Glossary › hypothesis
Trading glossary · advanced
hypothesis
An idea you want to test, like 'price often bounces here', before you trust it.
The fuller meaning
A testable statement of why an edge might exist, such as 'pullbacks to the 20-day average in strong trends tend to resume'. A strategy starts from a hypothesis, turns it into rules anyone could follow and then tests it; confirmation bias makes people read evidence in favour of the hypothesis they already hold.
hypothesis.
Related words
at the money · backtest · backwardation · basis · call option · contango · data snooping · delta · edge · entry trigger