Kairon AITerms, explained plainly
Plain-English definitions of the terms that matter in stock analysis, risk management and backtesting: risk/reward, drawdown, out-of-sample, profit factor, stop-loss and more.
A
Average true range (ATR)
The average daily price range of a security over a period (often 14 days), including gaps. Used to size stops relative to how much a stock normally moves, so a volatile stock gets a wider stop than a quiet one. Learn more →
Averaging down
Buying more of a position after the price has fallen, which lowers the average cost per share but increases exposure to a trade that is currently losing. Learn more →
B
Backtest
A simulation of how a set of rules would have performed on historical data. Useful for rejecting bad ideas, dangerous when the rules are tuned on the same data they are tested on. Learn more →
Bear case
The strongest reasoned argument that a stock will fall or underperform: valuation, risks, deteriorating fundamentals, weak technicals. A good bear case uses the same facts as the bull case and weighs them differently. Learn more →
Breakeven stop
Moving the stop-loss to the entry price once a trade has moved a set distance in your favour, so the trade can no longer turn into a loss (before fees and gaps). Learn more →
Breakeven win rate
The minimum share of winning trades needed to not lose money at a given risk/reward ratio: risk divided by (risk + reward). At 1:2 it is 33 %. Learn more →
Bull case
The strongest reasoned argument that a stock will rise or outperform: growth, catalysts, improving margins, supportive trend. Learn more →
C
Confidence level
In Kairon, a rating (low, medium, high) of how strongly the agents agree and how clean the setup is. It is not a probability of profit.
Confirmation bias
The tendency to look for, favour and remember information that supports what we already believe. The main reason investors benefit from a deliberately opposing second opinion. Learn more →
D
Drawdown
The decline from a peak in account value or equity curve to the following low, usually in percent. Maximum drawdown is the largest such decline in a period and a key measure of pain.
E
Equity curve
A chart of account value over time in a backtest or real account. Smoothness and drawdowns tell you more than the end value.
Expectancy
The average result per trade: win rate × average win minus loss rate × average loss. A positive expectancy is what makes a strategy worth trading, not a high win rate.
F
Factor score
Kairon's summary of 20 quantitative factors such as trend, momentum, valuation and volatility, as one number from −100 to +100. Above +20 is rather positive, below −20 rather negative. The rank compares a stock with similar ones in the nightly market scan. Learn more →
Form 4 (SEC)
The filing US corporate insiders (officers, directors, owners of more than 10 %) must submit within two business days of buying or selling their company's shares. Kairon's radar reads every Form 4, drops grants, option exercises and tax withholding and keeps real open-market buys and sells. Learn more →
Free cash flow
Operating cash flow minus capital expenditures. Cash a company actually generates after keeping its business running, harder to dress up than earnings.
I
In-sample
Data used to build or tune a model or trading rule. Results measured in-sample are optimistic by construction. Learn more →
Insider buying
An open-market purchase of shares by a corporate insider, reported on SEC Form 4. It is public information, not a recommendation. On Kairon, returns after a filing are always measured from the first close after the filing went public. Learn more →
L
Look-ahead bias
A backtest error where the simulation uses information that was not available at the time of the decision, such as restated financials or the day's closing price for a trade taken at the open. Learn more →
M
Market capitalization
Share price times the number of shares outstanding: the market value of a company's equity.
Momentum
The tendency of assets that have risen (or fallen) over the past months to keep doing so for a while. One of the best-documented market factors, and also prone to sharp reversals.
Moving average (SMA)
The average closing price over a set number of days, for example 50 or 200. The 200-day simple moving average is widely used as a line between long-term uptrend and downtrend.
O
Out-of-sample
Data a model or rule never saw while it was being built. Out-of-sample results are the honest estimate of how a strategy might behave on new data. Learn more →
Overfitting
Tuning a model so closely to past data that it captures noise instead of a repeatable pattern. Typical sign: great in-sample results that collapse out-of-sample.
P
P/E ratio
Price divided by earnings per share. A quick valuation measure that only makes sense compared with growth, peers and the company's own history.
Periodic Transaction Report (PTR)
The report in which members of the US House disclose stock trades, due within 45 days. Amounts are given in ranges. Kairon reads the official PDFs and shows the reporting delay next to each trade. Learn more →
Position sizing
Deciding how much to buy so that a loss at your stop equals a fixed, acceptable share of your account. Learn more →
Profit factor
Gross profits divided by gross losses. Above 1 a strategy made money in the tested period; below 1 it lost.
R
Resistance
A price zone where selling has repeatedly stopped advances. Not a wall, but a place where the odds of a pause or reversal are higher.
Risk/reward ratio
The potential loss to the stop compared with the potential gain to the target, for example 1:3. Learn more →
S
Sentiment
The mood of market participants toward a stock or the market, measured from news tone, social media, options positioning or surveys. Extreme sentiment often matters more than its direction.
Setup quality
How clean a chart looks for an entry right now, scored 0 to 100 from recognisable setups such as a pullback in an uptrend or a volatility squeeze. From 60 solid, from 75 strong. Stop and target shown with it are example levels, not a recommendation. Learn more →
Slippage
The difference between the price you expect and the price you get, caused by spreads, gaps and fast markets. Backtests that ignore it overstate results.
Stop-loss
A predefined price at which you exit a losing position. It limits risk only if you respect it, and gaps can still fill you worse. Learn more →
Support
A price zone where buying has repeatedly stopped declines. Often a former resistance level.
Survivorship bias
Testing only on companies that still exist today, which silently removes the bankruptcies and delistings and makes past results look better than they were.
W
Walk-forward test
A backtest method that tunes rules on one period, tests them on the following unseen period, then moves the window forward and repeats. The standard way to get out-of-sample results from historical data. Learn more →
Win rate
The share of trades that ended in profit. Meaningless on its own: a 70 % win rate can lose money if losses are large, and a 35 % win rate can be very profitable. Learn more →
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