Correlation
How closely two series move together.
Covariance
A measure of how two assets move together.
Cross-Sectional
Comparing many assets to each other at the same point in time.
CSV
A simple spreadsheet-style text file format.
Data Collection
The process of gathering the raw information a strategy will use.
Debt
Money a company has borrowed and must repay.
Decile
One of ten equal-ranked groups.
Diversification
Spreading risk across different assets or strategies.
Dividend
Cash paid by a company to shareholders.
Drawdown
The fall from a previous high to a later low.
Earnings
A company's accounting profit after costs, interest, and taxes.
Exponential Moving Average
A moving average that gives more weight to recent observations.
Fair Value Gap
A price-action zone where traders believe price moved too quickly through an area.
False Discovery Rate
A way to control false positives when testing many patterns.
Feature Engineering
Turning raw data into useful signals a model can understand.
Free Cash Flow
Cash left after a company pays to maintain and grow its business.
Fundamental Analysis
Assessing a company by studying its business, finances, and valuation.
Gross Exposure
Total long plus short exposure.
Hedge Fund
A professionally managed pool of capital that uses advanced strategies unavailable to retail funds.
Hedging
Taking an offsetting position to reduce a specific risk.
Inflation
A general rise in prices that reduces what money can buy.
Information Coefficient (IC)
How well a signal predicts future returns — measured as a correlation.
Leverage
Using borrowing or derivatives to increase exposure.
Limit Order
An order that trades only at a specified price or better.
Liquidity
How easily something can be traded without moving its price.
Liquidity Sweep
A move through a prior high or low that then closes back inside.
Long/Short
Owning expected winners and betting against expected losers.
Market Impact
The price movement caused by your own trade.
Market Microstructure
The mechanics of how trades actually happen.
Market-Neutral
A portfolio designed to have little exposure to broad market moves.
Mean Reversion
The tendency for an extreme move to drift back toward normal.
Momentum
The tendency for recent winners to keep outperforming for a while.
Net Exposure
Long exposure minus short exposure.
Newey-West
A statistical adjustment for noisy, autocorrelated return data.
Overfitting
When a model learns historical noise instead of a real pattern.
Paper Trading
Testing trades in a simulated account before using real money.
Point-in-Time Data
Data recorded as it was known at the time, without future revisions.
Portfolio Optimization
Choosing position sizes to balance expected return, risk, and constraints.
Principal Component Analysis
A method for finding common patterns in many variables.
Profit Factor
Gross profits divided by gross losses.
Profit Margin
How much profit a company keeps from each dollar of sales.
Purchasing Power
How much goods and services your money can buy.
R² (R-Squared)
The fraction of one variable's variance explained by another.
Real Estate
Property such as homes, apartments, offices, or land.
Rebalance
Updating portfolio positions on a schedule or when risk changes.
Regime
A market environment with a distinct behavior pattern.
Return on Equity
How much profit a company earns relative to shareholder equity.
Revenue Growth
How quickly a company's sales are increasing.
Reversal
The tendency for very recent moves to partially unwind.
Risk Model
A framework for estimating portfolio risk and shared exposures.
Seasonality
A pattern linked to the calendar.
Sector ETF
An ETF focused on one part of the economy.
Sharpe Ratio
Return per unit of volatility.
Shorting
Betting that a security will fall.
Slippage
The gap between the price you hoped to trade at and the price you actually get.
Smart Money Concepts
A price-action trading framework focused on structure, liquidity, and institutional-style zones.
Statistical Significance
Evidence that an observed result is unlikely to be random noise.
Systematic Strategy
An investing process run by explicit rules instead of discretionary judgment.
Trading Costs
All costs paid to enter and exit positions.
Train/Test Split
Separating history used to build a model from history used to evaluate it.
Turnover
How much of a portfolio is traded over a period.
Unconditional Mean
The simple average without extra filters or forecasts.
Valuation
Estimating what a company is worth compared with its current market price.
Volatility
How much returns move around.
Wald Test
A test of whether several estimated effects are jointly zero.
Walk-Forward Test
Repeatedly refitting a strategy on past data and evaluating it on later unseen data.
Winner-Minus-Loser
A spread between the strongest-ranked and weakest-ranked assets.