Technical Analysis Terminology
A Comprehensive List of Trading Jargon
Enhance Your Trading Vocabulary and Understanding with Our Complete Guide to Technical Analysis Terminology.
Technical analysis terminology refers to a set of specialized jargon utilized by traders and analysts to describe the various indicators, patterns, and tools used in technical analysis. This analytical method is employed to evaluate securities by examining market activity statistics, including past prices and trading volume. Technical analysts utilize a diverse range of tools and indicators, such as trend lines, candlestick charts, and moving averages, to detect patterns and trends in the market, enabling them to make informed trading decisions.
Explore A to Z Technical Analysis Terminology
Accumulation/Distribution is a technical indicator that looks at the underlying buying or selling pressure of a stock. It measures the relative demand and supply between buyers and sellers as they buy, sell, or trade the security. This indicator can be used to help identify trends in the stock’s price movement and help investors decide when to buy or sell particular stocks.
This is also called a three-wave pattern, a corrective pattern, or a counter-trend pattern
Average loss is a performance measurement used to gauge the profitability of a trading system by calculating the total losses divided by the number of trades that resulted in losses. This indicator provides traders with an objective view on their trading strategies and helps them identify areas for improvement.
The average win is a statistical measurement of trading performance that is calculated by taking the total profits earned from winning trades and dividing them by the number of successful trades. This metric can be used to measure overall success in the markets and assess whether your trading strategy is producing results
Acceleration is a chart pattern representing a sharp increase in the rate of change of share prices.
Activity level is a price at which there has been previously recognized activity – such as an old support or resistance level, or a breakout point.
Average Balance Volume
The Average Balance Volume (ABV) line is a technical indicator that utilizes tick volume to indicate whether current momentum is likely to continue or reverse. ABV is calculated by taking the average of the tick volumes from a given number of time periods and plotting them as a line to indicate changes in prices. It helps traders assess when to enter and exit trades, as well as determine potential breakouts and support levels.
An ascending triangle is an emerging chart pattern that occurs in a bullish state. It is characterized by a series of continually rising lows combined with flat/nearly flat highs. Volume should increase on each successive higher low to confirm the formation, and finally break out through the resistance at the top of the pattern to complete it.
Alpha-Beta Trend Channel
The Alpha-Beta Trend Channel is a popular technical analysis tool that uses data from the standard deviation of price movements in order to draw two trend lines, one above and one below a specified moving average. This creates what is known as a channel, or band, which creates an area of focus where the majority of prices can be expected to fall
The Advance/Decline Line is a tool used in technical analysis to track the number of stocks that closed with gains and losses on any given day. It is calculated by taking the difference between the sum of stocks that rose and subtracted from the sum of stocks that declined and then adding (or subtracting if negative) this difference to a running total or sum. This metric is also known as “Breadth” in investment circles.
The Advance/Decline Ratio
The Advance/Decline Ratio is a metric used to measure market sentiment, specifically the ratio of stocks that went up in price versus those that went down. This ratio can be calculated by dividing the total number of advancing stocks by the total number of declining stocks over a given period of time.
Arbitrage is the act of taking advantage of price differences in different markets. For example, in stock markets, arbitrage could involve the purchase of one stock and the sale of another related one; or in futures markets, it could mean buying a futures contract then simultaneously selling a like contract to take advantage of price discrepancies.
In the Elliott Wave Principle, one of the core patterns is known as alternation. Alternation occurs when waves 2 and 4 of an impulsive wave have different corrective forms – usually where wave 2 represents a shallow pullback, wave 4 is a deeper pullback. Zigzags, Triangles and flats may all be used to describe wave 4 following a flat in wave 2.
Alternate Count (alt)
An alternate count (alt) is a type of labeling used in Elliott Wave analysis to refer to alternate interpretations of the chart pattern. In some cases, there can be more than one way to apply the Elliott Wave label, so the analyst must consider both the primary and alternative counts when making their forecasts. Keeping track of different labeling and being prepared for changes are key to confirming or invalidating alternate counts.
The Coiled Spring trading strategy is used by traders in a range-bound market, where prices move between support and resistance levels, and also in a trending market, where prices are trending up or down. This strategy aims to enter positions at the point of transition from a range-bound market to a trending market.
Convergence-Divergence (C-D) is a trend analysis used in technical charting to determine the strength of a price outcome. It is determined by the charting of two or more landscape features and can be used to confirm or disprove an anticipated result.
Cross-verification is the process of corroborating multiple sources of information to ensure that a price is accurate and up to date. With this technique, data from various unrelated sources are compared and observed to verify that they all point to the same price level. This strategy helps financial professionals gain confidence in their pricing estimates.
A corrective wave is a pattern arising from the market’s price movements that turns against the trend of an overall larger degree. This three-wave pattern, or combination of three-wave patterns, moves in the opposite direction from that of the primary trend.
Congestion is a term used to describe a situation where the trading activity within a certain range of prices is limited and doesn’t move in any particular direction. During periods of congestion, the market trades within a range formed with support and resistance levels that prevent price movements up or down.
Countertrend is an opposite movement to the current trend in which prices may temporarily rise or fall. It is referred to as a minor or shorter-term move that typically does not last long and has less impact than the prevailing market trend
Candlestick charts are an ancient charting method originating in Japan during the 1700s. The highest and lowest price for a given time period is noted with a “shadow” line and plotted on the graph. The difference between the opening price and closing price is represented as a box or rectangle, with white or empty boxes indicating that the market closed higher than the open, and black boxes signifying a market close lower than the open.
Channels are a form of technical analysis that is used to spot potential support and resistance levels in the trading markets. They are formed when two parallel trendlines are created, with the upper trendline connecting most of the peaks or closing prices and the lower trendline connecting the lows or closing prices. It is expected that prices will reverse when they approach either boundary, thus offering traders more insight into where to place their trades.
Charts are graphical displays of data that showcase variables over a certain timeframe. Technical analysts typically rely on five main chart types in their analyses: bar, line, point and figure, candlestick and market profile. Seeing how price, volume and other factors have moved historically can give traders valuable insight into future price movements.
Churning is a trading phenomenon when prices remain stagnant, although there is significant activity. It is usually an indication of the market being indecisive and can lead to volatility as the trend corrects itself.
Confirmation occurs when two indicators provide support for the same trend or potential trade. An example of confirmation is when both a price movement and an oscillator’s relative strength index (RSI) values both point in the same direction, which suggests that the trend will continue. On the other hand, lack of confirmation between indicators is often called divergence and may signal that a trend reversal is imminent.
Consolidation is a period of relative inactivity that occurs when prices begin to trade sideways. This is seen as a sign of market indecision and can be the precursor to either an uptrend or downtrend. It provides an opportunity to reset and re-evaluate position sizes and strategies, as it serves as a break between trends that can help reduce risk exposure.
Continuation pattern is used to describe a market action wherein there is a brief pause in an established trend before the price extends the movement. This brief period of pause in trading activity, which can be observed through charting tools, suggests that the prevailing trend or price direction will likely continue after the temporary interruption.
A correction is a price movement that goes in the opposite direction of the main trend. Typically, corrections can go up or down by one-third to two-thirds of the previous gain or decline.
Counting is a point and figure analysis used to anticipate potential price targets, either up or down. Price targets are calculated based on the range of prior sideways movements in the market.
Concession or Spread
Concession or Spread refers to the difference in price between two trades when a block of stock is involved. This spread is generally established to ensure that the buyer and seller of the block both benefit from the transaction. By providing a concession, or difference in price, both parties can walk away with a profit.
Choppy price action
Choppy price action is a term used to describe a market in which prices are moving both up and down constantly within a trading range, with no clear direction or trend. This type of movement can be characterized by quick, volatile moves or slow steady shifts and generally remains confined to a certain range.
Corrective channel is a corrective retracement structure that is made up of two lines. The primary line connects the starting point of wave A to the ending point of wave B and then a parallel line is drawn from the end point of wave A. Usually, Wave C will end near this parallel line, thereby completing the corrective channel pattern.
The Contracting Triangle is a technical or chart pattern characterized by five converging trendlines that create three-point reversals, with the points labeled A, B, C, D and E. This pattern is typically found in Wave 4, B, X or Y Waves of price action and is composed of alternating lower highs and higher lows.
The Expanded Flat Correction is a market phenomenon that occurs when wave B in a flat correction moves to exceed the high or low point of wave A. In bullish markets, this will manifest as Wave B reaching a new high, while in bearish markets Wave B will move to make a new low.
According to the Elliott Wave theory, extensions are elongated impulses that come with amplified subdivisions. They can appear in any of the three actionary subwaves and frequently show up in the third wave which is usually prolonged. This knowledge of extensions equips traders with helpful information on the upcoming waves – for example, when first and third waves are analogous in length then the fifth will be an extended surge. However, if the third wave is extended, then the fifth one should be a reflection of wave one’s shape.
Elliott Wave Cycle
According to Elliott Wave Theory, markets tend to move in fractal patterns. This means that the same processes play out on a large and small scale. A complete wave cycle is composed of 8 waves: 5 impulse waves and 3 corrective waves. By using Elliott Wave Theory, traders attempt to predict market movements by analyzing current and past price data.
An ending diagonal is a specific price pattern within Elliott Wave Theory, in which wave 5 (or wave C, and sometimes even wave Y) forms a wedge shape. Specifically, the waves making up this structure follow a 3:3:3:3:3 substructure.
Elliott Wave Triangle
Elliott Wave Triangles are a corrective pattern made up of two diverging trendlines that join to form a triangle shape, which subdivides into 5 waves labeled A-B-C-D-E. Elliott Wave Triangles usually occur as part of the 4th wave (wave B, X or Y) in the Elliott Wave Theory.
An expanding triangle is a corrective chart figure that consists of converging trend lines, which divide the shape into three waves labeled A-B-C-D-E. Like a contracting triangle, an expanding triangle occurs in wave 4, B, X or Y wave, but the diverging trend lines indicate that this pattern is different from the former.
Elliott wave channel
Elliott wave channel is a technique used by technical analysts to project the endpoint of an uptrend or downtrend. The analyst first draws two parallel lines connecting the peak and trough of waves 2 and 4, then places a third line parallel to the first two at the peak or trough of wave
An extended stock is one that has gone beyond the usual limits of its trend. When a stock reaches its upper limit or lower limit for longer than expected, it means that it has been extended, and a period of consolidation may be anticipated.
An Execution Trigger is a pre-defined point when trading should be initiated. It takes into account factors such as price, time, and risk.
The Empty Zone refers to a period between market ranges in which the current trend lacks momentum and trading activity becomes less dynamic. At this point, it is unclear whether the market will experience a continuation of the previous trend or enter into a new one. During this period, many traders tend to wait for more definitive signs before entering positions.
Elliott Wave Theory
Elliott Wave Theory, first introduced by Ralph Nelson Elliott in 1939, is a pattern-based technical analysis tool used to examine and make predictions about stock market trends. According to the theory, markets move in distinct five-wave patterns when trending upwards and three-wave patterns when trending downwards. By tracking these waves, traders can spot buy and sell opportunities with better accuracy than just relying on historical data.
Gap Echo is the technical term for when a gap in a chart level, or price action break, occurs in the same direction as a recent gap breakout on the same chart. This can indicate a rapid change in momentum and may lead to further price movements.
The Gann Square is a system developed by investor W.D. Gann which graphically plots the highs, lows, and ranges of commodities and stocks to help traders find support and resistance levels on price charts. It uses the principle of cycles and fluctuations within a given time period to identify potential turning points in the market. The Gann Square involves plotting a set of numerical values around a central point, either an all-time high or low, which can be incremented or decremented depending on whether it is a peak or valley. These numbers then form a grid that can be used to predict future highs and lows with more accuracy than other methods.
Invalidation is the term used to refer to a trade that has been wrongfully executed and needs to be terminated. It is usually done at a certain projected price level, meaning that if the price reaches that level, it demonstrates that the trade has been mistaken and must be ended.
In financial markets, an index is a tool used to measure or track changes in the market such as stock prices, currency values, or bond yields. It consists of a numerical value or statistic that is calculated and updated regularly to represent changes in the market. The type of index used can vary and may include weighted indexes, simple averages, and other technical devices.
Indicators are market measuring tools that can help investors identify and monitor important changes in the stock market. These indicators, or indexes, are often used to signal possible trends such as levels of confidence or short sales ratios. Benchmarks and thresholds provide investors with information about potential shifts in outlook, allowing them to prepare accordingly.
An Inside Day is a trading phenomenon that occurs when the range of prices for a security, such as a stock or currency, stays within the range of the previous day. This typically indicates that investors are not actively trading the security and can sometimes signal an impending shift in market sentiment.
An intermediate term is a measure of time that usually lasts anywhere from a few weeks to months. It is used to describe a length of time which can be shorter than long-term investments, but longer than short-term investments.
An Island Reversal is a trading pattern which occurs when there is an exhaustion gap up followed by prices trading in a tight range over several days, and then another breakaway gap down. This results in what looks like an island of prices being stranded in the middle on a chart. The opposite situation – the island bottom reversal – occurs when the sequence of events is reversed.
Insiders are people who have access to inside information about a company which could affect their stock price. This includes officers, directors, shareholders, and others who know about the company’s performance before the public does.
An invalidation level is the point in an Elliott Wave count at which a particular wave pattern is considered to be no longer valid. If this level is pierced, then it means that some other counted pattern may be occurring instead. In some cases, these levels may even be used as stop-loss points in trades based on the Elliott Wave theory.
Impulse Wave channel
The Impulse Wave Elliott Wave channel is an analytical tool used to help identify, track and forecast market trends. It’s a way of plotting wave patterns along an upper and lower parallel trend line that enables traders to identify where the wave pattern is likely to go next. To construct the Impulse Wave Elliott Wave channel, the chartist connects wave 2 and 4 with a converging trendline, and then connects wave 3 with a parallel trendline. Usually wave 5 will eventually hit this trendline placed at the end of wave
An irregular flat correction is a type of price movement in either a bear or bull market where wave B moves to form a new high (in bullish conditions) or low (in bearish conditions). This can result from trader sentiment changes that cause price behaviors which deviate from the normal market expectations.
Impulse extensions are an element present in most Elliott Wave Patterns. They indicate elongated impulses with exaggerated subdivisions, typically occurring in only one of the three actionary subwaves. Depending on which subwave prooves to be the most commonly extended, market traders can use this guide to predict the length of upcoming waves – a third wave extension usually translates into a fifth wave surge, while a first or third wave extension should equate to simplistic fifth wave measurements.
Kagi charts, which originated in Japan and were popularized in the USA by Steve Nison, are like Candlestick and Renko charts. These rely on the fluctuations of price direction to create vertical lines, each having different thickness based on the current state of price action. When these closing prices change direction, a new line is generated in the next column; however, if they remain in the same direction as before, then that line will be extended. Also of note, when prices penetrate either prior columns high or low position then the thickness of that line will shift.
A Moving Average (MA) is a widely used technical indicator in trading that smooths out price data by comparing the average price to its previous values over a determined period of time. By looking at the MA, traders can better identify trends and predict future behavior of prices more accurately. The MA plotted on top of a chart shows investors where the current trend might be heading based on past values, helping them make more informed investment decisions.
Moving Average Crossover
Moving Average Crossover is an indicator used in technical analysis that signals the point at which two different moving averages cross each other. This crossover can occur between two different moving averages or between a moving average and the price of an asset. The signal suggests that the trend may reverse, and traders should pay close attention to potential trading opportunities.
Moving average rainbows
Moving average rainbows are a popular charting technique used by technical analysts. The indicators display several different moving averages of varying lengths and are color-coded according to their lengths, which creates a “rainbow” effect on the chart. These mathematically related moving averages help traders identify trends in prices and make calculated decisions about when to buy and sell the tradable instrument.
Market numbers are numerical levels that can act as a floor or ceiling for the price of a financial instrument. These levels are based around multiples of 10 and may include 5, 10, 20, 25, 30, 50, and 100. They represent an area where buyers or sellers become more aggressive with price action and can lead to potential breakouts.
Mutual Fund Liquidity Ratio
The Mutual Fund Liquidity Ratio represent the proportion of cash and equivalent assets held in a Mutual Fund, which excludes the money market funds. Data is made available by Washington D.C.’s Investment Company Institute with a one-month lag every month, and it serves as an indicator of both the total demand for stocks and the level of bullishness/bearishness seen among some professional fund managers.
Most Active Stocks
Stock activity can provide valuable insight into what’s going on at the moment in the markets. The most active stocks list compiles information of which shares have seen the highest traded volume over a certain period, typically daily. This can be used to help identify which issues are attracting more attention, as well as whether conservative or speculative investments are more favorably viewed.
Momentum is a concept commonly used in financial markets to measure the strength or sustainability of an asset’s price movement. It is generally calculated by looking at how long and strong a market move has been, which can be measured through the use of different indicators such as moving averages or comparisons to previous periods.
Member Short Sales Ratio
The Member Short Sales Ratio evaluates the ratio of short selling done by Open Market professionals compared to the amount of public short selling. This ratio is used as an indication of how closely the sentiment of market professionals aligns with that of the public.
Measured Move is an observed price tendency in some stocks where the stock price moves in equal or similar distances before beginning a period of consolidation. This pattern can be identified as the stock reaches highs and lows which have followed a relatively consistent pattern, indicating that it is preparing for a pause.
Momentum indicators measure the rate of change in price over a set period of time, to identify potential buying and selling opportunities. These indicators are used to gauge potential market trends as well as provide insight into support and resistance levels. Common momentum indicators include simple moving averages (SMA), exponential moving averages (EMA), relative strength index (RSI), and stochastics, among others.
Mark Up is a term used to describe a phase of trading which follows the accumulation stage, in which prices steadily and easily increase. Medium or intermediate terms involve investing over a timeline of five weeks to six months, usually lasting from three to five months.
Market analysis is the systematical examination of a market – such as a stock exchange or goods and services – using one or more approaches, including fundamental analysis, technical analysis, quantitative analysis and more. The goal of market analysis is to gain a deeper understanding of market trends, fluctuations and dynamics in order to make sound investments decisions.
MACD (Moving Average Convergence/Divergence)
MACD, the abbreviation for Moving Average Convergence/Divergence, is an oscillator used in technical analysis of markets to determine overbought or oversold conditions. It works by taking the difference between two exponential moving averages and creating a line that oscillates above and below a midpoint. Then, a signal line is created with another exponential moving average of the MACD line. Trends in the market can be determined through signals generated by the relationship between these two lines. Additionally, divergences between MACD and prices may indicate an upcoming trend reversal.
Motive Wave is a technical analysis term used in Elliott Wave Theory to describe a five-wave pattern of price activity that moves in the same direction as the main trend account. It typically consists of an impulse wave and three corrective waves that make up a larger degree or trend.
In Elliott Wave Theory, Overlap occurs when wave four enters the price territory marked by wave one. This can be accompanied by a lack of momentum at Wave 5 that causes the 2nd and 4th sub-waves to cross over one another, transforming into a diagonal triangle pattern.
Overbought is the term used to describe a security or stock market index that has moved up too much, too quickly, and is no longer being supported by buyers. This can be observed when the price of a security rises rapidly and then stalls, suggesting that the buyers are exhausted and unable to move the price higher.
Oversold is a term used to describe the situation when the price has declined significantly due to a lack of selling pressure. This can occur in any market, whether it’s a stock, commodity, currency, or cryptocurrency. When the prices fall below their perceived value and new buyers are absent, the asset is considered oversold and may be due for a rebound.
On Balance Volume
On Balance Volume (OBV) is a technical indicator developed by Joseph Granville in the early 1960s. It uses volume data to identify changes in a stock’s trend and measure momentum. OBV works on the assumption that a major increase or decrease in the stock price will usually be accompanied by an uptick or downtick in the trading volume over time, respectively. So it measures the cumulative total of volume added if prices rise and subtracted when they fall.
An Odd Lot is a unit of stock that consists of fewer than 100 shares. This type of stock purchase is generally seen as more difficult to sell, due to the small quantity, and are sometimes treated differently from larger units by the financial markets.
The first transaction of the day in a particular stock, which usually represents an accumulation of individual buy and sell orders but that appears on the tape as a single block.
An option is a type of financial contract that gives the buyer the right, but not the obligation, to buy or sell a specified quantity of an underlying security at a predetermined price within a specified amount of time. It is essentially a derivative of an underlying asset and can be traded on both stock exchanges and over-the-counter markets.
Odd Lot Shorts
Odd lot shorts refer to the sale of fewer than 100 shares. They are usually sold by individual investors who buy into the trend late, rather than institutions. Analysts often use the ratio of odd lot short sales to odd lot sales as a signifier for an impending market bottom or top: a high ratio implies a bottom, while a low ratio suggests an impending top.
Overlapping price action
Overlapping price action is an indication of indecision in the markets – prices fluctuate both up and down, but ultimately return to their original range. It often shows up during Elliott Wave corrections and in diagonal formations between waves two and four. This pattern can suggest that eventually the original trend will resume with a strong, impulsive move.
Describes a trend that is weakening and may soon reverse, usually preceded by either a support level of resistance level being breached.
A sideways correction is a market phenomenon where the price of an asset moves sideways in a tight range, as opposed to rapid sharp corrections. During this corrective period, prices may or may not reach or exceed the prior impulse wave’s extremes. In contrast, a sharp correction often sees prices fall sharply before they start rising again.
Spike formations are a type of chart pattern that show significant and drastic changes in the market, either moving to a new high or low. After the extreme shift, there will then be a large retreat back towards its original position.
Seasonality is the phenomenon whereby market fluctuations are regularly and predictably tied to specific calendar events. This includes seasonal changes, like holiday shopping influencing retail sales and colder weather impacting energy demand. Seasonal effects on markets can therefore be observed and anticipated in order to capitalize on them.
Slippage is the gap between the estimated costs associated with a transaction and the actual costs incurred. It occurs when prices change between when an order to buy or sell is placed, and when it is fulfilled. Slippage can be either positive or negative depending on how prices moved in favor or against the investor’s position.
A silent alarm is an alarm signal that may be triggered when a market moves out of a narrow established range. It is characterized by the presence of an unusually high trading volume, indicating that the market is poised for a large and sudden breakout. The signal can be used to detect changes in trading direction, making it valuable for both short-term traders who seek to capitalize on rapid price movements and long-term investors who monitor trends in the markets.
Standard deviation is a statistical measure of how much variation or “dispersion” there is in a set of data values. It is calculated by taking the square root of the variance (the average squared difference from the mean value). The standard deviation can tell you how to spread out your data relative to the mean, allowing for a comparison between two datasets or understanding how different individual values in a set relate to one another.
Swing trading is a method of trading financial assets in capital markets that typically hold positions for several days to multiple weeks. It involves traders analyzing charts to identify opportunities and then taking advantage of market movement within those identified timeframes.
A selling climax is a technical analysis pattern that signals the end of a bearish trend. It happens when security makes a new 52-week low and then closes above the previous week’s close. This is a very strong reversal signal, as it shows investors are eager to buy the security again at this lower price point.
The saucer chart formation is a sign of an upcoming market reversal. Also known as “U-shaped” or “inverse head and shoulders,” this type of chart usually appears after an extended period of decline. It takes the shape of a curved saucer, and it typically takes several weeks or months to complete. Additionally, the volume accompanying the pattern is usually similar to the pattern itself.
Secondary Distribution Index
A Secondary Distribution Index is a measure of how active the stock market is in terms of secondary sales or transfers. When primary offerings – such as initial public offerings – are not available, investors often turn to secondary sales, which creates increased supply and is viewed as bearish by investors. The Secondary Distribution Index tracks the number of secondary distributions taking place over a certain period in order to measure stock market activity.
A secular trend is a long-term trend that transcends multiple economic cycles, lasting for 10 to 20 years or more. It typically encompasses two or more cyclical trends and is used to predict future market and economic growth rates over longer periods of time.
Sentiment indicators attempt to measure investor attitudes towards the stock market. These tools are widely used in technical analysis and provide an insight into the level of investor optimism or pessimism. Some examples of sentiment indicators include shorting activity and advisory services which indicate if investors have bearish or bullish views on the market.
Specialist Short Sale Ratio
The Specialist Short Sale Ratio measures the proportion of shares sold short by the market specialists during a set period of time in comparison to the total amount of shares that were shorted. This ratio can give insight into the market sentiment among these professional traders.
The Speculation Index is a ratio that compares the volume of trading on the American Stock Exchange with the New York Stock Exchange. When American Exchange volume is higher, it suggests greater speculation in the market as a result of lower priced stocks traded there. When this index is exceptionally high, it often indicates an approaching peak in the stock markets.
Support levels are price points on a chart where a decline in price is likely to slow down due to increased demand. This helps stop the price from falling, providing stability and a potential turnaround. Support levels act as a barrier, the opposite of resistance levels which prevent prices from rising too high.
Short covering is the buying back of stock that was previously sold short. This often occurs when investors assume the value of a security will fall, which leads them to sell it in anticipation. When market conditions change and the presumed decrease does not happen, investors then buy back the shares to limit their losses.
Sentiment indicators are used to measure the attitude, opinion, and emotion of investors in order to predict future market movements. These indicators analyze data such as media coverage, surveys, economic reports, and investor sentiment in order to attempt to forecast future market trends.
Stabilization is an event in the stock market where prices stop moving significantly up or down and move more sideways. This often happens before a trend reversal occurs and is often called basing, accumulation after a decline or top formation/distribution after an advance. It can also be referred to as “Rebuilding”.
A sharp reaction (usually in an uptrend or base) that temporarily violates a trendline or support level, but quickly reverses to the original trend. Traders are “shaken out” of long positions on the violation but stronger holders (investors) retain their positions.
Short selling is a trading technique that involves selling shares that you do not currently own. Traders usually employ this method when they believe the price of a security will decrease in the future. By borrowing shares from another investor and then immediately selling them, traders can capitalize on any potential losses in market value.
A sharp correction is a corrective pattern found in technical analysis that does not reach the same level as the previous impulse wave. It’s the opposite of a sideways correction, and usually involves a quick, sharp adjustment in price.
Upside volume is a measure of the total trading activity of stocks that are up on a given day. It reflects the amount of buying pressure that has driven stock prices higher and indicates sentiment in the financial markets.
A wedge is a chart figure in technical analysis consisting of two converging trendlines that look like a triangle. A wedge can be either a continuation pattern or a reversal pattern, depending on the direction of the trendlines.
Window Dressing is a practice used by institutional investors to make their financial performance look better. It involves purchasing or selling securities near the end of a quarter in order to inflate reported profitable investments and minimize reported losses. The goal of window dressing is to project an image of success despite underlying actual results.
Whipsaw is a type of trading behavior that produces rapid and volatile price movements in the market. It is characterized by sudden shifts in price, often accompanied by sudden drops or spikes, which can lead to false signals and trading losses if not properly managed.
In financial markets, a wave is a sustained price trend in one direction that includes clearly defined highs and lows. This momentum can be used to identify potential trading opportunities.
Yield is the measure of return an investor gets on their stock investment, expressed as a percentage. This can be greater or lesser than the original amount invested, depending on a variety of factors.
The Bear Hug strategy is a trading technique used for weak markets that anticipate a coming breakdown. It looks for potential opportunities to short-sell in situations where the market is rallying into resistance or creating narrow-range bars.
Bucket Shops, also known as betting parlors or gambling parlors, were a form of stock speculation that became fashionable in the early twentieth century. Customers would place bets on which stocks would go up or down, and if their bet was correct, they could receive a sizable payout. The infamous trader Jesse Livermore discussed his experiences in these parlors in his classic book Reminiscences of a Stock Operator.
A beta is a number that measures how a stock’s price moves compared to the market as a whole. A stock with a Beta of 1 tends to move in the same direction and by about the same percentage as its index, while stocks with higher Beta values tend to be more volatile and move faster than the market. It’s important to note that Beta is not an absolute figure and can change over time based on different economic conditions.
Bear / Bull Trap
A Bear Trap or Bull Trap is a form of deceptive trading behavior in which investors are tricked into entering a buy or sell position based on false signals. This occurs when an asset’s price briefly moves above/below existing support/resistance levels, giving the impression of a breakout, but then quickly reverting to its original position, leaving traders “trapped”.
Base is a technical trading term referring to an area of support where the stock’s dip appears to have ended. It typically follows a large decline and serves as the point from which the stock may begin to rally. It can be recognized by the fact that the stock stops making new lows.
It’s a term used in stock market analysis. A buying climax occurs when the stock reaches a new 52-week high in one week and then closes below the previous week’s close. It’s considered a reversal signal and can be an indication of a market top. Investors Intelligence watches for these buying climaxes to get an idea of where the stock market is headed.
A bellwether refers to something that acts as an indicator or precursor of future events. Originally, the term referred to a sheep with a bell around its neck which was used by shepherds to lead their flock. Today, it is often used in the finance world to refer to stocks that are closely watched for indications of the direction of a stock market or sector.
A bear market is a phase in the stock market where prices drop significantly and enter a period of prolonged decline. It usually happens when investors become pessimistic and stop buying stocks, causing prices to drop. A bear market can last anywhere from months to years, but it typically lasts around one year or more within a four-year cycle.
Back testing is the process of using historical data to test and evaluate the effectiveness of a trading strategy. It involves running a strategy through a set period of time, then analyzing the results to determine how well it worked. By leveraging back testing, traders can refine their strategies and make more informed decisions on when to enter or exit a trade.
A bar chart is a graphical representation of the trading activities of a security, bond, index, option or average over a specific period. It consists of vertical lines connecting the highest and lowest values observed during that timeframe. The close of each period is indicated by a short horizontal line (crossbar) at the end of this vertical line. The price or level can be expressed as an arithmetic or semi-logarithmic scale on the vertical axis and time can be seen along the horizontal axis at the bottom. In addition, volume data for each specified period is also shown as a histogram at the base.
The Blow Off pattern is a stock market phenomenon occurring after an extended period of rising prices, where the price of an asset was making substantial gains. At the peak of the rally, investors see a sharp rise in the stock price accompanied by an increase in trading volume. The result is a major surge in prices followed by a rapid decline.
Breadth is a measure of the degree of participation in an up or down market. It is determined by comparing the number of advancing stocks to those that are declining. When more stocks are advancing than falling in an up market, the breadth is said to be strong; conversely, when more stocks are declining than advancing in a down market, it indicates a weak breadth.
The Breadth Ratio is a metric that measures the momentum in the stock market by calculating the ratio of advancing stocks to declining stocks over a given time period, such as a day or week. It is computed by dividing the number of advances by the number of declines.
A breakaway gap, in investing terms, occurs when a security’s trading suddenly jumps to higher levels due to especially intense buying activity. This is usually seen after breaking out of a tight consolidation pattern, with the volume of purchasing power being enough to cause the price to move without trading at any of the intermediate levels. Generally, this indicates that it’s the beginning of a strong and sustained up move.
A breakdown is a price phenomenon that occurs when it falls below an important support level or range. It suggests that sellers are now in control of the market and it may be the start or resumption of a bearish move. Breakdowns occur when buyers can no longer keep up with the selling pressure, leading to volatile drops in prices.
A broadening top is a technical analysis chart pattern shaped like a megaphone or wedge. It consists of three peaks in price, with each peak being higher than the last, and two intervening troughs that are progressively lower. The spike in price seen in the first peak is followed by decreasing momentum as prices rise on succeeding peaks, at which point the pattern is completed. After this, traders can expect to see the market move downwards to a significantly lower low.
Bollinger Bands are technical trading indicators consisting of two lines drawn above and below a simple moving average. They measure the degree of market volatility based on the closing prices for a set period, usually 20 trading days. When the markets fluctuate widely, the bands widen; when they move in steady patterns, the bands contract. This indicator is typically used to identify overbought and oversold levels, reversal points, potential targets for market moves and appropriate stop levels. Additionally, Bollinger Bands can be used in conjunction with other indicators like RSI or MACD histogram to find potential action points by detecting divergences between them. Generally speaking, buying opportunities should be sought when price action is close to or within the lower band while selling opportunities arise near or within the upper band.
Back and Fill
Back and fill is a term used in trading to describe the process of consolidating or stabilizing a security’s price. This occurs when two opposing forces drive the price up to a certain level, only for it to be actively traded back and forth within a narrow range.
To draw a base channel, firstly create three lines: a primary line connecting the starting point of wave 1 with the end of wave 2, a parallel line based on the termination point of wave 1, and a midline in between the two. If wave 1 is broken by several closing prices being outside the channel, it confirms that base channel. This is typically indicative of an impulsive price action as breaking past wave 1 means the price action is becoming notably sharper or extended. It is common that wave 4 will stop at one of these trendlines after it retraces from completing an extended wave 3, usually halting at the parallel/wave 1 line.
Bearish/Bullish Reversal pattern
A Bearish or Bullish Reversal pattern is a technical analysis pattern that suggests a potential change in the direction of an asset’s price trend. The reversal must be confirmed by an impulsive or corrective structure, such as an ending diagonal, Head and Shoulders pattern, or another significant move upward or downward. If the price action represents a bearish (downward) reversal, it signifies that prices have moved from a prior high to a new lower low; conversely, if the pattern indicates a bullish (upward) reversal, it means that prices have moved from a prior low to a new higher high.
The Dip Trip strategy is a market trading approach that is used in a bull market to buy stocks when their prices pull back from recent highs. It takes advantage of the bullish sentiment by buying on dips and capitalizing on the upward momentum. This strategy has become increasingly popular as it allows investors to capitalize on potential gains during an active bull market.
Dow Theory, developed by Charles Dow in the early 20th century, is a set of ideas that aim to explain how stock markets work. It suggests that the direction of the overall market is determined by the collective behaviors of all traders, and notes that broad market trends can be judged if three main averages – industrial stocks, transport stocks, and utilities -all move in a similar direction.
Divergence occurs when two indicators move in opposite directions. For example, if a stock’s price is rising but its volume of traded shares is decreasing, it may indicate that a potential turning point is near.
Demand is the amount of buying interest investors have in a particular asset. When demand increases, it means more people are interested in purchasing an asset and this can push prices up and create support for the asset.
A Descending Triangle is a continuation pattern seen in bearish markets. The lower boundary of the triangle is formed with a horizontal support line, while the upper boundary is sloping downward. The price action creates a series of lower highs and same lows. Once the price breaks below the lower horizontal support line, accompanied by increased volume, it confirms that the current downtrend is continuing.
Distribution is an economic process in which the demand for a particular asset or commodity is met by expanding its supply. This increased supply results in lower prices for the asset, particularly when it comes to stock prices. As distribution takes place, the price of a stock will usually show signs such as broadening, rounding or forming double and triple tops.
Double bottom is a bullish reversal chart pattern that signals the end of a downward trend. This pattern consists of two consecutive drops in price, both ending at roughly the same level. The “bottom” of the pattern resembles a letter “W”, and is usually accompanied by an increase in buying volume as buyers flock into the market and push prices up above the high between the two lows.
A Double Top is a chart pattern seen in stocks, commodities and other asset markets that signals a reversal of the current trend. It looks like the letter M on a price chart and occurs when an upward trend pauses twice at a similar level before turning back down. This is often viewed as a potential sign that an asset’s price has reached its peak, suggesting that now might be the time to sell.
Downside volume is a measure of the total trading volume of securities that dropped in price across a given period – commonly reported as daily, weekly or monthly summary. It can also act as an informal indicator of market sentiment, since heavy down volume typically accompanies times when stock prices are dropping.
Detrend is an interpretation of a moving average used to identify underlying cycles that can be difficult to detect in the original form of the moving average. With Detrend, a horizontal line is drawn as a basis for comparison and re-positioning of price bars depending on their relation to the moving average line. This makes it easier to identify trends and cyclical patterns in stock prices that may not have been readily apparent before.
Discounts occur when the price of an option or future is lower than its theoretical value, reflecting the degree of pessimism among market participants.
A downtick is an investment term used to refer to a stock, commodity, or currency that has been traded at a lower price than the most recent transaction. This is often seen as an indicator of a downward trend in the market and can be used to indicate the value of a particular asset.
Double Three is a chart pattern formed by two sideways corrective waves labeled W and Y, with an intervening corrective wave X between them. This complex chart pattern is used to anticipate changes in the direction of a trending asset.
Double Zig-Zag is a type of chart pattern identified in Technical Analysis. It consists of two zig-zag movements, labeled as W and X, separated by an intervening corrective wave labeled as X. This pattern usually appears after an impulsive move and signals a continuation of the previous trend.
The Fibonacci sequence, discovered by the medieval Italian mathematician Leonardo Fibonacci, is a series of numbers in which each successive number is the sum of the previous two numbers. This sequence applies to trading through the concept of retracement, or when a market finds support at a certain point after a dynamic move. These points are often at the 38%, 50%, or 61.8 % retracements of the move.
The Finger Finder trading strategy uses single-bar candlestick reversals to generate buying and selling signals. This is a flexible approach that can be adapted to various market conditions, allowing traders to take advantage of potentially profitable opportunities.
Fractals, in the financial world, refer to a small-scale pattern of price behavior that replicates itself when viewed at larger and larger intervals on a price chart. They are often used by technical analysts as predictive indicators and are believed to be able to provide insight into market direction.
The Fade trading strategy is a technical analysis technique that involves taking the opposite side of a prevailing trend. Specifically, it involves selling at resistance and buying when there is support. This can be done to profit from short-term cyclical market conditions and pricing discrepancies.
A flag is a chart pattern characterized by a short consolidation period within a longer price movement. Flags usually appear as small, sideways trading rectangles that tilt against the prevailing trend at an angle. The shape of a flag looks like a flag blowing in the wind, hence its name. It is also referred to as a continuation type pattern, since it most often predicts the continuation of an uptrend or downtrend.
A formation is a distinct, observable pattern on a stock market or other trading chart. While these formations can differ from one another in their specifics, each type tends to have predictable results. Technically proficient investors use formations to assess and evaluate the performance of particular stocks or securities.
A five-wave cycle is a set of repeating patterns used in the analysis of financial markets. It is composed of five distinct phases and consists of a three-wave impulse followed by two corrective waves in the opposite direction. This cycle can offer insight into the short and long term direction of a market’s complex price movements. The five-wave pattern can also indicate potential trend reversals when the cycle is complete.
A flat market is characterized by a sideways correction that follows a 3-3-5 pattern, dividing it into thirds labelled A, B and C.
Hard Right Edge
The Hard Right Edge is a key reference point for technical analysis and swing trading. It is the location where the next bar on the price chart will appear and serves as an important marker in predicting future market movements.
Hole in the Wall
A Hole in the Wall is a sharp decline in the prices of a stock or index that occurs directly following an extended upward swing. Commonly seen after strong rallies, this gap down often signals a reversal in sentiment as investors may suddenly become hesitant and sell off their holdings.
Head & Shoulder Pattern
The head & shoulder pattern is a popular and reliable stock chart reversal pattern that indicates a potential change in trend direction. This pattern consists of three peaks, with the middle peak being the highest. After this middle peak, or “head”, there are two lower peaks on both sides called the “shoulders”. To complete the reversal, the stock needs to break through a horizontal line drawn along the bottoms of the previous lows from the left shoulder and head. This breakout should be accompanied by high volume to confirm the reversal is real. Inverted head & shoulder patterns work similarly but signify a potential trend reversal in an upward direction.
The January Effect is an investment phenomenon that reflects the recoveries seen in stocks after year-end tax-related selling has been completed. This effect is noted in markets around the world, with stocks generally experiencing a boost during the first few months of the year.
Line formation is a chart pattern that appears in a narrow trading range. This means that the price swings between highs and lows stay within a tight range. Because of this, it’s possible to draw a line across the entire chart – hence its name. This pattern indicates an even balance between buyers and sellers, making it difficult to predict which direction the market will move next when it eventually breaks out of the range.
A leading diagonal is a rare harmonic pattern usually characterized by five waves with a wedge shape, in which each wave subdivides into three parts. This pattern typically follows a 5:3:5:3:5 ratio of subwaves, but on some occasions the ratio may be 3:3:3:3:3.
Liquidity refers to how fast and easy it is for buyers and sellers to enter into or exit from the market, trading an asset at a certain price. Highly liquid securities are exchanged at or near the current market rate without having a huge impact on its price. When assets are illiquid, buyers need to pay more money than in a normal situation to get the asset they want.
Long term investing refers to investments that have a time horizon of more than six months. This usually encompasses one full bull-bear cycle and can last anywhere from four to five years.
Noise is an ambiguous phrase associated with stock market trading. It describes the minor, random daily price and volume fluctuations that can make it difficult to interpret the true direction of a stock’s market performance.
Narrow Range Bar
A Narrow Range Bar is a candlestick formation that occurs when the high and low of a price bar are very close to each other, resulting in a much smaller range than the preceding price bar. This type of candle formation indicates market indecisiveness, which often precedes significant market moves.
Near Term or Short Term refers to a period of time spanning from a few weeks to two months in length. It is typically composed of three to five weeks.
Pattern analysis is a technique used in financial markets to forecast the price of an asset by analyzing historical chart formations and interpreting the collective sentiment of investors. By uncovering recurrent patterns, analysts can gain useful insight into how markets have reacted in similar situations in the past and use this information to predict future prices with increased accuracy.
Pattern Cycles refer to the regularity in which certain market price formations are repeated across different time frames. It is based upon a ‘master market blueprint’ that produces all chart patterns. This phenomenon allows traders to predict future market movements more accurately by leveraging past patterns as guidelines.
%WIN is a performance metric used to measure success in trading. It shows the number of successful trades out of the total number of trades taken, expressed as a percentage. This measurement can help traders keep track of their performance and ensure that they are making sensible decisions when it comes to trading.
Power Spike is a trading strategy that takes advantage of unusually high traded volumes in the market. It looks for sudden execution of orders to capitalize on their advantageous qualities and maximize profit potential.
A profit target is a price at which a trade will be closed if it is successful. It represents the point at which the investor expects to make a return on their investment and allows them to identify when first resistance might be encountered in the market.
A pennant is a short-term chart formation seen during periods of market volatility. It looks like a flag with a “flagpole,” and is often used by traders to determine the potential for an upcoming price breakout or breakdown. This formation typically occurs when there is a transient pause in trading activity, which can form the low angle of the pennant.
TA Pivot Point is essentially a technical indicator used in trading which helps to identify the overall trend of the market. This indicator is calculated by taking the average of a security’s high, low, and closing price from the previous day. Sometimes referred to as the ‘pivot,’ this number serves as an important reference point from which traders can determine if prices are going up or down. This means that when prices fall below the pivot point, it could behave as a form of resistance; conversely, when prices riseabove the pivot point, it may act as support.
50% Principle (one-half retracement)
The 50% Principle (also known as one-half retracement) suggests that after a substantial price movement, the market should be expected to pull back or consolidate by roughly half of the move before returning to the original trend. This principle is used in technical analysis to determine likely areas of support and resistance based on previous price action.
Point and Figure Chart
The Point and Figure Chart is a popular trading analysis tool which is used to simplify the visualization of price movements in stocks. It has no time or volume variables, as all that matters are the magnitude and direction of price changes. These are plotted on graph paper, with new columns beginning when prices have changed by at least one unit.
Pullback is a common phrase used on the stock market to describe a quick retreat from a breakout. This happens when the prices of one particular stock move out of their established range and only to go back shortly after to that same range. The pullback usually occurs with low volume, indicating that the short-term buyers were not able to sustain the trend.
Premium is the price of an option contract, which encompasses both the intrinsic value and time value of the option. Additionally, it describes the distinction between cash and futures prices.
Price Potential or Objective
Price Potential or Objective is the technical analysis of a stock’s future value. This can be performed in the short, medium, or long-term, and could involve an upper or lower boundary of a trend channel, a point and figure projection, or the next major support or resistance level.
Program Trading, also known as Program Activity, is a practice where large amounts of securities are bought or sold in a single order. This type of trading is usually done by institutions who carry out strategic shifts or index funds to get in or out of the market. In some cases, Program Trading may be completed alongside other trades such as stock options, index futures, and index options. This kind of trading is sometimes referred to as arbitrage program activity.
Previous Fourth Wave
The fourth wave of an impulse wave is the final movement in the wave pattern, preceding the corrective move. This wave usually marks the end point of a corrective pattern and indicates that it is time to resume the main direction of trend.
Random Walk is an economic theory that suggests that prices in the market fluctuate randomly, and are impossible to predict or forecast. It suggests that rather than being driven by fundamental or technical factors, the movement of prices is chaotic and unpredictable. This theory suggests that attempting to use past data to predict future price movements is futile.
Rainbow Crosspoint is a technical analysis tool that is created when two or more exponential moving averages intersect. This type of indicator can be used to identify areas where there may be an increase or decrease in price activity. A Rainbow Crosspoint provides support and resistance that traders can use in their decision-making process.
Reflection is a type of technical analysis chart pattern that demonstrates a sudden shift in investor sentiment. This can be seen through a candlestick chart showing two to four bars that quickly move away from the initial direction, followed by an immediate reversal in the opposite direction. The candles must be of equal size to indicate that investor sentiment has suddenly shifted from bullishness to bearishness or vice versa.
Rally or Reaction
A rally or a reaction occurs when the price of a stock moves in the opposite direction of its overall trend. This can occur suddenly or gradually, making it an important tool for investors to track price movements and anticipate changes.
Relative Strength is a measure of stock performance compared to a given market index. For example, if the S&P 500 index moves up 10% and a particular stock moves up 20%, it is said to have good relative strength. Relative strength can help investors determine which stocks are performing well in comparison to the broader market.
Resistance is a term used in stock trading to describe the concept of a supply waiting to be sold at a higher price than the current market rate. This phenomenon is usually created when there is significant trading at that price level, indicating that further attempts to increase the rate beyond this point could meet with resistance as fewer buyers are willing to purchase the stock.
Reversal is a term used to describe a change in the direction of price movement, which occurs when there is a shift in demand and/or supply. This can be seen following more substantial patterns that develop over time, reflecting their greater significance.
Renko charts, named after the Japanese word for “bricks”, are figures used in technical analysis to identify trends over time. Unlike traditional candlestick charts, which consist of wicks and bodies of multiple sizes, renko charts feature equal-sized boxes or “bricks” that are created whenever the underlying asset’s price moves a predetermined amount. For instance, a 5 unit renko chart with an underlying asset that rallies 20 points would display 4 equally sized 5 unit high bricks.
Reflex Rally or Reflex Reaction
A reflex rally, also known as a reflex reaction or pullback, is a short-term movement within the larger trend of a stock. It involves a sudden jump in share price that does not break or reverse the stocks trend but rather corrects an overbought or oversold situation before continuing on its current trajectory.
In a running flat or triangle, wave B extends beyond the beginning of wave A, and wave C does not go lower than the ending point of wave A. This is a common pattern found in technical analysis of stocks and other financial instruments.
A truncated fifth occurs in technical analysis when the fifth wave of a trend does not exceed the termination point of the preceding third wave. For a valid truncated fifth formation to be identified, five sub-waves must still be present within wave 5.
Third of a Third
A “Third of a Third” is a technical analysis term for a strong and sudden price movement that occurs in the middle of an impulse wave of a higher degree. This price movement may be seen as an indication that the trend is continuing and further market moves can be expected.
Thrust is an impulsive wave that occurs after the completion of a triangle chart pattern. It can indicate the emergence of a new trend or an acceleration in prices following a period of consolidation.
The Triple Three pattern is a combination of 3 corrective movements, labelled W, Y and Z, which are stacked on top of each other with a corrective phase, known as X, in between. This formation typically occurs during trends in the market and is used to anticipate the direction a trend is heading in. The Triple Three often gives traders an opportunity to enter the market at advantageous entry points.
The Triple Zig Zag pattern is composed of three zigzags, typically labelled W, Y, and Z. Each of these zigzags is separated by a corrective wave denoted by the letter X. This pattern often appears in currency price movements and can be an indication for traders that there could be a trend reversal ahead.
This situation typically occurs when prices reverse direction and move back within established channel or diagonal boundaries. If volume reaches a notable peak, this can signal a potential major reversal in the market
Trading range is the range in which a stock’s or index’s price moves. This range can be illustrated with two boundaries – an upper and lower boundary, usually indicating stability and a neutral trend in prices.
The theoretical value of an option or future is based on three factors: the exercise price versus the price of the underlying asset, the time value of money, and the volatility of the security. This figure is derived by considering all of these elements, and is sometimes referred to as ‘underlying value’.
Time index analysis is a term used by traders to describe the study of price movements in relation to time cycles. It is believed that in addition to price analysis, looking at the timing of price action can provide valuable insight into trading opportunities. Common cyclical patterns are seasonal or recurring turning points that may be observed on intra-day charts as well.
A triangle is a technical chart pattern that is formed by drawing two converging trendlines. This trendline shows the gradual narrowing of a trading range, with a series of lower highs and higher lows occurring within it. Once the triangle has been completed, one can expect to see a high volume break through either of the converging trendlines.
Top or Tops
A top is a term used in trading and investing to describe the highest point of an upward trend or one of several recognized reversal patterns. It can also refer to a period for distributing profits or revenue.
Tick Volume is the total number of price movements or “ticks” that have occurred in a given time frame. Commonly used to assess the performance of an asset, tick volume can be used to get an overall sense of the buying and selling activity happening in a market or asset. The average balance volume line also provides insight into tick volume by tracking the cumulative price changes over a given time period.
Three Percent Rule
The Three Percent Rule is a general rule of thumb used to asses the validity of breakouts and breakdowns in asset prices. It states that a valid move should be at least 3% above or below the preceding level, providing evidence that the motion is backed by real underlying change.
A ‘test’ refers to when the price of an asset moves toward an established level of support or resistance. This movement can either confirm that this level holds, thereby reinforcing its significance, or break through it and trigger a new event such as a breakout.
A trendline is a line used in technical analysis to connect a series of highs or lows on a chart over a specified period of time. It represents important aspects of an uptrend or downtrend, such as support levels or resistance levels. Trend lines are also applied to chart formations, such as horizontal trend lines that mark range-bound and support-resistance conditions.
A Trendlet is an isolated and short-lived pattern of activity on a chart. It emerges and disappears within a relatively short timeframe, typically making only a little impact on the overall trend.
Trend Relativity Error
Trend Relativity Error is an error that occurs in trading when a trader analyzes at a one-time frame but executes their trade elsewhere. This mistake can have serious repercussions if not caught and adjusted for before execution.
Trend Mirrors refer to the patterns from previous chart activity that inform the direction and progress of current market trends and price ranges. Such analysis can be used to determine ideal entry and exit points for traders looking to enter or exit trades in line with the current trend.
The transit zone is a technical analysis term used to identify the final portion of a current downtrend, before a possible upturn starts. It marks the end of the downtrend and the beginning of retracement or consolidation in the new range, indicating a price level that is watched for further momentum and direction.
Trending is a major part of technical analysis, which is the evaluation of securities to identify trading opportunities. Trending refers to the overall direction of a market or stock, regardless of short-term fluctuations. Identification of trends can be used by traders to gauge when it might be beneficial to buy and sell certain stocks or commodities. Counter-trends offer an alternative approach for those looking for alternate strategies in their trading.
Technical analysis is an analytical method used to predict market behavior based on the study of historical price and volume data. It uses various tools and indicators to identify patterns in the market which can be used to forecast potential future movements.
Volume Accumulation is a technical indicator developed by Marc Chaikin, designed to improve upon On Balance Volume (OBV). Instead of assigning all volume to positive or negative values, it assigns a portion of the volume based on how the close of the day compares to the average price. The full volume price is only assigned when the closing price and high are equal, and vice versa for when they are low.
The V-pattern, a common price pattern in financial markets, is characterized by a sharp decline followed by a quick and almost equal rise. It usually appears after sudden volatility in the market drives prices up or down quickly. This V-shaped reversal helps investors identify when to buy or sell since the index typically reaches similar highs and lows twice.
X-efficiency describes how well a company can use its resources when it is competing with other less efficient competitors. It involves maximizing the use of inputs for production, such as labor and capital, to achieve maximum output without wasting resources. X-efficiency has become increasingly important in today’s competitive marketplaces.
Zigzag is a common technical chart pattern that can be used to identify short-term trend reversals. It is plotted as a series of alternating peaks and troughs in price, forming an A-B-C pattern over three points. The A-B-C pattern of Zigzag divides into 5-3-5 subwave sequence.