Skip to content
background

AI Trading Glossary

A comprehensive glossary of AI trading terms and definitions

Algorithmic Trading

The use of computer programs and predefined rules to execute trades automatically based on market data, timing, and price conditions.

Artificial Intelligence (AI)

Systems that learn from data to recognise patterns, generate predictions, and support decision-making — including trade signals and risk controls.

Automated Trading Bot

Software that places and manages trades on your behalf according to configured strategies, often around the clock.

Backtesting

Evaluating a trading strategy against historical market data to estimate how it might have performed before live deployment.

BQP

Bounded-Error Quantum Polynomial Time — a complexity class describing problems efficiently solvable by quantum computers with a bounded chance of error.

Drawdown

The peak-to-trough decline in an account or strategy’s value, used as a key risk and performance metric.

Latency

The delay between market data arriving and a trade being executed. Lower latency can improve fill quality in fast markets.

Liquidity

How easily an asset can be bought or sold without significantly moving its price. Higher liquidity usually means tighter spreads.

Machine Learning

A subset of AI where models improve from examples — used in trading to detect regimes, forecast moves, and adapt strategies.

Quantum Computing

Computing that uses quantum effects such as superposition and entanglement to explore complex problem spaces more efficiently than classical systems for certain tasks.

Quantum Volume (QV)

An industry benchmark (popularised by IBM) that scores a quantum processor’s overall capability, not just raw qubit count.

Qubit

The basic unit of quantum information. Unlike a classical bit, a qubit can represent a combination of 0 and 1 until measured.

Qutrit

A three-level quantum system (states 0, 1, and 2), offering a denser information encoding than a two-level qubit.

Risk Management

Rules and controls — position sizing, stop-losses, exposure limits — designed to protect capital while pursuing returns.

Slippage

The difference between the expected trade price and the price actually filled, often larger in volatile or illiquid markets.

Volatility

A measure of how much an asset’s price fluctuates. Higher volatility can mean greater opportunity and greater risk.