Drawdown. Loss. This blog oftens refer to a trade's largest past drawdown since the beginning of my data (usually 1995, when the CFTC first started to publish the combined futures and options trading figures). This is the largest entry-to-intratrade drop that the trade saw during a trading signal. This, however, was not necessarily the loss at the end of the trade, since the price may have rebounded. I include the largest drawdown because I use it to calculate my maximum portfolio allocation for a trade (see "Portfolio allocation" below). I have a mental stop below this drawdown level for each trade (see "Stop" below).

Fading. Trading opposite to the prevailing trend. Analysts usually suggest fading the large speculators and small traders when their net positions hit historic extremes, and trading on the same side as the commercial traders. However, my research suggests this hasn't always been the best strategy in some markets.

Large speculators. See "Non-commercial traders" below.

Long position. Buying a security with the expectation that the asset will rise in value. Opposite of "short" (see "Short positions" below).

Non-commercial traders. Usually known as "large speculators" or "large specs" for short, this group generally consists of investment funds, hedge funds and other speculators. Analysts often see them as the "dumb money" who should be faded - or traded opposite to (see "Fading" above) - when their net COTs positions hit historic extremes.