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Definition of
Technical Terms
Apex - The point where the
two trendlines in a triangle converge.
Arithmetic Chart - With
arithmetic, the distance between each point of a chart is equal on a
vertical scale. It represents equal amount in currency terms.
Ascending Triangle - A
special form of symmetrical triangle wherein the upper boundary is
formed at an angle of 90 degrees, i.e., horizontal to the vertical axis.
Ask
- Lowest price that
an investor will sell for a tradable.
Average True Range - An
indicator that measures a security's volatility.
Bear Market - A securities
market characterized thus based on declining prices.
Bear Trap - A situation
wherein prices trigger a sell signal by breaking below a consolidation
but suddenly climbs back up and re-enter the consolidation.
Beta (Coefficient) - A
measure of the market/nondiversifiable risk associated with any given
security in the market. A ratio of an individual's stock historical
returns to the historical returns of the stock market.
- Bid - Highest price that
an investor will pay for a tradable.
Body - In Japanese
Candlesticks, the box that makes up the difference between the open and
close within a single candle.
Breakaway Gap - This type
of gap usually occurs when a price breaks out of a price pattern.
Breakout - The point when
the market price moves above a consolidation pattern.
Breakdown - The point when
the market price moves below a consolidation pattern.
Bull Market - A securities
market characterized by rising prices.
Bull Trap - A situation
wherein prices trigger a buy signal by breaking above a consolidation
but suddenly drops back down and re-enter the consolidation.
Candlestick Charts - A
charting method, originally from Japan, in which the high and low are
plotted as a single line and are referred to as shadows. The price range
between the open and the close is plotted as a narrow rectangle and is
referred to as the body. If the close is above the open, the body is
white. If the close is below the open, the body is black.
Channel - In charting, a
price channel contains prices throughout a trend. There are three basic
ways to draw channels: parallel, rounded and channels that connect lows
(bear trend) or highs (bull trend).
Consolidation - Also known
as a congestion period. A pause that allows participants in a market to
reevaluate the market and sets the stage for the next price move.
Correction - Any price
reaction within the market leading to an adjustment by as much as
one-third to two-thirds of the previous gain.
Cup and Handle - An
accumulation pattern observed on bar charts. The pattern lasts from
seven to 65 weeks; the cup is in the shape of a "U" and the handle is
usually more than one or two weeks in duration. The handle is a slight
downward drift with low trading volume from the right-hand side of the
formation.
Cycle - A variation where
a point of observation returns to its origin.
Dark Cloud Cover - In
Japanese Candlesticks, this pattern is a bearish reversal pattern and
occurs only during uptrends. The first day is a long white candle which
supports the trend. The second day opens above the high of the white day
but closes below the midpoint of the range of the first day.
Dead Cat Bounce - A rally
within a bear market.
Descending Triangle - A
special form of symmetrical triangle wherein the lower boundary is
formed at an angle of 90 degrees, i.e., horizontal to the vertical axis.
Divergence - When two or
more prices or indicators fail to show confirming trends.
Doji - In Japanese
Candlesticks, a single candle pattern wherein the open and close for
that candle are the same.
Double Bottom (Top) - The
price action of a security or market average where it has declined
(advanced) two times to the same approximate level, indicating the
existence of a support (resistance) level and a possibility that the
down ward (upward) trend has ended.
Double Top - See
Double Bottom. A price pattern seen on a chart. The patterns occurs when
prices rise to a resistance level on significant volume, retreat to a
support level, and subsequently return to the resistance level on
decreased volume. Prices then decline and break through the support
level, marking the beginning of a new downtrend in the price of the
stock.
Engulfing Pattern - In
Japanese Candlesticks, the pattern consists of two candles of opposite
colors, wherein the second day's candle completely engulfs the prior
day's candle.
Entry - The point at which
a trader gets into a position in the market.
Equilibrium Market - A
price region that represents a balance between demand and supply.
Evening Star Pattern - In
Japanese Candlesticks, the pattern is three candle bearish reversal
pattern. The first day is a long white candle. The second day gaps up
above the first day but forms a small body. The third day is a black
candle the moves into the first day's white body.
Exhaustion Gap - This type
of gap occurs after a very long ascent or descent wherein prices have
gapped two or more times already. The exhaustion gap is associated with
the terminal phase of a trend.
Exit - The point at which a
trader closes out of a trade.
Extreme - The highest or
lowest price during any time period, a price extreme.
Failure Swings - The
inability of price to reaffirm a new high in an uptrend or a new low in
a downtrend.
Falling Wedge - Represents
a temporary interruption of a rising trend. It is a pattern that
consists of two converging trendlines with both trendlines falling.
Fibonacci Ratio - The ratio
between any two successive numbers in the Fibonacci sequence, known as
phi (f). The ratio of any number to the next higher number is
approximately 0.618 (known as the Golden Mean or Golden Ratio), and to
the lower number approximately 1.618 (the inverse of the Golden Mean),
after the first four numbers of the series. The three important ratios
the series provides are 0.618, 1.0 and 1.618.
Flag - As the name implies,
looks like a flag on the chart. It is sideways market
price action that has a slight drift in price counter to the direction
of the main trend; a consolidation phase.
Gap - A day in which the
daily range is completely above or below the previous day's daily range.
Hammer - In Japanese
Candlesticks, a single candle pattern that occurs in a downtrend,
wherein the candle has a long lower shadow and a small body.
Harami - In Japanese
Candlesticks, a small candle contained within a relatively long candle.
Head and Shoulders - The
pattern consists of a final rally (the head) separating two smaller,
though not necessarily identical, rallies (the shoulders). The first
shoulder is the penultimate advance in the bull market, and the second
is in effect the first bear market rally.
Inside Day - A day in which
the daily price range is completely within the previous day's daily
price range.
Island Reversal - The
pattern occurs at the end of a sustained move and isolated from a
previous price behavior by an exhaustion gap and a breakaway gap.
Mental Stop-Loss - A
stop-loss order kept in your head instead of instructing your broker.
Momentum - A time series
representing change of today's price from some fixed number of days back
in history.
Momentum Indicator - A
market indicator utilizing price and volume statistics for predicting
the strength or weakness of a current market and any overbought or
oversold conditions, and to note turning points within the market.
Morning Star - In Japanese
Candlesticks, the pattern is three candle bullish reversal pattern. The
first day is a long black candle. The second day gaps down below the
first day but forms a small body. The third day is a white candle the
moves into the first day's black body.
Moving Average - A
mathematical procedure to smooth or eliminate the fluctuations in data
and to assist in determining when to buy and sell. Moving averages
emphasize the direction of a trend, confirm trend reversals and smooth
out price and volume fluctuations or "noise" that can confuse
interpretation of the market; the sum of a value plus a selected number
of previous values divided by the total number of values.
Neckline - A trendline
drawn along the support or resistance points of various reversal and
consolidation pattern (i.e., head and shoulder, double and triple
top/bottom formations).
Outside Day - A day in
which the previous daily price range is completely within the day's
daily price range.
Overbought - Market prices
that have risen too steeply and too fast.
Oversold - Market prices
that have declined too steeply and too fast.
Parabolic -
Of, having the form of or relating to a parabola.
Pennant - As the name
implies, looks like a pennant on the chart. It is sideways market
price action that has a slight drift in price counter to the direction
of the main trend; a consolidation phase.
Piercing Line - In
Japanese Candlesticks, this patterns occurs in a downtrend and is a two
candle pattern. The first day is black which supports the downtrend and
the second day is a long white candle which opens at a new low and then
closes above the midpoint of the preceding black day.
Pivot Point - In market
activity, a price reversal point.
Range - The difference
between the high and low price during a given period.
Rectangle - A consolidation
pattern that is formed by two parallel trendlines acting as its support
and resistance.
Resistance - A price level
at which rising prices have stopped rising and either moved sideways or
reversed direction; usually seen as a price chart pattern.
Resistance Line - On a
chart, a line drawn indicating the price level at which rising prices
have stopped rising and have moved sideways or reversed direction.
Relative Strength - A
comparison of the price performance of a stock to a market index such as
the Phisix stock index.
Retracement - A price
movement in the opposite direction of the previous trend.
Reverse Head and Shoulders
- The opposite of a Head and Shoulders pattern. It consists of a final
ascent (the head) separating two smaller, though not necessarily
identical, ascent (the shoulders). The first shoulder is the penultimate
decline in the bull market, and the second is in effect the first bull
market rally.
Rising Wedge - Represents
a temporary interruption of a falling trend. It is a pattern that
consists of two converging trendlines with both trendlines rising.
Runaway Gap - This type of
gap often occurs halfway between a previous breakout and the ultimate
duration of the move. It occurs during a straight-line advance or
decline when price quotations are moving rapidly and emotions are
running high.
Semi-logarithmic Chart - With semilog, the distance between each point of a chart is exponential.
Semilog scaling is used to compare relative price changes rather than
physical point changes.
Shadows - In Japanese
Candlesticks, the shadows represents the high and low prices reached
during the candle.
Shooting Star - In
Japanese Candlesticks, a single candle pattern wherein a gap occurs in
the open and prices rally to try to form a long white candle. Prices
weaken during the day and closes near the low.
Spike - A sharp rise in
price in a single day or two; may be as great as 15-30%, indicating the
time for an immediate sale.
Star - In
Japanese Candlesticks, a small body that gaps above or below the
previous day's long body.
Stop Loss -
The risk management technique in which the trade is liquidated to halt
any further decline in value.
Stops - Buy
stops are orders that are placed at a predetermined price over the
current price of the market. The order becomes a "buy at the market"
order if the market is at or above to the price of the stop order. Sell
stops are orders that are placed with a predetermined price below the
current price. Sell-stop orders become "Sell at the market" orders if
the market trades at or below the price of the stop order.
Support - A
historical price level at which falling prices have stopped falling and
either moved sideways or reversed direction; usually seen as a price
chart pattern.
Support Line
- On a chart, a line drawn indicating the price level at which falling
prices have stopped falling and have moved sideways or reversed
direction.
Symmetrical Triangle
- The pattern is composed of a series of two or more rallies and
reactions in which each succeeding peak is lower than its predecessor,
and the bottom from each succeeding reaction is higher than its
predecessor. The trendlines joining the peaks and troughs of the pattern
converge.
Trading Range
- The difference between the high and low prices traded during a period
of time; in commodities, the high/low price limit established by the
exchange for a specific commodity for any one day's trading.
Trailing Stop
- A stop-loss order that follows the prevailing price trend.
Trend - The
general drift, tendency or bent of a set of statistical data as related
to time.
Trend Channel -
A parallel probable price range centered about the most likely price
line. Historically, this term has been used to denote the area between
the base trendline and the reaction trendline defined by price moves
against the prevailing trend.
Trend-Following
- Moving in the direction of the prevailing price movement.
Trending Market
- Price moves in a single direction, generally closing at an extreme for
the day.
Trendless -
Price movement that vacillates to the degree that a clear trend cannot
be identified.
Trendline -
A line drawn that connects either a series of highs or lows in a trend.
The trendline can represent either support as in an uptrend line or
resistance as in a downtrend line. Consolidations are marked by
horizontal trendlines.
Triangle -
A pattern that exhibits a series of narrower price fluctuations over
time; top and bottom boundaries need not be of equal length.
Tweezers Bottoms
and Tops - In Japanese Candlesticks. both candles must have
identical highs and lows. Significant when found at contract highs or
lows, and can indicate a breakout.
V-Reversals
- Abrupt reversals of a trend with little or no prior warning. In a
bullish V-Reversal pattern, no higher low occurs. From a lower low,
prices climb and simply makes a higher high. In a bearish V-Reversal
pattern, no lower high occurs. From a higher high, prices climb and
simply makes a lower low.
Valid Trendline
- A Trendline wherein there are more than two troughs or peaks that make
up the Trendline.
Value Turnover -
The value of transactions for a given market or tradable within a
specified time period.
Volatility
- A measure of a stock's tendency to move up and down in price, based on
its daily price history over the latest 12 months.
Volume -
The shares that are traded for a given market or tradable within a
specified time period.
Whipsaw - A
situation wherein after a trader takes a long position, prices drops
down. Or, after a trader takes a short position, prices climbs up.
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