Learning pack
Glossary
Every key word has a one-line meaning. If English is not your first language, read the glossary first.
B
- Backtest
- Running your rules on past data to see what would have happened.
- Base weight
- The share an industry gets before the hurdle, trend filter, or regime rule changes it.
- Benchmark
- A standard to compare against. Here, the market index of all US stocks.
C
- CAGR
- Compound annual growth rate. The steady yearly growth that links start value to end value.
- Cash
- Money held in the safest short-term form. Here, it earns the one-month US Treasury bill rate.
- Client
- The person or family whose money the fund manager looks after.
- Compounding
- Each period's return applies to the new value, not the original.
D
- Dividend
- A cash payment from a company to its shareholders.
- Drawdown
- The fall from a previous high.
E
- Equal weight
- Every holding gets the same share.
- Excess return per drawdown
- Fund CAGR minus cash CAGR, divided by max(MDD, 5%). Growth beyond cash earned per unit of pain. A fund in cash scores zero.
- Exposure
- How much of the fund is in industries and not in cash.
F
- F&O
- Futures and options. Fast, high-risk products that SEBI's studies found most individuals lose money in.
- Fund
- A pool of money managed by a set of rules.
- Fund manager
- The person who decides where the client's money goes.
H
- Hidden windows
- Three sealed five-year periods used to score your fund. You see them at the final.
- Hurdle
- A test a chosen industry must pass. A failing industry's weight goes to cash.
I
- Index
- A number that tracks a group of assets. Here, it starts at 100.
- Inverse volatility
- A sizing method: calmer industries get larger weights.
L
- Lookback
- The number of weeks (N) used to measure past return for ranking.
M
- Mandate
- The client's written goal and limits.
- Market regime
- The overall condition of the market, judged here by whether it is above or below its moving average.
- Maximum drawdown (MDD)
- The deepest fall from a previous high in the whole test.
- Momentum
- The tendency of recent winners to keep winning for a while.
- Moving average
- The average of the last X closes, updated every week.
N
- N-week return
- The return over the last N weeks.
O
- Overfitting
- Tuning rules to fit past data so closely that they fail on new data.
P
- Position sizing
- Deciding how much to put in each holding.
R
- Rebalance
- Refreshing your choices on a set schedule (every R weeks).
- Relative drawdown
- Your fund's MDD divided by max(market MDD, 5%). Lower is better. If your fund was invested less than 50% of the time in a window, that window counts as 1.0.
- Relative strength
- An asset's performance compared with another, often the market.
- Resistance
- A price level where rises have repeatedly stalled.
- Return
- The percentage change in value.
- Risk
- The chance of a result you cannot accept.
- Robustness
- Working well across many conditions, not just one.
- RSI
- Relative strength index. A 0 to 100 gauge of recent gains and losses. Not the same as relative strength.
S
- Sealed fund
- Your final rulebook. It cannot change.
- SEBI
- The Securities and Exchange Board of India, the market regulator.
- Stopped
- An industry that fell below its trend-filter average. It holds cash until the next rebalance.
- Stress room
- The final's test: one common 26-week crisis.
- Support
- A price level where falls have repeatedly stopped.
T
- Time invested
- The average total industry weight in your fund.
- Total-return index
- An index that includes dividends.
- Treasury bill (T-bill)
- A short loan to the US government. Its rate is the cash return.
- Trend
- The general direction of prices: up, down, or sideways.
V
- Volatility
- How much returns swing from week to week.
- Volume
- The number of units traded in a period. Shown as bars on many charts.
W
- Warm-up
- The 52 weeks of data before a period starts, used so indicators work from day one.
- Whipsaw
- Repeated false signals in a sideways market.