Investing & AI Glossary

Plain-English definitions of the trading, investing, and AI terms we use in our daily model analyses. Every term has a formal definition, a simple explanation, a concrete example, and related concepts.

52-Week HighThe highest price at which a stock has traded in the past year.
AI AgentAn AI system that plans and takes actions toward a goal over multiple steps.
AI BenchmarkA standardized test that compares AI models on the same task under identical conditions.
AI Financial ReasoningA model's ability to analyze markets, weigh evidence, manage risk, and justify its decisions.
AI Model EvaluationJudging an AI model on the quality of its decisions, not just its final output.
AI TradingUsing artificial intelligence systems to make or assist trading decisions.
AlphaThe excess return of an investment above its risk-adjusted benchmark.
Bear MarketA prolonged market decline of 20% or more from recent highs.
BetaA measure of a stock's volatility relative to the broader market.
BreakoutWhen a stock's price pushes decisively through a support or resistance level.
Bull MarketA sustained period of rising stock prices and optimism.
Calmar RatioAnnualized return divided by maximum drawdown, a return-to-pain measure.
CapitulationA panic wave of selling that often marks a market bottom.
Context WindowThe maximum amount of text, measured in tokens, a model can consider at once.
CorrelationA measure of how closely two assets' prices move together, from -1 to +1.
DiversificationSpreading investments across many assets to reduce overall risk.
Dividend AristocratAn S&P 500 company that has raised its dividend for 25+ consecutive years.
Dividend YieldAnnual dividends per share divided by share price, expressed as a percentage.
DrawdownThe peak-to-trough decline of a portfolio or stock before it reaches a new high.
EmbeddingA list of numbers that represents the meaning of text so software can compare it.
Enterprise ValueA company's total value including debt and net of cash.
EPSEarnings Per Share: a company's net profit divided by outstanding shares.
Fine-TuningFurther training a general model on specialized data to adapt it to a task.
Free Cash FlowThe cash a company generates after funding operations and capital spending.
Fundamental AnalysisEvaluating a stock based on a company's financial statements and business prospects.
GroundingTying a model's claims to real evidence so its output can be checked against the facts.
HallucinationWhen a model states something confidently that is false or unsupported by its data.
InferenceRunning a trained model to produce an output from a given input.
Intrinsic ValueThe estimated true value of a business based on fundamentals, independent of market price.
LiquidityHow easily an asset can be bought or sold without moving its price.
MACDA trend-and-momentum indicator built from the difference of two moving averages.
Margin of SafetyThe discount between a stock's market price and its estimated intrinsic value.
Market CapitalizationThe total market value of a company's outstanding shares.
Market CorrectionA decline of 10% to 20% from a recent market peak.
Maximum DrawdownThe largest peak-to-trough loss a portfolio suffered over a chosen time window.
Model CalibrationHow well a model's stated confidence matches how often it is actually right.
MomentumThe tendency of a stock's recent price trend to continue.
Moving AverageThe average price of a stock over a rolling window of time.
P/E RatioPrice-to-Earnings ratio: a stock's price divided by its earnings per share.
Payout RatioThe share of earnings a company pays out as dividends.
PEG RatioThe P/E ratio divided by the earnings growth rate.
Position SizingDeciding how much capital to allocate to a single trade or holding.
Price-to-Book (P/B) RatioA stock's price divided by its book value per share.
Prompt EngineeringThe iterative practice of crafting model instructions to get the desired output.
Relative Strength Index (RSI)A momentum oscillator measuring the speed and size of recent price moves, from 0 to 100.
Retrieval-Augmented GenerationCombining a search step with a language model so answers are grounded in fetched data.
Return on Equity (ROE)Net income as a percentage of shareholders' equity.
Risk ManagementThe practice of identifying, measuring, and controlling investment losses.
Risk-Adjusted ReturnInvestment return measured relative to the amount of risk taken to earn it.
S&P 500An index of 500 of the largest US publicly traded companies by market capitalization.
Sector RotationShifting investments between sectors based on the economic cycle.
Semantic SearchSearching by meaning rather than exact keywords, using embeddings to rank relevance.
Sentiment AnalysisMeasuring market or news mood to forecast stock moves.
Sharpe RatioA measure of return earned per unit of total risk taken.
Short SellingBetting a stock will fall by selling borrowed shares and buying them back later.
Sortino RatioA risk-adjusted return measure that penalizes only downside volatility.
Standard DeviationA statistical measure of how much returns spread around their average.
Stop-Loss OrderA standing order to sell a stock once it falls to a preset price.
Structured OutputForcing a model to return data in a fixed, machine-readable format such as JSON.
Support and ResistancePrice levels where a stock tends to stop falling (support) or rising (resistance).
System PromptThe fixed instruction that sets a model's role, rules, and goals before a conversation.
Technical AnalysisForecasting price using historical price and volume data.
TokenThe small chunk of text, often a word piece, that models read and generate.
Tool CallingWhen a model invokes an external function or API instead of only producing text.
Value at Risk (VaR)The maximum expected loss over a period at a given confidence level.
Value InvestingBuying stocks trading below their estimated intrinsic value.
Vector DatabaseA database that stores and searches embeddings to find items by meaning.
VIX (Volatility Index)A real-time index of expected S&P 500 volatility, known as the fear gauge.
VolatilityThe magnitude of price fluctuations over time.