Glossary

Education only. Plain definitions of 38 terms used on this site, and why each matters for AI trading tools. Updated Oct 22, 2026.

A B C D E G H I L M O P R S T W

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AI agent: An AI app that can take actions with tools (for example run code, call an API or use an MCP server), not just answer in text.
API: An application programming interface: a defined way for one program to request data or actions from another.
API key: A secret credential that lets a program access an account through an API. Keys usually carry permissions such as view, trade or transfer.
Backtesting: Testing a set of trading rules on historical data to see how they would have behaved.
Commission and fees: What a broker or exchange charges per trade or over time, including commissions, spreads and platform fees.
Context window: The amount of text (measured in tokens) a model can consider at once, including your prompt, files and its own reply.
Custody: Who holds the assets. A custodial platform (a broker or exchange) holds your funds; a self-custody wallet means you hold the keys.
DCA bot: A bot that buys (or sells) a fixed amount on a schedule or in steps, based on dollar-cost averaging.
Drawdown: The fall from a peak in account value to a later low, often given as a percentage. Max drawdown is the largest such fall.
Expectancy: The average amount won or lost per trade, combining win rate and average win and loss size.
Grid bot: A bot that places a ladder of buy and sell orders at set price intervals within a range.
Hallucination: When an AI model states something false or made up with confidence, such as a wrong number, a fake source or code for a function that does not exist.
IP allowlist: A setting that only accepts API requests from IP addresses you list.
Least privilege: Giving a tool or key only the permissions and account access it needs, and nothing more.
LLM (large language model): A model trained on large amounts of text that predicts and generates language. Chat assistants such as Claude and ChatGPT are built on LLMs.
Look-ahead bias: A backtest error where the rules use information that would not have been available at the time, such as the bar's closing price before it closed.
Maker and taker fees: On many exchanges, a maker order adds liquidity (it rests on the order book) and a taker order removes it (it fills immediately). The two usually have different fee rates.
Market and limit orders: A market order fills right away at the available price. A limit order only fills at your price or better, and may not fill at all.
MCP (Model Context Protocol): An open standard that lets AI apps connect to outside services through "servers" that expose tools the AI can call, such as reading data or placing an action.
OAuth: A standard sign-in flow where you approve an app on the provider's own login page, and the app gets a limited token instead of your password.
Out-of-sample testing: Checking rules on data that was not used to build or tune them.
Overfitting: Tuning rules so closely to past data that they capture noise rather than anything repeatable.
Paper trading: Simulated trading with fake money, using live or recent market data.
Phishing: Fake messages or sites that try to trick you into giving up passwords, codes or keys.
Pine Script: TradingView's scripting language for custom indicators, strategies and alerts on its charts.
Prompt: The instructions and context you give an AI model. Clear, specific prompts usually give more useful, checkable output.
Python: A general-purpose programming language widely used for data analysis and backtesting libraries.
Read-only access: Permission to view data, such as balances or trade history, without placing orders or moving funds.
Screener: A tool that filters a market list by conditions such as price, volume or indicators.
Sharpe ratio: A measure of return per unit of volatility: average excess return divided by the standard deviation of returns.
Slippage: The difference between the price you expected and the price your order actually filled at.
Trading bot: Software that places orders automatically according to rules you set.
Trading journal: A record of your trades with notes, used to review behavior and results.
Two-factor authentication (2FA): A second sign-in check, such as an authenticator code or security key, in addition to your password.
Walk-forward analysis: Repeatedly tuning on one window of history, then testing on the next unseen window, and stepping forward through time.
Webhook: An automatic message one app sends to a URL when something happens, such as a chart alert firing.
Win rate: The share of trades that made money.

Frequently asked questions

What is this glossary for?

It explains terms used on TraderStacks, such as MCP, API key, backtesting and slippage, in plain language. It is educational only and is not investment advice.

Does the glossary recommend any strategy or asset?

No. Definitions describe how tools and concepts work. TraderStacks never suggests what to trade.