Terms | Technical Analysis Guide

Terms

Accumulation Area

A price range in which investors typically purchase shares of a particular stock. The accumulation area is determined by looking at the volume and its corresponding price. It appears as a rectangle with a price line bouncing up and down between the upper and lower limits. According to technical analysts, stocks that hit the accumulation area presents an opportunity to buy because it is expected to attract more demand.
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Advances And Declines

The number of stocks that closed at a higher price than the previous day's close, and the number of stocks that closed at a lower price than the previous day's close. Technical analysts looks at advances and declines to analyze the overall behavior of the stock market, in order to discern volatility and to predict whether a price trend is likely to continue or reverse. Typically, a market will be more bullish if more stocks advance than decline.
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Arms Index - TRIN

A short-term technical analysis breadth indicator calculated as the following: Arms Index (TRIN)

TRIN stands for TRaders' INdex. A value below 1 usually indicates bullish sentiment, and a value above 1 – bearish. A reading reaching 1.5 is very bearish. The index was introduced by Richard Arms, and is continuously displayed during trading hours, among other indices, on the New York Stock Exchange's central wall display for the stocks traded on that exchange.
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Aroon Indicator

A technical indicator used for identifying trends in an underlying security and the likelihood that the trends will reverse. It is made up of two lines: one line is called "Aroon up", which measures the strength of the uptrend, and the other line is called "Aroon down", which measures the downtrend. The indicator reports the time it is taking for the price to reach, from a starting point, the highest and lowest points over a given time period, each reported as a percentage of total time. Aroon Indicator

Aroon Indicator

Aroon Oscillator

What Does Aroon Oscillator Mean? A trend-following indicator that uses aspects of the Aroon indicator ("Aroon up" and "Aroon down") to gauge the strength of a current trend and the likelihood that it will continue. The Aroon oscillator is calculated by subtracting Aroon down from Aroon up. Readings above zero indicate that an uptrend is present, while readings below zero indicate that a downtrend is present.
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Ascending Channel

What Does Ascending Channel Mean? An ascending channel is the price action contained between upward sloping parallel lines. Higher pivot highs and higher pivot lows are technical signals of an uptrend. Trendlines frame out the price channel by drawing the lower line on pivot lows, and the upper line is the channel line drawn on pivot highs. Price is not always perfectly contained but the channel lines show areas of support and resistance for price targets. A higher high above an ascending channel can signal continuation. A lower low below the low of an ascending channel can signal trend change. Ascending Channel or Uptrend

Ascending Channel or Uptrend

Ascending Tops

What Does Ascending Tops Mean? This refers to a series of peaks, each peak higher than the previous one on the stock's chart pattern. The chart below illustrates a series of four ascending tops.

Ascending Tops

Ascending Triangle

What Does Ascending Triangle Mean?

A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs. Traders enter into long positions when the price of the asset breaks above the top resistance. The chart below is an example of an ascending triangle:

These patterns are normally seen in an uptrend and viewed as a continuation pattern as buying demand gain more and more control, running up to the top resistance line of the pattern. While you normally will see this pattern form in an uptrend, if you do see it in a downtrend it should be paid attention to as it can act as a powerful reversal signal.

Bar Chart

What Does Bar Chart Mean? A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates the highest price a security traded at during the day, and the bottom represents the lowest price. The closing price is displayed on the right side of the bar, and the opening price is shown on the left side of the bar. A single bar like the one below represents one day of trading. Bar Chart

Bar Chart

Basing

A period in which a stock price has very little or no trend. The resulting price pattern is a flat line. Basing

Basing

Bearish Engulfing Pattern

What Does Bearish Engulfing Pattern Mean? A chart pattern that consists of a small white candlestick with short shadows or tails followed by a large black candlestick that eclipses or "engulfs" the small white one.

Bearish Engulfing Pattern

Bollinger Band

What Does Bollinger Band Mean? Bollinger Bands and the related indicators %b and BandWidth are technical analysis tools invented by John Bollinger in the 1980s. Having evolved from the concept of trading bands, Bollinger Bands can be used to measure the highness or lowness of the price relative to previous trades. Bollinger Bands consist of:

an N-period moving average (MA)
an upper band at K times an N-period standard deviation above the moving average (MA + Kσ)
a lower band at K times an N-period standard deviation below the moving average (MA − Kσ)

Typical values for N and K are 20 and 2, respectively. The default choice for the average is a simple moving average with a band plotted two standard deviations away.

Bollinger Band

The use of Bollinger Bands varies widely among traders. Some traders buy when price touches the lower Bollinger Band and exit when price touches the moving average in the center of the bands. Other traders buy when price breaks above the upper Bollinger Band or sell when price falls below the lower Bollinger Band. Moreover, the use of Bollinger Bands is not confined to stock traders; options traders, most notably implied volatility traders, often sell options when Bollinger Bands are historically far apart or buy options when the Bollinger Bands are historically close together, in both instances, expecting volatility to revert back towards the average historical volatility level for the stock.
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Breakaway Gap

What Does Breakaway Gap Mean? A term used in technical analysis. A breakaway gap represents a gap in the movement of a stock price supported by levels of high volume. It occurs when prices break away from an area of congestion. When the price is breaking away from a triangle (Ascending or Descending) with a gap then it can be implied that change in sentiment is strong and coming move will be powerful. One must keep an eye on the volume. If it is heavy after the gap is formed then there is a good chance that market does not return to fill the gap. When the price is breaking away on a low volume, there is a possibility that the gap will be filled before prices resume their trend.

File:Breakawaygap new.jpg

Breakdown

What Does Breakdown Mean? A price movement through an identified level of support, which is usually followed by heavy volume and sharp declines. Technical traders will short sell the underlying asset when the price of the security breaks below a support level because it is a clear indication that the bears are in control and that additional selling pressure is likely to follow. Breakdown

Breakdown

Breakout

What Does Breakout Mean? A price movement through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility. Traders will buy the underlying asset when the price breaks above a level of resistance and sell when it breaks below support. The real plot or the mental line on the chart is generally comes from one of the classic chart patterns. A breakout often leads to a setup and a resulting trade signal. The breakout is supposed to herald the end of the preceding chart pattern, e.g. a bull breakout in a bear trend could signal the end of the bear trend.

Breakout

This chart shows a stock that has historically encountered a lot of resistance near $37, but notice how it heads sharply higher following the breakout.
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Broadening Formation

What Does Broadening Formation Mean? A pattern that occurs during high volatility, when a security shows great movement with little direction. The formation is identified by a series of higher pivot highs and lower pivot lows. A trendline drawn over the pivot highs and under the pivot lows frames out the widening pattern. It looks like a megaphone and, in fact, it is also known by that name. Broadening Formation

Broadening Formation

Bullish Engulfing Pattern

What Does Bullish Engulfing Pattern Mean? A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses or "engulfs" the previous day's candlestick. The shadows or tails of the small candlestick are short, which enables the body of the large candlestick to cover the entire candlestick from the previous day. Bullish Engulfing Pattern

Bullish Engulfing Pattern

Candlestick

What Does Candlestick Mean?

Candlesticks are graphical representations of price movement for a given period of time. They are commonly formed by the opening, high, low, and closing prices of stock. If the opening price is above the closing price then a filled (normally red or black) candlestick is drawn. If the closing price is above the opening price, then normally a green or a hollow candlestick (white with black border) is shown. The filled or hollow portion of the candle is known as body or real body, and can be long, normal, or short depending on its proportion to the line above or below it. The lines above and below, known as shadows, tails, or wicks represent the high and low price ranges within the specified time period. However, not all candlesticks have shadows.

Candlestick

Chaikin Oscillator

What Does Chaikin Oscillator Mean? An oscillator created by subtracting a 10-day exponential moving average EMA from a 3-day EMA of the accumulation/distribution line. Being an indicator of an indicator, it can give various sell or buy signals, depending on the context and other indicators. The name accumulation/distribution comes from the idea that during accumulation buyers are in control and the price will be bid up through the day, or will make a recovery if sold down, in either case more often finishing near the day's high than the low. The opposite applies during distribution.
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Channel

What Does Channel Mean? A price channel is a pair of parallel trend lines that form a chart pattern for a stock or commodity. Channels may be horizontal, ascending or descending. When prices pass through and stay through a trendline representing support or resistance, the trend is said to be broken and there is a "breakout." Alternatively, it is the technical range between support and resistance levels that a stock price has traded in for a specific period of time. Channel

Channel

Common Gap

What Does Common Gap Mean? A price gap found on a price chart for an asset. These gaps are brought about by normal market forces and, as the name implies, are very common. They are represented graphically by a non-linear jump or drop from one point on the chart to another point. They tend to occur when trading is bound between support and resistance level on a short span of time and market price is moving sideways. One can also see them in price congestion area. Usually, the price moves back or goes up in order to fill the gaps in the coming days. If the gap is filled, then they offer, not much in the way of forecasting significance.

File:Commongap new.jpg

Confirmation

What Does Confirmation Mean? 1. The occurrence of two or more indicators corresponding with one another and thereby corroborating the predicted trend. 2. The written acknowledgment provided by a broker indicating that a trade has been completed. This includes details such as the date, price, commission, fees and settlement terms of the trade.
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Consolidation

What Does Consolidation Mean? In technical analysis, the movement of an asset's price within a well-defined pattern or barrier of trading levels. Consolidation is generally regarded as a period of indecision, which ends when the price of the asset breaks beyond the restrictive barriers. Periods of consolidation can be found in charts covering any time interval (i.e. hours, days, etc.), and these periods can last for minutes, days, months or even years. Lengthy periods of consolidation are often known as a base.
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Continuation Pattern

What Does Continuation Pattern Mean? A technical analysis pattern that suggests a trend is exhibiting a temporary diversion in behavior, and will eventually continue on its existing trend. The symmetrical triangle charts displayed below are both exhibiting a continuation pattern. Notice how the chart extends above (below) its existing pattern.

Continuation Pattern

Corrective Waves

What Does Corrective Waves Mean? A set of stock price movements that occur against the main trend according to the Elliot Wave method of technical analysis. According to the Elliott Wave theory, stock price movements occur in predictable cycles. These movements are broken up into motive waves and corrective waves. Motive waves are stock price movements in the direction of the trend, and corrective waves are movements against the trend. Together, motive waves and corrective waves form certain patterns which are the basis of the Elliott Wave theory.
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Countermove

What Does Countermove Mean? The movement of a security's price against the current trend. A countermove occurs soon after the original trend and in the opposite direction, but by a lesser amount. Countermoves allow investors to try to "buy low, sell high," by taking advantage of the price retreating along the current trend to obtain a better entrance. Also known as a retracement.
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Countertrend Trading

What Does Countertrend Trading Mean? A type of swing-trading strategy that assumes a current trading trend will reverse and attempts to profit from that reversal. Countertrend trading is a medium-term strategy in which positions are held between several days and several weeks. Countertrend traders rely on graphs (such as the Bollinger band), indicators (such as the Aroon indicator) and oscillators (such as the relative strength index or Chande momentum oscillator) to make their decisions.
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Cross-Sectional Analysis

What Does Cross-Sectional Analysis Mean? A type of analysis an investor, analyst or portfolio manager may conduct on a company in relation to that company's industry or industry peers. The analysis compares one company against the industry it operates within, or directly against certain competitors within the same industry, in an attempt to discover the best of the breed.
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Crossover

What Does Crossover Mean? The point on a stock chart when a security and an indicator intersect. Crossovers are used by technical analysts to aid in forecasting the future movements in the price of a stock. In most technical analysis models, a crossover is a signal to either buy or sell. Below we have a stock that falls below its 20-day moving average - a bearish sign.

Crossover

Cup and Handle

What Does Cup and Handle Mean? The cup and handle formation (also called the cup with handle formation) is a bullish chart pattern that is defined by a chart where a stock drops in value, then rises back up to the original value, then drops a small amount in value, and then rises a small amount in value. The "cup and handle" formation was discovered by William O'Neil, Founder of Investor's Business Daily, and explained in his top selling book, "How to Make Money in Stocks." A pattern on bar charts resembling a cup with a handle. The cup is in the shape of a "U" and the handle has a slight downward drift. The right-hand side of the pattern has low trading volume. It can be as short as seven weeks and as long as 65 weeks. As the stock comes up to test the old highs, the stock will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the stock price trade sideways with a tendency towards a downtrend for four days to four weeks... then it takes off. Below is an example of a cup and handle chart pattern:

Cup and Handle

A cup and handle formation is considered to be a bullish signal, and is usually followed by a sharp rise in value. A rather accurate estimation of the expected price rise is found by measuring the price rise from the bottom of the cup to the right side. The reason for a price rise following a cup and handle formation is largely unknown. Likely because many traders know about this signal and buy when they see it forming thus artificially creating the bullish uptrend.

Important characteristics

Trend: A cup and handle formation should follow an increase trend, ideally one that is only a few months old. The older the increase trend, the less likely it is that the cup and handle will be an accurate indicator.
Shape: In a cup and handle formation, the cup must always precede the handle. The cup should form a rounded bowl shape, with an obvious bottom. A V-shaped bowl is said to be avoided. The cup should be fairly shallow, and ideally should retrace about 30% to 50% of the previous increase. The perfect pattern would have equal highs on either side of the cup, but this is not always the case.
Duration: The cup should last 1 to 6 months, while the handle should only last for 1 to 4 weeks. These are only approximate values, however; a cup may last anywhere from a few weeks to a few years.
Volume: The volume of the stock should decrease along with the price during the cup and should increase rapidly near the end of the handle when the price begins to rise

Daily Chart

What Does Daily Chart Mean? A line graph that displays the intraday movements of a given security. This contrasts to longer term charts, such as those that show a security's movement over a period of days, months or even years.
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Dark Cloud Cover

What Does Dark Cloud Cover Mean? In candlestick charting, a pattern where a black candlestick follows a long white candlestick. It can be an indication of a future bearish trend.

Dark Cloud Cover

Death Cross

A crossover resulting from a security's long-term moving average breaking above its short-term moving average or support level. Death Cross

Death Cross

Descending Channel

What Does Descending Channel Mean? A descending channel or downtrend is the price action contained between two downward sloping parallel lines. Lower pivot highs and lower pivot lows are a bearish signal. In a downtrend, a trade might be entered at the trendline and exited at the channel line. A lower low below a descending channel can signal continuation. A higher high above the low of an ascending channel can signal trend change.
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Descending Tops

What Does Descending Tops Mean? A pattern in charts where each peak in price is lower then the previous peak in price. The pattern signals a bearish trend in the security.

Descending Tops

The above is an example of descending tops.
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Descending Triangle

What Does Descending Triangle Mean? The descending triangle is formed when the market makes lower highs and the same level lows. These patterns are normally seen in a downtrend and viewed as a continuation pattern as the bears gain more and more control running down to the bottom support line of the pattern. While you normally will see this pattern form in a downtrend, if you do see it in an uptrend it should be paid attention to as it can act as a powerful reversal signal. A bearish chart pattern used in technical analysis that is created by drawing one trendline that connects a series of lower highs and a second trendline that has historically proven to be a strong level of support. Traders watch for a move below support, as it suggests that downward momentum is building. Once the breakdown occurs, traders enter into short positions and aggressively push the price of the asset lower. The chart below is an example of a descending triangle:

Diamond Top Formation

What Does Diamond Top Formation Mean? A technical analysis reversal pattern that is used to signal the end of an uptrend. This relatively uncommon pattern is found by identifying a period in which the price trend of an asset starts to widen and then starts to narrow. This pattern is called a diamond because of the shape it creates on a chart.
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Divergence

What Does Divergence Mean? When the price of an asset and an indicator, index or other related asset move in opposite directions. In technical analysis, traders make transaction decisions by identifying situations of divergence, where the price of a stock and a set of relevant indicators, such as the money flow index (MFI), are moving in opposite directions.

Divergence

Doji

What Does Doji Mean? The doji is a commonly found pattern in a candlestick chart and is characterized by being small in length—meaning a small trading range—with an opening and closing price that are virtually equal.

The doji represents indecision in the market. A doji is not as significant if the market is not clearly trending, as non-trending markets are inherently indicative of indecision. If the doji forms in an uptrend or downtrend, this is normally seen as significant, as it is a signal that the buyers are losing conviction when formed in an uptrend and a signal that sellers are losing conviction if seen in a downtrend.

Neutral : Dojis form when the opening and closing prices are virtually equal. Alone, dojis are neutral patterns.

Long-Legged: This doji reflects a great amount of indecision about the future direction of the underlying asset.

Gravestone: The long upper shadow suggests that the direction of the trend may be nearing a major turning point.

Dragonfly: The long lower shadow suggests that the direction of the trend may be nearing a major turning point.

Donchian Channels

What Does Donchian Channels Mean? A moving average indicator developed by Richard Donchian. It plots the highest high and lowest low over the last period time intervals. The Donchian channel is a useful indicator for seeing the volatility of a market price. If a price is stable the Donchian channel will be relatively narrow. If the price fluctuates a lot the Donchian channel will be wider. Its primary use, however, is for providing signals for long and short positions. If a security trades above its highest n periods high, then a long is established. If it trades below its lowest n periods low, then a short is established. Originally the n periods were based upon daily values. With today's trading platforms, the period may be of the value desired by the investor. ie: day, hour, minute, ticks, etc.
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Double Bottom

What Does Double Bottom Mean? A charting pattern used in technical analysis. It describes the drop of a stock (or index), a rebound, another drop to the same (or similar) level as the original drop, and finally another rebound.

Double Bottom

Double Exponential Moving Average - DEMA

What Does Double Exponential Moving Average - DEMA Mean? A technical indicator developed by Patrick Mulloy that first appeared in the February, 1994 Technical Analysis of Stocks & Commodities. The DEMA is a calculation based on both a single exponential moving average (EMA) and a double EMA.

Double Top

What Does Double Top Mean? A term used in technical analysis to describe the rise of a stock, a drop, another rise to the same level as the original rise, and finally another drop.

Double Top

Double Top And Bottom

What Does Double Top And Bottom Mean? Chart patterns in which the quote for the underlying investment moves in a similar pattern to the letter "W" (double bottom) or "M" (double top). Double top and bottom analysis is used in technical analysis to explain movements in a security or other investment, and can be used as part of a trading strategy to exploit recurring patterns.

Downtrend

What Does Downtrend Mean? Describes the price movement of a financial asset when the overall direction is downward. A formal downtrend occurs when each successive peak and trough is lower than the ones found earlier in the trend.

Downtrend

Notice how each successive peak and trough is lower than the previous one. For example, the low at Point 3 is lower than the low at Point 1. The downtrend will be deemed broken once the price closes above the high at Point 4. Downtrend is the opposite of uptrend.
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Dragonfly Doji

What Does Dragonfly Doji Mean? A type of candlestick pattern that signals indecision among traders. The pattern is formed when the stock's opening and closing prices are equal and occur at the high of the day. The long lower shadow suggests that the forces of supply and demand are nearing a balance and that the direction of the trend may be nearing a major turning point.

Drawdown

What Does Drawdown Mean? The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted as the percentage between the peak and the trough.
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Elliott Wave Theory

What Does Elliott Wave Theory Mean? The Elliott Wave Principle is a form of technical analysis that traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology, highs and lows in prices, and other collective factors. Ralph Nelson Elliott (1871–1948), a professional accountant, discovered the underlying social principles and developed the analytical tools in the 1930s. He proposed that market prices unfold in specific patterns, which practitioners today call Elliott waves, or simply waves. Elliott stated that "because man is subject to rhythmical procedure, calculations having to do with his activities can be projected far into the future with a justification and certainty heretofore unattainable."

Evening Star

What Does Evening Star Mean? A bearish candlestick pattern consisting of three candles that have demonstrated the following characteristics: 1. The first bar is a large white candlestick located within an uptrend. 2. The middle bar is a small-bodied candle (red or white) that closes above the first white bar. 3. The last bar is a large red candle that opens below the middle candle and closes near the center of the first bar's body. As shown by the chart below, this pattern is used by traders as an early indication that the uptrend is about to reverse. Evening Star

Evening Star

Exhaustion Gap

What Does Exhaustion Gap Mean? A gap that occurs after the rapid rise in a stock's price begins to tail off. An exhaustion gap usually reflects falling demand for a particular stock.

Exhaustion Gap

The image shows a gap at the end of a large upward movement, signaling a reversal.
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Exponential Moving Average - EMA

What Does Exponential Moving Average - EMA Mean? A type of moving average that is similar to a simple moving average, except that more weight is given to the latest data. The exponential moving average is also known as "exponentially weighted moving average".
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Fade

What Does Fade Mean? 1. A contrarian investment strategy used to trade against the prevailing trend. "Fading the market" is typically very high risk, requiring the trader to have a high risk tolerance. A fade trader would sell when a price is rising and buy when it's falling. Also known as "fading". 2. In a dealer market, it is the failure of a dealer to honor a quote when a customer or another dealer wants to trade.
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Failed Break

What Does Failed Break Mean? A price movement through an identified level of support or resistance that does not have enough momentum to maintain its direction. Since the validity of the breakout (or breakdown) is compromised, many traders close their positions and the price fails to make the sharp move that many were expecting. A failed break is also commonly referred to as a "false breakout".

Failed Break

Fakeout

What Does Fakeout Mean? A term used in technical analysis to refer to a situation in which a trader enters into a position in anticipation of a future transaction signal or price movement, but the signal or movement never develops and the asset moves in the opposite direction. Fakeout

Fakeout

Falling Knife

What Does Falling Knife Mean? A slang phrase for a security or industry in which the current price or value has dropped significantly in a short period of time. A falling knife security can rebound, or it can lose all of its value, such as in the case of company bankruptcy where equity shares become worthless. A falling knife situation can occur because of actual business results (such as a big drop in net earnings) or because of increasingly negative investor sentiment.
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Falling Three Methods

What Does Falling Three Methods Mean? A bearish candlestick pattern that is used to predict the continuation of the current downtrend. This pattern is formed when the candlesticks meet the following characteristics: 1. The first candle in the pattern is a long red candlestick within a defined downtrend. 2. A series of ascending small-bodied candlesticks that trade within the range of the first candlestick. 3. A long red candlestick creates a new low, which suggests that the sellers are back in control of the direction.

False Signal

What Does False Signal Mean? In technical analysis, a false signal refers to an indication of future price movements which gives an inaccurate picture of the economic reality. False signals may arise due to a number of factors, including timing lags, irregularities in data sources, smoothing methods or even the algorithm by which the indicator is calculated.

Fibonacci Arc

What Does Fibonacci Arc Mean? A charting technique consisting of three curved lines that are drawn for the purpose of anticipating key support and resistance levels, and areas of ranging.

Fibonacci Arc

Fibonacci Channel

What Does Fibonacci Channel Mean? A variation of the Fibonacci retracement pattern in which the trendlines run diagonally rather than horizontally. These channels are used to estimate areas of support and resistance in the same way as the horizontal Fibonacci retracement levels.
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Fibonacci Clusters

What Does Fibonacci Clusters Mean? A tool used in technical analysis that combines various numbers of Fibonacci retracements, all of which are drawn from different highs and lows. Fibonacci clusters are indicators which are usually found on the side of a price chart and look like a series of horizontal bars with various degrees of shading. Each retracement level that overlaps with another makes the horizontal bar on the side darker at that price level. The most significant levels of support and resistance are found where the Fibonacci cluster is the darkest.
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Fibonacci Extensions

What Does Fibonacci Extensions Mean? Levels used in Fibonacci retracement to forecast areas of support or resistance. Extensions consist of all levels drawn beyond the standard 100% level and are used by many traders to determine areas where they will wish to take profits. The most popular extension levels are 161.8%, 261.8% and 423.6%. Fibonacci Extensions

Fibonacci Extensions

Fibonacci Fan

What Does Fibonacci Fan Mean? A charting technique consisting of three diagonal lines that use Fibonacci ratios to help identify key levels of support and resistance.

Fibonacci Fan

Fibonacci Numbers

What Does Fibonacci Numbers/Lines Mean? Leonardo Fibonacci was an Italian mathematician born in the 12th century. He is known to have discovered the "Fibonacci numbers," which are a sequence of numbers where each successive number is the sum of the two previous numbers. e.g. 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. These numbers possess a number of interrelationships, such as the fact that any given number is approximately 1.618 times the preceding number.
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Fibonacci Retracement

What Does Fibonacci Retracement Mean? A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going higher). The Fibonacci retracement is the potential retracement of a financial asset's original move in price. Fibonacci retracements use horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before it continues in the original direction. These levels are created by drawing a trendline between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%. Fibonacci Retracement

Fibonacci Retracement

Fibonacci Time Zones

What Does Fibonacci Time Zones Mean? An indicator used by technical traders to identify periods in which the price of an asset will experience a significant amount of movement. This charting technique consists of a series of vertical lines that correspond to the sequence of numbers known as Fibonacci numbers (1, 2, 3, 5, 8, 13, 21, 34, etc.). Once a trader chooses a starting position (most commonly following a major move) on the chart, a vertical line is placed on every subsequent day that corresponds to the position in the Fibonacci number sequence. Fibonacci Time Zones

Fibonacci Time Zones

Fifty Percent Principle

What Does Fifty Percent Principle Mean? A principle that predicts that, before the observed trend continues forward, a price correction of approximately 1/2 to 2/3 of the change in price will occur.
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Flag

What Does Flag Mean?

A technical charting pattern that looks like a flag with a mast on either side. Flags result from price fluctuations within a narrow range and mark a consolidation before the previous move resumes. Likewise, "pennant" formations are usually treated like flag formations because they are very similar in appearance, tend to show up at the same place in an existing trend, and have the same volume and measuring criteria.

Flag

Footprint Charts

What Does Footprint Charts Mean? A group of charts that provide price and volume activity together on one data point over a specified time frame. Footprint charts, provided by MarketDelta, attempt to provide traders with increased price transparency and a clearer picture of market activity, similar to that of a level II quote or depth-of-market order book. There are several types of Footprint charts:

Footprint Profile - Shows traders the volume at each price through a vertical histogram, in addition to the regular Footprint bars. The Footprint Profile allows traders to see at what prices liquidity is pooling.
Bid/Ask Footprint - Adds color to the real-time volume for easier visualization of buyers and sellers probing the bid or ask. Using the Bid/Ask Footprint, traders can see whether it is the buyers or the sellers influencing a price move.
Delta Footprint - Displays the net difference between volume initiated by buyers and volume initiated by sellers at each price. The Delta Footprint is used by traders to help confirm that a price trend has started and will continue.
Volume Footprint - Different from a volume histogram on traditional charts, the Volume Footprint segments volume not only by time, but by price as well. This chart is meant to help traders determine points of capitulation.

Gann Angles

What Does Gann Angles Mean? Created by W.D. Gann, a method of predicting price movements through the relation of geometric angles in charts depicting time and price.
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Gap

What Does Gap Mean?

A break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Gaps can be created by factors such as regular buying or selling pressure, earnings announcements, a change in an analyst's outlook or any other type of news release.

Gap

Golden Cross

What Does Golden Cross Mean?

A crossover involving a security's short-term moving average (such as 15-day moving average) breaking above its long-term moving average (such as 50-day moving average) or resistance level.

Golden Cross

Gravestone Doji

What Does Gravestone Doji Mean? A type of candlestick pattern that is formed when the opening and closing price of the underlying asset are equal and occur at the low of the day. The long upper shadow suggests that the day's buying buying pressure was countered by the sellers and that the forces of supply and demand are nearing a balance. This pattern is commonly used to suggest that the direction of the trend maybe be nearing a major turning point.

Hammer

What Does Hammer Mean?

A price pattern in candlestick charting that occurs when a security trades significantly lower than its opening, but rallies later in the day to close either above or close to its opening price. This pattern forms a hammer-shaped candlestick.

Hammer

Harami Cross

What Does Harami Cross Mean?

A trend indicated by a large candlestick followed by a doji that is located within the top and bottom of the candlestick's body. This indicates that the previous trend is about to reverse.

Harami Cross

Haurlan Index

What Does Haurlan Index Mean? A technical analysis indicator, developed by P.N. Haurlan, that is used to detect market breadth. There are three components of the Haurlan index: Short Term: a 3-day exponential moving average is taken of the net NYSE advances over declines. Intermediate Term: same, using a 20-day exponential moving average. Long Term:same, using a 200-day exponential moving average.
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Head And Shoulders Pattern

What Does Head And Shoulders Pattern Mean?

A technical analysis term used to describe a chart formation in which a stock's price: 1. Rises to a peak and subsequently declines. 2. Then, the price rises above the former peak and again declines. 3. And finally, rises again, but not to the second peak, and declines once more. The first and third peaks are shoulders, and the second peak forms the head.

Head And Shoulders Pattern

Hockey Stick Chart

What Does Hockey Stick Chart Mean? A line chart in which a sharp increase or decrease occurs over a period of time. The line connecting the data points resembles a hockeystick, with the "blade" formed from data points shifting diagonally and the "shaft" formed from the horizontal data points. Hockey stick charts have been used as a visual to show dramatic shifts, such as global temperatures and poverty.

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Hook Reversal

What Does Hook Reversal Mean? A short-term candlestick pattern, occurring in either an uptrend or a downtrend, that is used to predict a reversal in the trend's direction. The pattern is identified when a candlestick has a higher low and a lower high compared to the previous day's candlestick. This pattern is unique because the difference in size between the first and second bar's body is small, compared to that seen in other types of engulfing patterns.

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Horizontal Channel

What Does Horizontal Channel Mean? Using trendlines to connect variable pivot highs and lows shows price contained between the upper line of resistance and lower line of support. This is price range or sideways trend. This horizontal channel or sideways trend is also a rectangle pattern (dotted lines show the pattern). Buying and selling pressure is equal and the prevailing direction of price sideways. This happens in periods of price consolidation.

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Impulse Wave Pattern

What Does Impulse Wave Pattern Mean?

A term used in the Elliott wave theory to describe the strong move in a stock's price coinciding with the main direction of the underlying trend. These impulse waves are shown in the illustration below as wave 1, wave 3 and wave 5. Impulse waves also refer to the strong downward movements in a downtrend.

Impulse Wave Pattern

Inside Day

What Does Inside Day Mean?

A candlestick formation that occurs when the entire daily price range for a given security falls within the price range of the previous day. Inside day often refers to all versions of the harami pattern and can be very useful for spotting changes in the direction of a trend.

Inverse Head And Shoulders

What Does Inverse Head And Shoulders Mean? A chart pattern used in technical analysis to predict the reversal of a current downtrend. This pattern is identified when the price action of a security meets the following characteristics: 1. The price falls to a trough and then rises. 2. The price falls below the former trough and then rises again. 3. Finally, the price falls again, but not as far as the second trough. Once the final trough is made, the price heads upward toward the resistance found near the top of the previous troughs. Investors typically enter into a long position when the price rises above the resistance of the neckline. The first and third trough are considered shoulders, and the second peak forms the head. Inverse Head And Shoulders

Inverse Head And Shoulders

This pattern is also known as a "reverse head and shoulders" or a "head and shoulders bottom".
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Kagi Chart

What Does Kagi Chart Mean?

A type of chart developed by the Japanese in the 1870s that uses a series of vertical lines to illustrate general levels of supply and demand for certain assets. Thick lines are drawn when the price of the underlying asset breaks above the previous high price and is interpreted as an increase in demand for the asset. Thin lines are used to represent increased supply when the price falls below the previous low.

Kagi Chart

Lagging Indicator

What Does Lagging Indicator Mean? 1. A measurable economic factor that changes after the economy has already begun to follow a particular pattern or trend. 2. A technical indicator that trails the price action of an underlying asset, and is used by traders to generate transaction signals or to confirm the strength of a given trend. Since these indicators lag the price of the asset, a significant move will generally occur before the indicator is able to provide a signal.
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Line Chart

What Does Line Chart Mean?

A style of chart that is created by connecting a series of data points together with a line. This is the most basic type of chart used in finance and it is generally created by connecting a series of past prices together with a line.

Line Chart

Long-Legged Doji

What Does Long-Legged Doji Mean? A type of candlestick formation where the opening and closing prices are nearly equal despite a lot of price movement throughout the trading day. This candlestick is often used to signal indecision about the future direction of the underlying asset.
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Low Volume Pullback

What Does Low Volume Pullback Mean? A technical correction toward an area of support that occurs on lower-than-average volume. The low volume is a signal to traders that the trend is not reversing and that it is only the weak longs looking to lock in a quick profit. Frequent moves that occur in the opposite direction of a trend, which are accompanied by low volume, are normal fluctuations and generally deemed to be insignificant. On the other hand, a large spike in volume in the opposite direction of the trend could be used to signal that the smart money is starting to look for the exits and that the trend is getting ready to reverse.
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Market Breadth

What Does Market Breadth Mean? A technique used in technical analysis that attempts to gauge the direction of the overall market by analyzing the number of companies advancing relative to the number declining. Positive market breadth occurs when more companies are moving higher than are moving lower, and it is used to suggest that the bulls are in control of the momentum. Conversely, a disproportional number of declining securities is used to confirm bearish momentum.
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Matrix Trading

What Does Matrix Trading Mean?

A fixed-income trading strategy that looks for discrepancies in the yield curve, which an investor can capitalize upon by instituting a bond swap. Discrepancies come about when current yields on a particular class of bond (corporate, municipal, etc.) don't match up with the rest of the yield curve or its historical norms.

Mean Reversion

What Does Mean Reversion Mean? A theory suggesting that prices and returns eventually move back towards the mean or average. This mean or average can be the historical average of the price or return or another relevant average such as the growth in the economy or the average return of an industry.
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Mechanical Investing

What Does Mechanical Investing Mean? Buying and selling stocks according to a screen based on predetermined criteria, usually with the help of technical indicators such as relative strength or momentum. This method allows traders to enter transactions without emotion and backtest their strategies by using historical data from any time period.
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Mini-Lot

What Does Mini-Lot Mean? A currency trading lot size that is 1/10 the size of the standard lot of 100,000 units. One pip of a currency pair based in U.S. dollars is equal to $1 when trading a mini-lot, compared to $10 for a standard-lot trade. Mini-lots are available to trade if you open a mini-account with a forex dealer.
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Momentum Investing

What Does Momentum Investing Mean? An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
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Morning Star

What Does Morning Star Mean?

A bullish candlestick pattern that consists of three candles that have demonstrated the following characteristics: 1. The first bar is a large red candlestick located within a defined downtrend. 2. The second bar is a small-bodied candle (either red or white) that closes below the first red bar. 3. The last bar is a large white candle that opens above the middle candle and closes near the center of the first bar's body. As shown by the chart, this pattern is used by traders as an early indication that the downtrend is about to reverse.

Morning Star

Moving Average - MA

What Does Moving Average - MA Mean?

An indicator frequently used in technical analysis showing the average value of a security's price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance.

Moving Average (MA)

Neckline

What Does Neckline Mean? A level of support or resistance found on a head and shoulders pattern that is used by traders to determine strategic areas to place orders. Each peak of a regular head and shoulders pattern falls toward a support level, also known as a neckline, before it rises to create the next peak. A move below the neckline (in the case of a head and shoulders top) is used by traders as a signal of a reversal of the current uptrend.

Neckline

Odd Lot Theory

What Does Odd Lot Theory Mean? A technical analysis theory/indicator based on the assumption that the small individual investor is always wrong. Therefore, if odd lot sales are up - that is small investors are selling stock- it is probably a good time to buy.
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OHLC Chart

What Does OHLC Chart Mean? Short for "Open, High, Low, Close chart." This is a securities chart that clearly shows the opening, high, low and closing prices for a security.
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Outside Reversal

What Does Outside Reversal Mean? A charting trend in which a stock price's high and low for the day exceed those of the preceding day.
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Overbought

What Does Overbought Mean? 1. A situation in which the demand for a certain asset unjustifiably pushes the price of an underlying asset to levels that do not support the fundamentals. 2. In technical analysis, this term describes a situation in which the price of a security has risen to such a degree - usually on high volume - that an oscillator has reached its upper bound. This is generally interpreted as a sign that the price of the asset is becoming overvalued and may experience a pullback.
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Oversold

What Does Oversold Mean? 1. A condition in which the price of an underlying asset has fallen sharply, and to a level below which its true value resides. This condition is usually a result of market overreaction or panic selling. 2. A situation in technical analysis where the price of an asset has fallen to such a degree - usually on high volume - that an oscillator has reached a lower bound. This is generally interpreted as a sign that the price of the asset is becoming undervalued and may represent a buying opportunity for investors.
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P-Test

What Does P-Test Mean?

A statistical method used to test one or more hypotheses within a population or a proportion within a population. When testing a hypothesis about a population proportion (p) within a large population (one in which the sample size, "n", is not greater than 5% of the overall population), the formula is:

x = (m/n-P) / SqRt[P(1-P)/n] m= "yes" response n = random sample size p = proportion P = population This formula is used to test three hypotheses:

p ≤ P
p ≥ P
p = P

The p-test statistic typically follows a standard normal distribution when large sample sizes are used, and researchers use Z-tests to determine whether a hypothesis passes based on a specific significance level will be rejected. The larger the p-value in the p-test, the more likely the hypothesis is true.

Parabolic Indicator

What Does Parabolic Indicator Mean? A technical analysis strategy that uses a trailing stop and reverse method called "SAR," or stop-and-reversal, to determine good exit and entry points.

Parabolic Indicator

Also known as Parabolic Stop And Reverse (PSAR)
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Pattern Day Trader

What Does Pattern Day Trader Mean? An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
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Pennant

What Does Pennant Mean? A continuation pattern in technical analysis formed when there is a large movement in a stock, the flagpole, followed by a consolidation period with converging trendlines, the pennant, followed by a breakout movement in the same direction as the initial large movement, the second half of the flagpole. Pennant

Pennant

As can be seen in the above picture, there is a large rise in the stock, followed by a converging consolidation period that resembles a pennant and a resulting continuation of the initial trend.
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Percentage Price Oscillator - PPO

What Does Percentage Price Oscillator - PPO Mean? A technical momentum indicator showing the relationship between two moving averages. To calculate the PPO, subtract the 26-day exponential moving average (EMA) from the nine-day EMA, and then divide this difference by the 26-day EMA. The end result is a percentage that tells the trader where the short-term average is relative to the longer-term average. Calculated as:

Piercing Pattern

What Does Piercing Pattern Mean? A technical trading signal that is marked by a closing down day with a good-sized trading range, followed by a trading gap (drop) lower the following day that covers at least half of the upward length of the previous day's real body (the range between the opening and closing prices), and then closes up for the day. A piercing pattern often signals the end of a small to moderate downward trend.
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Pivot

What Does Pivot Mean? A price level established as being significant either because the market fails to penetrate it or because a sudden increase in volume accompanies a move through that price level.
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Point & Figure Chart

What Does Point & Figure Chart Mean? A chart that plots day-to-day price movements without taking into consideration the passage of time. Point and figure charts are composed of a number of columns that either consist of a series of stacked Xs or Os. A column of Xs is used to illustrate a rising price, while Os represent a falling price. As you can see from the chart below, this type of chart is used to filter out non-significant price movements, and enables the trader to easily determine critical support and resistance levels. Traders will place orders when the price moves beyond identified support/resistance levels. Point & Figure Chart

Point & Figure Chart

Price Action

What Does Price Action Mean? The movement of a security's price. Price action is encompassed in technical and chart pattern analysis, which attempt to find order in the sometimes seemingly random movement of price. Swings (high and low), tests of resistance and consolidation are some examples of price action. The candlestick and price bar are important tools for analyzing price action, since they help traders visualize of price movement. Candlestick patterns such as the Harami, engulfing pattern and cross are all examples of visually interpreted price action.
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Price By Volume Chart - PBV

What Does Price By Volume Chart - PBV Mean? A horizontal histogram plotted on the chart of a security, which corresponds to the volume of shares traded at a specific price level. Price by volume histograms are found on the Y-axis and are used by technical traders to predict areas of support and resistance.
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Profit Target

What Does Profit Target Mean? A predetermined point at which an investor will exit a trade in a profitable position. Profit targets are part of many trading strategies that technical traders use to manage risk. Before an investor enters a trade, he determines a profitable exit point at which he will sell out of the position. Traders establish profit targets to avoid letting emotion take over a trade. A profit target can be expressed as a dollar amount or as a percentage return.
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Program Trading

What Does Program Trading Mean? Computerized trading used primarily by institutional investors typically for large-volume trades. Orders from the trader's computer are entered directly into the market's computer system and executed automatically.
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Pullback

What Does Pullback Mean? A falling back of a price from its peak. This type of price movement might be seen as a brief reversal of the prevailing upward trend, signaling a slight pause in upward momentum.
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Put-Call Parity

What Does Put-Call Parity Mean?

A principle referring to the static price relationship, given a stock's price, between the prices of European put and call options of the same class (i.e. same underlying, strike price and expiration date). This relationship is shown from the fact that combinations of options can create positions that are the same as holding the stock itself. These option and stock positions must all have the same return or an arbitrage opportunity would be available to traders. Any option pricing model that produces put and call prices that don't satisfy put-call parity should be rejected as unsound because arbitrage opportunities exist.

Put-Call Parity

Put-Call Ratio

What Does Put-Call Ratio Mean?

A ratio of the trading volume of put options to call options. It is used to gauge investor sentiment.

Quantitative Analysis

What Does Quantitative Analysis Mean? A business or financial analysis technique that seeks to understand behavior by using complex mathematical and statistical modeling, measurement and research. By assigning a numerical value to variables, quantitative analysts try to replicate reality mathematically. Quantitative analysis can be done for a number of reasons such as measurement, performance evaluation or valuation of a financial instrument. It can also be used to predict real world events such as changes in a share price.
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Range-Bound Trading

What Does Range-Bound Trading Mean? A trading strategy that identifies stocks trading in channels. By finding major support and resistance levels with technical analysis, a trend trader buys stocks at the lower level of support (bottom of the channel) and sells them near resistance (top of the channel).
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Rate Of Change

What Does Rate Of Change Mean? The speed at which a variable changes over a specific period of time. Rate of change is often used when speaking about momentum, and it can generally be expressed as a ratio between a change in one variable relative to a corresponding change in another. Graphically, the rate of change is represented by the slope of a line.
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Red Candlestick

What Does Red Candlestick Mean?

The component of a candlestick chart that represents a downward movement in the underlying price. A red candlestick is composed of the period's high, low, opening and closing prices. If the closing price is lower than the day's opening price, then the body of the candle is red or black. Also known as a "black candlestick" or a "closed candlestick".

Red Candlestick

Relative Strength

What Does Relative Strength Mean? A measure of price trend that indicates how a stock is performing relative to other stocks in its industry.
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Relative Strength Index - RSI

What Does Relative Strength Index - RSI Mean? A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula: RSI = 100 - 100/(1 + RS*) *Where RS = Average of x days' up closes / Average of x days' down closes. Relative Strength Index (RSI)

Relative Strength Index (RSI)

As you can see from the chart, the RSI ranges from 0 to 100. An asset is deemed to be overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued and is a good candidate for a pullback. Likewise, if the RSI approaches 30, it is an indication that the asset may be getting oversold and therefore likely to become undervalued.
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Relative Vigor Index - RVI

What Does Relative Vigor Index - RVI Mean? An indicator used in technical analysis that measures the conviction of a recent price action and the likelihood that it will continue. The RVI compares the positioning of a security's closing price relative to its price range, and the result is smoothed by calculating an exponential moving average of the values. The indicator is calculated by using the following formula: Relative Vigor Index (RVI)

Renko Chart

What Does Renko Chart Mean?

A type of chart, developed by the Japanese, that is only concerned with price movement; time and volume are not included. It is thought to be named for the Japanese word for bricks, "renga". A renko chart is constructed by placing a brick in the next column once the price surpasses the top or bottom of the previous brick by a predefined amount. White bricks are used when the direction of the trend is up, while black bricks are used when the trend is down. This type of chart is very effective for traders to identify key support/resistance levels. Transaction signals are generated when the direction of the trend changes and the bricks alternate colors.

Renko Chart

Resistance

What Does Resistance (Resistance Level) Mean?

The price at which a stock or market can trade, but not exceed, for a certain period of time. Often referred to as "resistance level".

Resistance

Retracement

What Does Retracement Mean?

A reversal in the movement of a stock's price, countering the prevailing trend.

Retracement

Reversal

What Does Reversal Mean?

A change in the direction of a price trend. On a price chart, reversals undergo a recognizable change in the price structure. An uptrend, which is a series of higher highs and higher lows, reverses into a downtrend by changing to a series of lower highs and lower lows. A downtrend, which is a series of lower highs and lower lows, reverses into an uptrend by changing to a series of higher highs and higher lows. Also referred to as a "trend reversal", "rally" or "correction".

Reversal

Ripple

What Does Ripple Mean? A term used by "The Dow Theory" author, Robert Rhea, to describe the day-to-day fluctuations in stock market price activity. Rhea wrote that three simultaneous movements of stock pricesoccur that can be compared to tides, waves and ripples. The Dow Theory, published in 1932, indicated that speculators attempt to ride the tides and the occasional big waves, and that only reckless investors would ever attempt to profit by the day-to-day price changes or ripples.
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Rising Bottom

What Does Rising Bottom Mean? A pattern on a security's chart that results from the daily low price rising over time, creating a series of ascending troughs. Technical traders use this pattern to confirm that the trend of the underlying security is heading upward. The chart below illustrates a security that has three rising bottoms, indicating progressively higher lows over time. Also known as "ascending bottom".

Rising Bottom

Rising Three Methods

What Does Rising Three Methods Mean?

A bullish candlestick pattern that is used to predict the continuation of the current uptrend. This pattern is formed when the candlesticks meet the following characteristics: 1. The first candle in the pattern is a long white candlestick within a defined uptrend. 2. A series of descending small-bodied candlesticks that trade within the range of the first candlestick. 3. A long white candlestick creates a new high, which suggests that bullish are back in control of the direction.

Rounding Bottom

What Does Rounding Bottom Mean?

A chart pattern used in technical analysis, which is identified by a series of price movements that, when graphed, form the shape of a "U". Rounding bottoms are found at the end of extended downward trends and signify a reversal in long-term price movements. This pattern's time frame can vary from several weeks to several months and is deemed by many traders as a rare occurrence. The chart below illustrates a rounding bottom.

Rounding Bottom

Rounding Top

What Does Rounding Top Mean?

A chart pattern used in technical analysis which is identified by price movements that, when graphed, form the shape of an upside down "U". A rounding top may form at the end of an extended upward trend and indicates a reversal in the long-term price movement. The pattern can develop over several weeks, months or even years, and is considered a rare occurrence by many traders. The chart below illustrates a rounding top.

Rounding Top

Runaway Gap

What Does Runaway Gap Mean? A type of gap on a price chart that occurs during strong bull or bear movements characterized by an abrupt change in price and appearing over a range of prices. They are best decribed as gaps caused by an sudden increase/decrease in interest for a stock.

Runaway Gap

The image shows a gap in the middle of a large upward movement.
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Selling Into Strength

What Does Selling Into Strength Mean? A proactive trading strategy carried out by selling out of a long or into a short position when the price of the asset being traded is still rising but is expected to reverse in price. Opposite of "buying into weakness".
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Setup Price

What Does Setup Price Mean? A price level predetermined as the point of entry into a specific security, stock, or currency. Once the setup price is broken the trader will enter the position determined by the setup. This could include shorting a stock because they think the price will drop or going long because they expect an upward movement.
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Shadow

What Does Shadow Mean? A small line found on a candle in a candlestick chart that is used to indicate where the price of a stock has fluctuated relative to the opening and closing prices. Essentially, these shadows illustrate the highest and lowest prices at which a security has traded over a specific time period.
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Shooting Star

What Does Shooting Star Mean?

A type of candlestick formation that results when a security's price, at some point during the day, advances well above the opening price but closes lower than the opening price.

Shooting Star

Short Interest

What Does Short Interest Mean? The total number of shares of a security that have been sold short by customers and securities firms.
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Short Interest Ratio

What Does Short Interest Ratio Mean? A sentiment indicator that is derived by dividing the short interest by the average daily volume for a stock. This indicator is used by both fundamental and technical traders to identify the prevailing sentiment the market has for a specific stock. Also known as the "short ratio".

Sideways Market

What Does Sideways Market / Sideways Drift Mean? A sideways market occurs where the price trend of a certain trading instrument, such as a stock, has been experiencing neither an uptrend nor a downtrend. Instead, the price activity has been oscillating between a relatively narrow range without forming any distinct trends. A sideways market is said to be trading in a horizontal range or channel, with neither the bears nor the bulls taking control of prices.
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Sideways Trend

What Does Sideways Trend Mean? Describes the horizontal price movement that occurs when the forces of supply and demand are nearly equal. A sideways trend is often regarded as a period of consolidation before the price continues in the direction of the previous move. A sideways price trend is also commonly known as a "horizontal trend."
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Signal Line

What Does Signal Line Mean? A moving average plotted alongside a technical indicator and is used to create transaction signals. Buy signals are generally created when the indicator crosses above the signal line, while sell signals are generated when the indicator crosses below it. A signal line is also commonly known as a "trigger line."
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Specialist Short Sale Ratio

What Does Specialist Short Sale Ratio Mean?

A ratio comparing the number of short sales made by specialists versus the total number of short sales transacted on the market.

Speed Resistance Lines

What Does Speed Resistance Lines Mean?

A tool in technical analysis that is used for determining potential areas of support and resistance. This tool, consisting of three trendlines, is created by drawing the first trendline from the most recent low to the most recent high when the asset is in an uptrend, and from the most recent high to the most recent low when the asset is in a downtrend. The other two trendlines are drawn with smaller angles in an attempt to predict areas that will act as possible barriers in the event of a retracement.

Speed Resistance Lines

Spinning Top

What Does Spinning Top Mean?

A type of candlestick formation where the real body is small despite a wide range of price movement throughout the trading day. This candle is often regarded as neutral and used to signal indecision about the future direction of the underlying asset.

Square Position

What Does Square Position Mean? A term used in foreign-exchange trading. The term "square position" denotes that the positions of the currency dealer are offsetting – the buy positions of the dealer are equal to the sell positions.
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Star

What Does Star Mean? 1. A type of candlestick formation that is identified when a small bodied-candle is positioned above the price range of the previous candle as a result of a gap in the underlying assets price. Star

Star

2. One of the four categories (quadrants) of the BCG growth-share matrix that represents the division within a company that has a large market share in a rapidly expanding industry.
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STARC Bands

What Does STARC Bands Mean? A type of technical indicator that is created by plotting two bands around a short-term simple moving average (SMA) of an underlying asset's price. The upper band is created by adding a value of the average true range (ATR) - a popular indicator used by technical traders - to the moving average. The lower band is created by subtracting a value of the ATR from the SMA. Upper STARC band = SMA + ATR^* Lower STARC band = SMA - ATR^** The average true range (ATR) is generally multiplied by a user-specific multiplier factor before being added/subtracted from the SMA.
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Stochastic Oscillator

What Does Stochastic Oscillator Mean?

A technical momentum indicator that compares a security's closing price to its price range over a given time period. The oscillator's sensitivity to market movements can be reduced by adjusting the time period or by taking a moving average of the result. This indicator is calculated with the following formula: %K = 100[(C - L14)/(H14 - L14)] C = the most recent closing price L14 = the low of the 14 previous trading sessions H14 = the highest price traded during the same 14-day period. %D = 3-period moving average of %K

Stochastic Oscillator

StochRSI

What Does StochRSI Mean? An indicator used in technical analysis that ranges between zero and one and is created by applying the Stochastic Oscillator formula to a set of Relative Strength Index (RSI) values rather than standard price data. Using RSI values within the Stochastic formula gives traders an idea of whether the current RSI value is overbought or oversold - a measure that becomes specifically useful when the RSI value is confined between its signal levels of 20 and 80.
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Stock Cycle

What Does Stock Cycle Mean? The evolution of a stock's price from an early uptrend to a price high and eventually to a downtrend. The stock cycle is a buy-and-sell cycle that occurs over several years and has four stages: 1. Accumulation 2. Markup 3. Distribution 4. Markdown
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Structural Pivot

What Does Structural Pivot Mean? A price-bar formation that gives real-time price signals of support and resistance. When a series of price bars reverses direction, it is considered a structural pivot (not a calculated pivot). The price bar has an open, high, low and close. The pivot is composed of a minimum of three bars and occurs in every time frame. The pivot lows and highs are used to draw trendlines to show support, resistance and trend direction.

Structural Pivot

Support

What Does Support (Support Level) Mean?

The price level which, historically, a stock has had difficulty falling below. It is thought of as the level at which a lot of buyers tend to enter the stock. Often referred to as the "support level".

Support

Swing

What Does Swing Mean? 1. A fluctuation in the value of an asset, liability or account. This term is most commonly used when referring to a situation in which the price of an asset experiences a significant change over a short period. 2. A short-term trading strategy in which a trader attempts to capture gains by holding a security for only a few days. Also known as "swing trading."
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Swing Trading

What Does Swing Trading Mean? A style of trading that attempts to capture gains in a stock within one to four days. Swing traders use technical analysis to look for stocks with short-term price momentum. These traders aren't interested in the fundamental or intrinsic value of stocks, but rather in their price trends and patterns.
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Symmetrical Distribution

What Does Symmetrical Distribution Mean? A situation in which the values of variables occur at regular frequencies, and the mean, median and mode occur at the same point. Unlike asymmetrical distribution, symmetrical distribution does not skew. A symmetrical distribution is commonly shaped like a bell curve when depicted on a graph. If a line is drawn down the middle of the graph, the two sides will mirror each other. Also called a "symmetric distribution" or "normal distribution."

Symmetrical Triangle

What Does Symmetrical Triangle Mean?

A chart pattern used in technical analysis that is easily recognized by the distinct shape created by two converging trendlines. The pattern is identified by drawing two trendlines that connect a series of sequentially lower peaks and a series of sequentially higher troughs. Both trendlines act as barriers that prevent the price from heading higher or lower, but once the price breaches one of these levels, a sharp movement often follows.

Symmetrical Triangle

Technical Analysis

What Does Technical Analysis Mean? A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.
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Technical Decline

What Does Technical Decline Mean? A technical decline is a fall in the price of a security caused by factors other than a change in the fundamental value of the security. Typically a security is said to experience a technical decline when the security or the overall market are trending upwards overall and the price dips downward based on technical factors. Generally the connotation is that a technical decline will prove to be only a momentarily dip in demand, followed by an appreciation back to the fair market value suggested by business fundamentals.
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Technical Indicator

What Does Technical Indicator Mean? Any class of metrics whose value is derived from generic price activity in a stock or asset. Technical indicators look to predict the future price levels, or simply the general price direction, of a security by looking at past patterns. Examples of common technical indicators include Relative Strength Index, Money Flow Index, Stochastics, MACD and Bollinger Bands.
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Technical Rally

What Does Technical Rally Mean? An upward movement in a security's price following a declining trend. The movement is caused by technical as opposed to fundamental factors affecting sentiment.
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Test

What Does Test Mean? In technical analysis, it is when a stock price approaches a support or resistance level set by the market. If the stock stays within the support and resistance levels, the test is passed. However, if the stock price reaches new lows and/or new highs, the test has failed.

Throwback

What Does Throwback Mean?

A price move back toward the entry level of a security that has broken beyond the barrier of a price pattern or trendline. The retreat toward the level of the breakout is not uncommon and is used by many traders to confirm the validity of the new momentum. Notice how the price in the chart below retests the neckline of the head and shoulders pattern before continuing its move higher.

Throwback

Thrusting Line

What Does Thrusting Line Mean? In technical analysis, the bearish or bullish thrusting line serves as a continuation indicator, adding evidence that a stock will continue its current price trend. The visual depiction of this pricing trend using candlestick graphs shows the second day of trading closing the opposite direction of the first, but failing to break through the midpoint of the real body (the range between the opening and closing prices).
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Trade Signal

What Does Trade Signal Mean? A sign, usually based on technical indicators, that it is a good time to buy or sell a particular security. Trade signals come in a variety of forms, including bull or bear pennants, rectangles, triangles and wedges, as well as head-and-shoulders chart patterns. Trade signals may also bring attention to abnormal volumes, options activity and short interest.

Trend Analysis

What Does Trend Analysis Mean? An aspect of technical analysis that tries to predict the future movement of a stock based on past data. Trend analysis is based on the idea that what has happened in the past gives traders an idea of what will happen in the future. There are three main types of trends: short-, intermediate- and long-term.
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Tri-Star

What Does Tri-Star Mean?

A type of candlestick pattern that signals a reversal in the current trend. This pattern is formed when three consecutive doji candlesticks appear at the end of a prolonged trend. The chart below illustrates a bearish tri-star pattern at the top of the uptrend and is used to mark the beginning of a shift in momentum.

Tri-Star

Triangle

What Does Triangle Mean?

A technical analysis pattern created by drawing trendlines along a price range that gets narrower over time because of lower tops and higher bottoms. Variations of a triangle include ascending and descending triangles. Triangles are very similar to wedges and pennants.

Triangle

Trigger Line

What Does Trigger Line Mean? A moving-average line found in the moving average convergence divergence (MACD) theory, which is used to signal buy or sell points for a security. The trigger line interacts with the two moving averages that form the MACD line and attempts to predict upcoming trends.
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Triple Bottom

What Does Triple Bottom Mean?

A pattern used in technical analysis to predict the reversal of a prolonged downtrend. The pattern is identified when the price of an asset creates three troughs at nearly the same price level. The third bounce off the support is an indication that buying interest (demand) is outweighing selling interest (supply) and that the trend is in the process of reversing.

Triple Bottom

Triple Top

What Does Triple Top Mean?

A pattern used in technical analysis to predict the reversal of a prolonged uptrend. This pattern is identified when the price of an asset creates three peaks at nearly the same price level. The bounce off the resistance near the third peak is a clear indication that buying interest is becoming exhausted. It is used by traders to predict the reversal of the uptrend.

Triple Top

True Strength Index - TSI

What Does True Strength Index - TSI Mean? A technical momentum indicator that helps traders determine overbought and oversold conditions of a security by incorporating the short-term purchasing momentum of the market with the lagging benefits of moving averages. Generally a 25-day exponential moving average (EMA) is applied to the difference between two share prices, and then a 13-day EMA is applied to the result, making the indicator more sensitive to prevailing market conditions. After the data is smoothed, some calculations are done to make the indicator fall in a range from +100 to -100, or from +1 to -1.
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Turtle Channel

What Does Turtle Channel Mean? A trading band created by plotting the highest and lowest prices of an asset over a certain time period around the price of that asset.

Upside Tasuki Gap

What Does Upside Tasuki Gap Mean?

A candlestick formation that is commonly used to signal the continuation of the current trend. The pattern is formed when a series of candlesticks have demonstrated the following: 1. The bar is a large white candlestick within a defined uptrend. 2. The second bar is another white candlestick that has gapped above the close of the previous bar. 3. The last bar is a red candlestick that closes within the gap between the first two bars. It is important to note that the red candle does not need to fully close the gap.

Volatility Ratio

What Does Volatility Ratio Mean? A technical indicator used to identify price ranges and breakouts. The volatility ratio uses a true price range to determine a stock's true trading range and is able to identify situations where the price has moved out of this true range.
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VWAP Cross

What Does VWAP Cross Mean? A trading indicator that occurs when the current price crosses over the volume-weighted average price (VWAP). Since the VWAP provides a measure of the average price within a time period, traders often look to buy a security at a VWAP cross price lower than the VWAP. Conversely, when the current price crosses above the VWAP, it may be an indicator to sell.
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W-Shaped Recovery

What Does W-Shaped Recovery Mean? An economic cycle of recession and recovery that resembles a "W" in charting. A W-shaped recovery represents the shape of the chart of certain economic measures such as employment, GDP, industrial output, etc. A W-shaped recovery involves a sharp decline in these metrics followed by a sharp rise back to the previous peak, followed again by a sharp decline and ending with another sharp rise. The middle section of the W can represent a significant bear market rally or a recovery that was stifled by an additional economic crisis.
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Wave

What Does Wave Mean? A pattern of behavior marked by noticeable increases and decreases. Waves can be identified in stock price movements and in consumer behavior. Investors trying to profit from a market trend could be described as "riding a wave". A large, strong movement by homeowners to replace their existing mortgages with new ones that have better terms is called a refinancing wave.

Weak Shorts

What Does Weak Shorts Mean? Refers to the group of investors who hold a short position and are quick to exit their positions at the first sign of strength in the underlying asset. This group of investors looks to capture the gain on a move lower, but they are usually unwilling to take on as much risk as other investors.
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Wedge

What Does Wedge Mean?

A technical chart pattern composed of two converging lines connecting a series of peaks and troughs.

Wedge

Weekly Chart

What Does Weekly Chart Mean? A chart where each data point is comprised of the price movement for a single week of trading. This type of chart typically shows high, low, open, and close for the whole week and does not show the day-to-day movements of the security. This type of chart is used by technical analysts to gauge the long-term trend of a given asset.
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Weighted Alpha

What Does Weighted Alpha Mean? A weighted measure of how much a stock has risen or fallen over a certain period, usually a year. Generally, more emphasis is placed on recent activity by assigning higher weights to it than those assigned to earlier movements. This helps to give a return figure that has a greater focus on the most current period and is a more relevant measure for short-term analysis. This technique is popular with technical analysts.
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White Candlestick

What Does White Candlestick Mean?

A point on a candle stick chart representing a day in which the underlying price has moved up. Candlesticks will have a body and usually two wicks on each end. The bottom of the white body represents the opening price and the top of the body represents the closing price. The top and bottom tips of each wick are the day's highest and lowest price respectively. Also known as an "open candlestick."

White Candlestick

Williams %R

What Does Williams %R Mean?

In technical analysis, this is a momentum indicator measuring overbought and oversold levels, similar to a stochastic oscillator. It was developed by Larry Williams and compares a stock's close to the high-low range over a certain period of time, usually 14 days.

Williams %R

Wolfe Wave

What Does Wolfe Wave Mean?

In technical analysis, it is a naturally occurring trading pattern present in all financial markets. The pattern is composed of five waves showing supply and demand and a fight towards an equilibrium price. These patterns can develop over short- and long-term time frames such as minutes or weeks and are used to predict where a price is heading and when it will get there.

Wolfe Wave

Source: www.harmonictrader.com

Zone Of Resistance

What Does Zone Of Resistance Mean? A price zone in which a stock finds resistance and begins to trade downward. In technical analysis, that support occurs not at a finite point, but in a zone. The "density" of the zone of resistance (how far up the price can move through it), depends on the volume of trading as the price approaches and enters the zone. The higher the volume of trading in the zone of resistance, the lower the point at which the actual resistance will most likely occur.
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Zone Of Support

What Does Zone Of Support Mean? A price zone in which a stock finds support and begins to trade upward once again. In technical analysis, support occurs not at a finite point, but in a zone. The "density" of the zone of support (how far the price can move down through it) depends on the volume of trading as the price approaches and enters the zone. The higher the volume of trading in the zone of support, the higher the point at which actual support will most likely occur.
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