Trading Systems Definitions

Fuzzy Logic

Fuzzy Logic was conceived by Lotfi Zadeh, a professor at the University of California at Berkley as a better method for sorting and handling data. It mimics human control logic and is now being applied in the world of trading systems. See also: Artificial Intellig

Fozzy Method

The Fozzy Method is a forex trading system using daily charts and an RSI/Moving Average crossover. The method uses 8 period RSI with an 8 period exponential moving average layed over it. Average True Range is employed to help estimate exit levels. The entry signal occurs when RSI crosses it’s

Filter

A filter is an additional criteria to look for as confirmation to enter a trade. See also: Technical Indicators

Maximum Adverse Excursion

Developed by John Sweeney, Maximum Adverse Excursion (MAE) is designed to calculate the worst possible loss that might occur during a trade. The concept is used in the development of trading systems and in risk management. See also: Trading Systems

Black Box

A proprietary computerized trading system whose formulas and calculations are not disclosed or readily accessible. Users enter information and the system utilizes pre-programmed logic to return output to the user, which may include trading signals and other data.

Artificial Intelligence

The creation of programs to perform tasks which humans perform using their intelligence, thus mimicing our thought processes. See also: Neural Networks

Risk/Reward Ratio

The relationship between the probability of loss and profit. This ratio is often used as a basis for trade selection or comparison.