Glossary of automated & agentic trading terms

Automated trading has its own vocabulary, and a lot of it is used loosely — sometimes deliberately, to make a tool sound smarter or safer than it is. This glossary defines the terms the way we use them on this site, in plain language, with the caveats attached. Where a term has a deeper page, we link to it. Nothing here is investment advice; it is reference material.

Agents & connectors

AI agent

A language model wired to tools and allowed to act, not just chat. An agent can read data, make a decision, and call an external function — for example, fetching a quote and submitting an order. On its own a model cannot trade; it becomes an "agent" only when you connect it to systems and grant permission. See can Claude trade stocks? for what that actually requires.

MCP (Model Context Protocol)

An open standard for exposing tools to an AI model through a connector. An "MCP server" publishes a set of functions — get quote, list positions, place order — that an agent can call. It is the plumbing that lets a model interact with a brokerage or a data feed in a structured, permissioned way.

Agentic trading

Trading in which an AI agent runs the execution loop — read the market, decide, place orders, confirm fills — typically on a schedule. The key distinction is who decides the trade: an improvising agent reasons fresh each run, while a rules engine hands the agent a fixed, tested strategy to execute. We compare the two in self-tuning vs. static trading bots.

Broker MCP

An MCP connector published by a brokerage that lets an authorized agent call broker actions — quotes, positions, buying power, and order placement — on your behalf. Robinhood's Agentic Trading is one example; equivalent broker connectors work the same way. The broker, not the model, executes and clears every order.

Alpaca

A brokerage and market-data provider. Coil uses a free Alpaca data key for price history and quotes; the data feed and the broker that places orders can be different services. Your credentials stay on your own machine.

Instruments

Leveraged ETF

An exchange-traded fund that aims to deliver a multiple — typically 2x or 3x — of an index's daily return. Because it resets daily, its return over longer periods diverges from a simple multiple of the index, and choppy markets erode value through compounding. This is "volatility decay." See SOXL and leveraged-ETF decay for the mechanics.

Inverse ETF

A fund built to move opposite to its index — it rises when the index falls. Inverse leveraged ETFs (like a −1x or −3x product) combine the inverse exposure with daily-reset decay, making them especially unsuited to buy-and-hold. Coil never holds the inverse ETF overnight.

SOXL

A 3x leveraged ETF that seeks three times the daily return of a semiconductor index. It rises sharply when chips rally and falls just as sharply when they drop. It is one half of the only pair Coil trades. Compared head to head with its inverse in SOXL vs. SOXS.

SOXS

The inverse counterpart to SOXL — a 3x ETF that seeks three times the opposite of the same daily semiconductor return, so it gains when chips fall. Coil uses it only for short-timeframe bearish legs and never carries it overnight.

Strategy mechanics

Leg-rider / compression-to-ignition

Coil's entry concept. A period of quiet "compression" gives way to "ignition" — a sustained intraday move of about 2% or more, which the engine treats as a short-timeframe leg inside the prevailing hourly trend, and rides. It is a momentum-confirmation entry, not a prediction.

Trailing stop

An exit that follows price in your favor and triggers if price reverses by a set amount. Coil exits on a 0.8% counter-move soft trail on the underlying signal — roughly 2.4% on the 3x ETF — locking in a leg once momentum turns.

Hard stop

A fixed maximum loss on a single position, no trailing involved. If price hits the level, the position is closed. Coil's per-position hard stop is 5%.

Circuit breaker

An account-level risk rule that throttles or halts trading after losses, regardless of any individual signal. Coil uses an equity-high-water-mark ladder: a −6% day halts new entries, −10% and −15% cut size, and −25% is a hard account stop. It is designed so one bad stretch can't compound unchecked.

High-water mark

The highest account equity reached so far. Risk rules measured against the high-water mark — rather than against the starting balance — react to drawdown from the peak, which is the loss that actually matters to you.

Single-symbol cap

A ceiling on how much of the account any one symbol may occupy. Coil caps a single symbol at 65% of equity, so the portfolio is never fully concentrated in one position even at maximum conviction.

Sweep / cash yield

On no-setup days the account sits in cash, where the broker's own cash-sweep program may pay interest. For example, Robinhood Gold advertised roughly 3.35% APY in early 2026. That is the broker's variable rate — not paid by Coil, not guaranteed, and not risk-free — but it means idle days aren't necessarily idle capital.

Testing & metrics

Backtest

Running a strategy against historical data to estimate how it would have performed. A backtest is a hypothesis about the past, not a guarantee about the future — and it is only as honest as the harness that produced it.

Cold backtest / regime

A backtest run in a fresh process for each market regime (a distinct environment such as a bull, a bear, or a choppy year), so warmed-up state or cached data from one period can't leak into another and flatter the result. A "regime" is just a label for the kind of market a window represents. Coil ships a cold-backtest harness that runs one fresh process per regime.

Look-ahead bias

A backtesting error in which the strategy is accidentally allowed to use information it could not have known at the time — for instance, a future price or a same-bar close used to make an earlier decision. It inflates results dramatically. Coil's harness once caught three such bugs in its own code: a look-ahead leak, a next-day price leak, and a sign-inverted short book.

Overfitting

Tuning a strategy so tightly to past data that it captures noise rather than a real edge — it looks brilliant on the test set and falls apart on new data. The honest defense is a small number of robust rules tested across regimes, plus humility about how few trades you actually have.

Walk-forward

A validation method that tunes on one slice of history, tests on the next unseen slice, then rolls forward — repeating so each evaluation happens on data the strategy didn't train on. It is a stronger check against overfitting than a single in-sample backtest.

Self-tuning

A rules engine that re-fits its parameters to recent market behavior within fixed bounds, rather than running identical static settings forever. The rules stay the same; their calibration adapts. This is different from an improvising agent — the logic is fixed and testable. More in self-tuning vs. static trading bots.

Profit factor (PF)

Gross profit divided by gross loss across a set of trades. A PF above 1.0 means the wins outweighed the losses over that sample; the higher the number, the wider the margin. It says nothing about how many trades produced it, so a high PF on a small sample is weak evidence.

Max drawdown

The largest peak-to-trough decline in account equity over a period, expressed as a percentage. It is the worst stretch you would have had to sit through. A strategy with a strong return but a deep drawdown can still be unbearable — and dangerous — to actually hold.

Commerce

Merchant of record (MoR)

The company that legally sells a product to you and is responsible for the transaction — collecting payment, charging the right sales tax or VAT, and handling refunds and chargebacks. When a MoR is in the loop, you are buying from them, not directly from the developer.

Lemon Squeezy

The merchant of record Coil uses for checkout. It is Stripe-backed and handles payment processing, tax, and refunds, so the purchase is a clean, standard transaction. Coil itself never sees your card details.

How these terms show up in Coil

Coil is a rules-based, self-tuning engine for one ETF pair — SOXL and SOXS — that you install and run yourself, with your own broker credentials and capital. Claude runs on a schedule as the agent; a broker MCP like Robinhood places the orders. The strategy is a compression-to-ignition leg-rider with a soft trailing stop, a hard stop, and a circuit-breaker ladder, validated by a cold-backtest harness. Here is how the metrics above looked across different regimes.

The +78.3% window is the single strongest one in the sample, not the typical one — quoting it as an expectation would be exactly the kind of cherry-picking this glossary warns against. The 2022 bear at −1.4% is the honest weak spot; it improved from −3.6% only after a stand-down-to-cash gate on confirmed bear days. To see the full mechanics behind these terms, read how Coil works, or weigh the approach against the field in Coil vs. trading bots and signal services.