Glossary

Plain-English definitions of every term used on this site. If a word appears on another page and isn't here, that's a bug — please report it.

Annualization — Scaling a metric measured over a short window (daily, weekly) to a one-year equivalent so different windows are comparable. Volatility is multiplied by the square root of the number of periods per year (√365 for crypto, √252 for equities). Returns are compounded.

Cumulative return — Total return from a chosen start date to today, expressed as a percentage. Captures the effect of compounding day-on-day returns.

Daily close — The price of an asset at the end of a trading day. On Binance for crypto, this is the price at UTC midnight.

Drawdown — The percentage drop from a peak to a subsequent trough. A drawdown of 30% means the asset fell 30% from a recent high before recovering.

Fat tails — A property of return distributions where rare large moves happen more often than a normal (bell-curve) distribution predicts. Crypto returns are fat-tailed.

Log return — The natural logarithm of the price ratio between two consecutive periods: ln(P_t / P_{t-1}). Used because log returns are additive across time, unlike simple returns.

Paper trade — A trade recorded as if executed, but with no real money at risk. Used to track decisions and apply metrics to them without committing capital.

Risk-free rate — The return on an asset assumed to have no risk (typically short-term government debt). Used as the baseline that risky returns are compared against, e.g. in the Sharpe ratio. Set to 0 in v1 of this site.

Rolling window — A fixed-length window of recent observations (e.g. 30 days) that moves forward one observation at a time. Used to compute metrics that change over time, like recent volatility.

Sharpe ratio — Mean excess return per unit of risk (volatility) over a chosen window, annualized. A Sharpe of 1 means about one unit of return per unit of volatility on a per-year basis.

Simple return — The fractional price change between two consecutive periods: P_t / P_{t-1} − 1. Reported as a percentage. Intuitive, but not additive across time.

Standard deviation — A measure of dispersion: how far values typically sit from the mean of a series.

Volatility — Standard deviation of returns over a window, usually annualized. A higher number means more dispersed returns; this is the most common summary of how bumpy an asset has been.