Understanding SYGNAL Charts
A SYGNAL chart is a robust evaluation tool designed to visually represent the historical relationship between an instrument's price and the output of a quantitative signal model.
Its purpose is to help you assess how a specific model behaved during past market conditions—such as bull markets, downturns, or volatile periods. By observing how the signal and price interact, you can gain a deeper understanding of a model's characteristics and historical fit.
Crucially, the signal data shown in these charts is the output of back-tested model simulations. It does not represent actual trading results or an investment track record. This information is provided for educational and evaluation purposes only and is not investment advice.
Deconstructing the Chart: The Key Elements
Every SYGNAL chart contains four primary components. Understanding each one is the first step to a straightforward interpretation.
Back-tested signal data — for illustrative purposes.
1. The Chart Title
The title identifies the instrument and the specific quantitative model on display. It follows the format: Instrument Ticker: Model Name. For example, AAPL:US: Mid-Term Trend Following shows a trend-following model applied to Apple Inc. stock.
2. The Price Line (Green Line)
This familiar line represents the historical price of the instrument. Its value corresponds to the right-hand axis (e.g., "Price USD"). The price shown is the specific data point used by the model for its calculations, such as the daily closing price for equities or an hourly price for intraday crypto signals.
3. The Signal (Blue Area)
The blue area represents the unique output of the quantitative model. Its value corresponds to the left-hand axis ("Signal"), which is standardised on a scale from -1.00 (Maximum Bearish) to +1.00 (Maximum Bullish).
- +1.00: Indicates the model has a maximum bullish view on the instrument.
- 0.00: Indicates the model is neutral, with no directional view.
- -1.00: Indicates the model has a maximum bearish view on the instrument.
Values between these points (e.g., +0.50 or -0.25) reflect the model's degree of conviction. Some models are binary, jumping directly between -1.00, 0, and +1.00, while others are continuous, moving smoothly through the range.
4. The Timeline (X-Axis)
The horizontal axis displays the historical time period covered by the chart, allowing you to correlate signal and price movements with specific dates.
Reading the Story: How Signal and Price Interact
The actual value of the chart lies in observing the dynamic relationship between the signal and the price. As you analyse a chart, ask yourself these key questions to understand the model's behaviour:
- Reaction to Trends: When the price was in a clear uptrend, did the signal turn positive and remain there? How quickly did it react?
- Reaction to Downturns: When the price experienced a significant drop, did the signal turn negative before, during, or after the decline?
- Behaviour in Choppy Markets: During periods of sideways or volatile price action, did the model generate frequent, rapidly changing signals (known as "whipsaws"), or did it remain stable and filter out the noise?
- Signal Conviction: Does the model tend to stay at maximum values (+1.00/-1.00), suggesting a high-conviction, "all-in" or "all-out" logic? Or does it show more nuanced, continuous values, reflecting a more gradual approach?
A Practical Walkthrough
Let's apply these questions to our example chart for AAPL:US: Mid-Term Trend Following, highlighted with key events.
- Event 1 (May 2022): Observe how the signal turned decisively negative. This change in the model's output occurred during a clear price downtrend, illustrating the model's reaction to negative momentum.
- Event 2 (January 2023): Here, the signal jumped from neutral territory directly to its maximum bullish value (+1.00). This decisive shift marked the definitive start of a major price uptrend that continued for months.
- Event 3 (February 2025): Here, the signal crosses from positive to negative. This shift in the model's output corresponds with a significant price peak, demonstrating how the signal reacts to a major reversal in the market trend.
The Purpose: Why Use a Signal Chart?
A signal chart is not for predicting the future. It is a tool for understanding the past behaviour of a quantitative model. Use it to:
- Assess a Model's Character: Quickly determine if a model is aggressive (reacting to short-term moves) or conservative (focused on long-term trends).
- Evaluate Historical Fit: See how well a model's logic would have aligned with different market environments you are familiar with, such as the 2020 crash or the 2021 bull market.
- Compare Different Models: Open charts for two different models on the same instrument to visually compare their behaviours side-by-side.
Deepen Your Understanding
The concepts behind quantitative signals are interconnected. To learn more, explore our related resources: