Many people face doubts when dwelling on the role of the trading signal in the output prospects of a trading strategy. Well, to make it clear first, the trading signal is the output of a quantitative trading strategy. It’s an important parameter and tool to measure the performance of the trading strategy that you employed. Let’s take a simple example. If we were to consider a simple strategy which involves one security, it would have a bounded signal between -1 and +1. Thus, a trading signal involving one security, being the output of your trading strategy, tells how much to move around that specific security. A trading signal with value ‘-1’ would mean to go fully short while that of ‘+1’ would imply going fully long the security. Although, all values between -1 and +1 of this simple example are possible, having a ‘0’ for a trading signal would imply taking no position in the security. Thus, the trading signal can have continuous values and discrete values as well. For e.g. in the continuous case, it can assume any value between the bounds, say 0.7, which would mean to enter with 70% of the allocated value. While in the discrete case, the signal will only oscillate or fluctuate between say, +1, 0, -1. So, seeing through the example given, it should be now quite clear that how having a trading signal is innate and inherent to any quantitative trading strategy. It paves a nice way to know the amount of the capital with which to enter; also it identifies the security and the movement around it.