Definition of Technical Terms

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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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