Glossary
A quick reference for the abbreviations, metrics, and statistical methods that appear throughout this documentation and the alpha-forge CLI output (synced with alpha-forge issue #1192).
| Term |
Field / full name |
Meaning |
| Sharpe |
sharpe_ratio |
Risk-adjusted return = return divided by volatility (standard deviation). Higher is better. The default objective for optimization and WFT. |
| Sortino |
sortino_ratio |
Risk-adjusted return that only divides by downside volatility (variation of negative returns). A downside-only variant of Sharpe. |
| Calmar |
calmar_ratio |
CAGR ÷ max drawdown. Return efficiency relative to drawdown resilience. Higher is better. |
| MDD (Max Drawdown) |
max_drawdown_pct |
The largest peak-to-trough decline of the equity curve (%). Smaller is better. |
| CAGR |
cagr_pct |
Compound Annual Growth Rate (%). Lets you compare returns regardless of period length. |
| PF (Profit Factor) |
profit_factor |
Gross profit ÷ gross loss. Above 1.0 means net profit. null when there are no losses (gross loss = 0). |
| Win rate |
win_rate_pct |
Percentage of trades that closed with a profit. |
| tail_ratio |
— |
95th-percentile gain ÷ |5th-percentile loss| of daily returns. Above 1.0 means a fatter upside tail. |
| VaR / CVaR |
var_95 / cvar_95 |
Value at Risk (worst expected loss at 95% confidence) and the conditional expected loss beyond that threshold. |
Validation and statistics
| Term |
Full name |
Meaning |
| IS |
In-Sample |
The period used for parameter optimization / training — the first half of backtest run --split. |
| OOS |
Out-of-Sample |
The period held out for validation only — the second half of --split. A small IS↔OOS performance gap indicates low overfitting. |
| WFT |
Walk-Forward Test |
Robustness check that repeatedly optimizes on IS then validates on OOS across N rolling windows (optimize walk-forward). Detects overfitting. |
| DSR |
Deflated Sharpe Ratio |
A significance measure that deflates the Sharpe ratio to correct for "lucky" results from running many optimization trials (Bailey & López de Prado, 2014). The more trials (n_trials), the stricter the correction. |
| MC |
Monte Carlo |
Runs many randomized simulations (trade reordering / resampling) to estimate the final-equity distribution, ruin probability (ruin_probability_pct), 95th-percentile MDD, and more (backtest monte-carlo). |
| PSR |
Probabilistic Sharpe Ratio |
The probability that the observed Sharpe exceeds a benchmark value. The statistical basis of DSR. |
Exploration and regimes
| Term |
Full name |
Meaning |
| HMM |
Hidden Markov Model |
A probabilistic model that classifies the market into hidden "regimes" (e.g. Bull / Range / Bear) so signals can switch per state. Used via the HMM indicator. |
| Regime |
— |
A market state such as bullish, bearish, or range-bound. Gated by HMM or macro indicators to control entries per state. |
| near_pass |
rescue zone |
A mechanism in the explore pre_filter that lets "almost-passing" strategies proceed to the optimizer (pre_filter.near_pass in goals.yaml). |
| pre_filter |
— |
A pre-check in explore run that aborts a strategy right after the backtest if it fails minimum Sharpe / MDD / trade-count thresholds, skipping optimization and WFT to save compute. |