Algo trading glossary

How to use this glossary

Every entry follows the same pattern: a one-sentence definition, a longer explanation, a worked example with deliberately round and made-up numbers, a practical note on how to read or test the idea, what AKQX does with it, and the mistake people most often make. The examples are there to show method. None of them describes a real result.

Several terms, especially the ICT and SMC ones, are defined slightly differently by different educators. Where that is true the entry says so, and says how AKQX turns the idea into an explicit rule so it can be tested. AKQX is not affiliated with any ICT or SMC educator, and nothing here claims any concept is profitable.

Basics

• Algorithmic tradingAlgorithmic trading is placing orders by pre-written rules that a computer follows exactly, instead of by a person deciding each trade by hand.
• BacktestingBacktesting runs a set of trading rules over historical price data to see how those rules would have behaved, before any real money is used.
• OverfittingOverfitting is tuning a strategy's parameters so closely to past data that it captures that history's noise instead of a behaviour that will repeat.
• Paper tradingPaper trading is running a strategy on live market prices with virtual money, so nothing reaches an exchange or broker and no real funds are at risk.
• Paper walletA paper wallet is a pool of virtual capital used for paper trading, kept separate from real money so simulated results never mix with real balances.
• Walk-forward testingWalk-forward testing fits a strategy's parameters on one slice of history, then tests them on the next unseen slice, repeating the process forward in time.

Costs and fills

• Maker and taker feeA maker adds a resting order to the book and a taker removes one; exchanges often charge takers more, so the two orders can cost different fees.
• SlippageSlippage is the difference between the price you expected to trade at and the price you actually got, caused by movement or thin liquidity.
• SpreadThe spread is the gap between the highest price a buyer will pay and the lowest price a seller will accept, and it is a cost paid on every round trip.

Order flow

• DeltaDelta is buy volume minus sell volume for a price row or a whole candle, measuring which side was more aggressive in the trades that actually executed.
• Footprint chartA footprint chart shows the volume traded at each price level inside a candle, split into buying and selling, so you see how the candle was built.
• ImbalanceAn imbalance is a price level where buying and selling volume are heavily lopsided, usually by a set ratio, rather than roughly matched.
• Order flowOrder flow is the record of actual buy and sell trades as they execute, showing who was aggressive at each price rather than only where price ended.
• POC (point of control)The point of control is the price level with the most traded volume within a candle or a range, marking where the most business was done.

ICT and SMC concepts

• Break of structure (BOS)A break of structure is price closing beyond the most recent swing high or low in the direction of the existing trend, read as its continuation.
• Fair value gap (FVG)A fair value gap is commonly a three-candle pattern where the first and third candles' ranges do not overlap, leaving a gap treated as a revisit zone.
• Kill zoneA kill zone is a time window in the trading day, often tied to a market session open, in which setups are preferred because volatility tends to be higher.
• Liquidity sweepA liquidity sweep is a brief move beyond an obvious high or low that takes out resting stop orders, followed by price reversing back inside the range.
• Market structure shift (MSS)A market structure shift is price breaking a swing level against the existing trend, taken as an early sign the trend may be changing direction.
• Order blockAn order block is commonly defined as the last opposing candle before a strong move, treated as a zone where price may react when it returns.
• PSPIn AKQX, a PSP is a divergence between two correlated pairs where their candles for the same period close in opposite directions.
• SMT divergenceSMT divergence is when two normally correlated markets stop agreeing at a swing point, such as one making a higher high while the other fails to.
• True Day Open (TDO)In AKQX, the True Day Open is the opening price of the 00:00 UTC candle for that day, used as a daily directional anchor for filtering setups.

Performance metrics

• DrawdownDrawdown is the fall in account equity from a previous peak to a later low, usually expressed as a percentage of that peak.
• ExpectancyExpectancy is the average amount a strategy makes or loses per trade, combining how often it wins with how large its wins and losses are.
• Profit factorProfit factor is gross profit divided by gross loss over a set of trades; a value above 1.0 means the wins outweighed the losses.
• Win rateWin rate is the share of closed trades that finished in profit, calculated as winning trades divided by the total number of trades taken.

Risk and orders

• Circuit breakerA circuit breaker halts a strategy automatically when a limit you set is hit, such as consecutive losses, then waits through a cool-down before resuming.
• Daily loss capA daily loss cap is a ceiling on how much a strategy may lose in one day, after which it stops trading until the next session begins.
• LeverageLeverage is controlling a position larger than the money you put up, expressed as a ratio, which magnifies both gains and losses on the same price move.
• MarginMargin is the collateral you must hold to open and keep a leveraged position, which an exchange or broker can take if losses grow too large.
• Partial take profitA partial take profit closes only part of a position at a target while the rest stays open, trading some upside for less chance of giving gains back.
• Position sizingPosition sizing is deciding how large each trade should be, usually so the amount lost if the stop is hit equals a fixed fraction of your capital.
• Stop lossA stop loss is an order that closes a position automatically when price reaches a set level against you, limiting how much a single trade can lose.
• Take profitA take profit is an order that closes a position automatically when price reaches a set favourable level, locking in a gain at a target decided in advance.
• Trailing stopA trailing stop is a stop loss that moves in your favour as price advances, following it at a set distance but never moving back against you.

Price-action setups

• Breakout and retestA breakout and retest waits for price to break a level, then enters when it returns to that level and holds, instead of chasing the initial move.
• Donchian channelA Donchian channel plots the highest high and lowest low over the last N periods; a close beyond either edge is used as a breakout signal.
• Opening rangeThe opening range is the high and low of price during the first minutes of a session, with a break above or below it used as a trade trigger.
• Wedge patternA wedge is a chart pattern where price moves between two converging trend lines, both sloping the same way, and is watched for a break out of the range.

Markets

• BANKNIFTYBANKNIFTY, the Nifty Bank index, tracks the most liquid and large banking stocks listed on the NSE and is more volatile than the broad NIFTY 50.
• NIFTY 50NIFTY 50 is the National Stock Exchange of India's benchmark index of 50 large listed companies, widely used as a gauge of the Indian equity market.

Security

• API keyAn API key is a credential that lets software act on your exchange account within permissions you set, without handing over your password.
• Two-factor authentication (2FA)Two-factor authentication asks for a second proof beyond your password, usually an authenticator-app code, so a stolen password alone is not enough.

Where these ideas live in the product