Technical Bazaar

Technical Abbrevieations

Technical Abbrevieations, Indicators and Parameters

Absolute Price Oscillator (APO): An indicator based on the difference between two exponential moving averages, and is expressed in absolute terms. Also known as the MACD indicator, the APO is calculated by subtracting the longer EMA from the shorter EMA.
Accrued Interest: The amount of interest that has been earned since the last interest payment date. When a bond trades, the buyer pays the seller the accrued interest - a pro rata portion of the next interest payment, which will be paid to the buyer of the bond.
Accumulation: The act of buying more shares of a security without causing the price to increase significantly. After a decline, a stock may start to base and trade sideways for an extended period. While this base builds, well-informed traders and investors may seek to establish or increase existing long positions. In that case, the stock is said to have come under accumulation.
Accumulation Distribution Line: A momentum indicator that relates price changes with volume. It relates the closing price to the range of prices (H - L). The closer the close is to the high, the more volume is added to the cumulative total.
In summary, the Accumulative Swing Index is best used as a confirmation tool with other technical indicators and charting patterns
Advance Decline Line: One of the most widely used indicators to measure the breadth of a stock market advance or decline. The AD line tracks the net difference between advancing and declining issues. It is usually compared to a market average where divergence from that average would be an early indication of a possible trend reversal.
Advance Decline Ratio: The ratio of advancing issues over declining issues. Taking the moving average of the AD ratio will smooth it so it can be used as an overbought and oversold indicator.
Advancing: A market stage of a stock that is characterized by an up trend with subsequently higher highs and higher lows.
Advancing Declining Issues: A market momentum indicator using the advancing issues and the declining issues. It subtracts the declining issues from the advancing ones and is usually smoothed to make it a good overbought oversold indictor.
Adverse Excursion: The loss attributable to price movement against the position in any single trade.
After Hours: Any trade posting, adjusting, or changes made by specialists or member firm after the official close of the market.
Against Actuals: A transaction generally used by two hedgers who want to exchange futures or cash positions.
Analysis of Variance: A technique used to improve the analysis over regression techniques. It can be used for identifying relationships between predictor and criterion variables, whether the predictor variables are quantitative or qualitative in nature.
Analyst: A person with expertise in evaluating financial instruments; he or she performs investment research and makes recommendations to institutional and retail investors to buy, sell, or hold. Most analysts specialize in a single industry or business sector.
Andrew's Pitchfork: Developed by Alan Andrews, this concept that uses three parallel lines drawn from three points that you select. The points selected to begin the pitchfork are usually three consecutive major peaks or troughs. The three parallel lines extending out to the right are used as normal support and resistance points.
Announcement Date: The date on which a company first publicly announces an impending stock split.
Annualized: The translation of periods of less than a year into an annual rate for comparative purposes. To annualize quarterly figures, you multiply them by four.
Arbitrage: The simultaneous buying and selling of securities to take advantage of price discrepancies. Arbitrage opportunities usually surface after a takeover offer.
Area Pattern: A pattern of sideways price movement that follows a stalled up trend or downtrend of a stock or commodity. Some of these patterns (triangles, flags, wedges etc.) have good predictive value.
Arithmetic (Linear) Scaling: On an Arithmetic (Linear) scale chart, the spacing between each point on the vertical scale is identical. Thus the vertical distance between 10 and 20 is the same as the vertical distance between 90 and 100.
Aroon: An indicator system that can be used to determine whether or not a stock is trending and the strength of its trend. The Aroon Oscillator signals an upward trend when it rises above zero and a downward trend when it falls below zero. The farther away the oscillator is from the zero line, the stronger the trend
Aroon Oscillator: An indicator called the Aroon Oscillator can be constructed by subtracting Aroon(down) from Aroon(up). Since Aroon(up) and Aroon(down) oscillate between 0 and +100, the Aroon Oscillator oscillate between -100 and +100 with zero as the center crossover line
The Aroon indicator is used to help traders know when a market is up trending, down trending, or is in a range-bound, trundles market.
Knowing when a market is trending is very useful, mainly because trend following technical analysis indicators are profitable during trending markets but cause losses during non-directional markets. Similarly, oscillators are extremely profitable indicators during range-bound markets, but perform very poorly during strong trending markets. The Aroon indicator can show which mode the market is in.
Ascending Trend Channel: An ascending line that connects the bottoms of the down waves and is parallel to a trend line. The ascending channel line and the trend line form borders on an up trend.
Ascending Triangle: A sideways price pattern between two converging trend lines in which the lower line is rising while the upper line is flat. This is generally a bullish pattern.
Ask: Also known as the "offer", the price that the market maker guarantees to fill a buy order. A buy order placed at the market will usually be filled at the current asking (offer) price. The ask price is usually greater than the bid price.
Average Directional Index (ADX): Part of the Directional Movement Indicator system developed by J. Welles Wilder, the ADX line is based on the spread between the +DI and -DI lines from that same system
The Average Directional Movement Index (ADX) technical analysis indicator describes when a market is trending or not trending. When combined with the DMI+ plus and DMI- minus (see: DMI) the ADX can generate buy and sell signals. However, the main purpose of the ADX is to determine whether a stock, future, or currency pair is trending or is in a trading range. Determining which mode a market is in is helpful because it can guide an investor or trader as to which other technical analysis indicators to use.
Trending Market: Use moving averages, trendlines, and other trend following technical indicators.
Trading Range Market: Use oscillators like Stochastic Fast & Slow, RSI, or Williams %R and other range-bound indicators like Bollinger Bands or Moving Average Envelopes.
The ADX is so popular because determining whether a stock, commodity, or currency market is trending or not trending can help a trader avoid the pitfalls of some indicators.
Moving Averages: Moving averages and their variants are effective during trending markets; however, during consolidation periods when prices go up and down, but in no direction, moving average indicators have a tendency to give numerous false buy and sell signals that add up to stock trading, futures trading, or currency trading losses.
Oscillators: Oscillators are extremely effective in non-trending markets. Buying low and selling high is accomplished quite readily with oscillators. Unfortunately, during trending markets, oscillators perform quite poorly, often selling short during a bull market run or buying during a bear market downtrend, adding up to large losses.
Average True Range (ATR): An indicator that measures a security's volatility. High ATR values indicate high volatility and may be an indication of panic selling or panic buying. Low ATR readings indicate sideways movement by the stock.
Back Testing: A strategy that is optimized on historical data, and then applied to current data to see if the results are similar. Rarely done properly and usually resort to a form of curve fitting.
Bar Chart: A popular way to display and analyze financial price information in graphical form. The horizontal axis of a bar chart represents the passage of time with the most recent time periods on the right side while the vertical axis represents the stock's price.
Basing: A period where the stock or market is "catching its breath" after a decline, characterized by a flat trading range without any noticeable trend. It is common to see a basing period after a lengthy decline of the stock price. Basing may be a sign of accumulation.
Basis: The difference between cash prices and the futures contract prices.
Bear: A person who believes prices will decline and might be described as having a "bearish" outlook. Bear markets occur when roughly 80% of all stocks decline for an extended period of time.
Bear Market: A long period of time when prices in the market are generally declining. It is often measured by a percentage decline of more than 20%.
Bear Trap: A situation that occurs when prices break below a significant level and generate a sell signal, but then reverse course and negate the sell signal, thus "trapping" the bears that acted on the signal with losses. A bear trap is another form of whipsaw and relates to the spring.
Bid: The price at which the market maker guarantees to fill a sell order. A sell order placed at the market will usually be filled at the current bid price. The bid price is usually less than the ask price.
Blue Chip Stock: A well known, public company that is thought to be in good financial shape and have sound fundamentals (profitability, earnings). An investment in a blue chip is regarded as a safe investment.
Bollinger Bands: An indicator that allows users to compare volatility and relative price levels over a period of time. It consists of three bands designed to encompass the majority of a security's price action. Prices will often meet resistance at the upper band and support at the lower band
Bollinger Bands is a versatile tool combining moving averages and standard deviations and is one of the most popular technical analysis tools available for traders. There are three components to the Bollinger Band indicator:
Moving Average: By default, a 20-period simple moving average is used.
Upper Band: The upper band is usually 2 standard deviations (calculated from 20-periods of closing data) above the moving average.
Lower Band: The lower band is usually 2 standard deviations below the moving average.
Bond Price: Not to be confused with bond yield, it is the amount an investor pays to buy a bond. Bond prices and interest rates have an inverse relationship: when rates rise, bond prices fall; when rates decline, bond prices rise.
Bond Yield: The return an investor would earn if a bond was purchased and held to maturity. Usually, the longer the term of a bond, the higher the interest rate that's paid to the holder, compensating for the inflation risk of having money tied up for a long time. To determine the yield, divide the interest rate by the purchase price of the bond.
Box Size: In Point & Figure charts, it is the price value of one "X" or "O". An X is shown when prices rise by the box size, and an O is shown when prices fall by the box size. Increasing the box size filters smaller price movements.
Breadth: A comparison of the number of issues traded with the number of issues listed for trading. A measurement of the number of issues advancing versus the number of issues declining on a given day or as a moving average. Many measurements are used: advances divided by declines, as a percentage, advances minus declines as a net positive or negative number. The measurement consistently followed is an insight into investor sentiment and is used extensively by market analysts.
Breadth Thrust: Martin Zweig developed this momentum indicator that illustrates a "thrust" when, during a 10-day period, the average number of issues that are advancing goes from below 40% to above 61.5%. This means the market went from being oversold to one of strength, but is not yet considered overbought.
Breakout: Price of a security emerging from a previous trading pattern. The new price "breaks out" above the high (or below the low) trading pattern lines that enclose all other prices for that security in the preceding period. Technical analysts to predict substantial upside or downside movement use breakouts.
Bull: A person who believes prices will advance and might be described as having a "bullish" outlook. Bull markets occur when roughly 80% of all stocks advance over an extended period of time
Bull Bear Ratio: The Investor's Intelligence market sentiment indicator, which shows the relationship between bullish and bearish advisors. It is interpreted as a contrary indicator, meaning that if it reflects extreme bullishness, the market is probably at a top.
Bull Market: A long period of time when prices in the market are generally increasing.
Bull Trap: A situation that occurs when prices break above a significant level and generate a buy signal, but suddenly reverse course and negate the buy signal, thus "trapping" the bulls that acted on the signal with losses. A bull trap is another form of whipsaw and relates to the up thrust.
Bullish Percent Index (BPI): A popular market breadth indicator that is calculated by dividing the number of stocks in a given group (an exchange, an industry, etc.) that are currently trading with Point and Figure buy signals, by the total number of stocks in that group. BPI can be used to determine overbought/oversold conditions and can generate buy/sell signals. It is important to note that the Bullish Percent Index is not something that can be applied to a single stock but rather an index that is calculated for a group of
Bump and Run Reversal: A reversal chart pattern that forms after excessive speculation drives prices up too far, too fast. It is designed to identify speculative advances that are unsustainable for a long period.
Buy Signal: A condition that indicates a good time to buy a stock. The indicator will determine the exact circumstances of the signal that an analyst is using. For example, it's considered a buy signal when the MACD crosses above its signal line.
Buy Stop: A buy order usually placed above the current price, ensuring that a security would have to trade at the set level before the buy order would be activated. At 100 by placing a buy stop order just above resistance, a trader can ensure that the security will break resistance before going long. On the other hand, traders looking to catch a bottom or intrude low might place a buy stop below the current price, but near support.
Buyback: A company's repurchase of it's own shares of stock.
Buying Climax: A sudden upward movement in the market value of a security characterized by a gap in the prices between one trading session and the next. Used by technical analysts and often considered an indication that a security has been overbought and the price will fall.
Buying on Margin: A risky short-term strategy where a buyer borrows money from a broker to make an investment. The buyer believes the stock price will rise and is trying to maximize profits by investing more money in the stock.
Capital Gain: The profit derived from the selling price exceeding its initial purchase price. A realized capital gain is an investment that has been sold at a profit. An unrealized capital gain is an investment that hasn't been sold yet but would result in a profit if sold. Capital gain is often used to mean realized capital gain.
Chaikin Money Flow (CMF): An oscillator that helps signal if a stock is undergoing accumulation or distribution. It is calculated from the daily readings of the Accumulation Distribution Line. The CMF is unlike a momentum oscillator in that it is not influenced by the daily price change. Instead, the indicator focuses on the location of the close relative to the range for the period (daily or weekly).
Chaikin Oscillator: This is a moving average of the Accumulation Distribution Line. It was developed by Marc Chaikin. It is created by subtracting a 10 period exponential moving average of the accumulation/distribution line from a 3 period exponential average of it.
Channel: When prices trend between two parallel trendlines, this is referred to as a channel.
Channel Line: A straight-line drawn parallel to the basic trendline. In an up trend, the channel line slants up to the right and is drawn above rally peaks; in a downtrend, the channel line is drawn below price troughs and slants down to the right. Prices often meet resistance at rising channel lines and support at falling channel lines. .
Commodity Channel Index (CCI): Developed by Donald Lambert, the CCI is an indicator designed to identify cyclical turns in commodities. It may also be applied to stocks or bonds .
The Commodity Channel Index (CCI) is a very popular indicator that gives easy to use buy and sell signals; the CCI also is used to identify overbought and oversold areas of price action. The CCI is calculated so that roughly 75% of price movement should be between +100 (overbought) and -100 (oversold).
Confirmation: A subsequent signal that validates a position stance. Traders and investors sometimes look for more than one signal or require validation before acting. For example: confirmation of a trend change may entail an advance past the previous reaction high. For an indicator such as MACD, confirmation of a divergence may be a subsequent moving average crossover.
Continuation Pattern: A type of chart pattern that occurs in the middle of an existing trend. The previous trend resumes when the pattern is complete. Examples include the Rectangle and Pennant continuation patterns. For more continuation patters,
Correction: After an advance, a decline that does not penetrate the low from which the advance began is known as a correction. Also referred to as a retracement, a correction usually retraces 1/3 to 2/3 of the previous advance.
Crossover: A point on a graph where two lines intersect. Depending on which lines they are, a crossover may indicate a buy or sell signal. For example, the price line crossing above a moving average line may generate a buy signal. Oscillators such as MACD and Chaikin Money Flow experience centerline crossovers.
Cup with Handle: A bullish chart pattern that marks a consolidation period followed by a breakout. The "cup" part of the pattern resembles a rounding bottom, and is followed by a "handle" that acts as a final consolidation before a breakout.
Cyclical Stocks: Shares of companies that are highly sensitive to economic performance. Cyclical stocks tend to perform well when the economy is growing and suffer when the economy contracts.
Day Trading: A style of trading where all positions are cleared before the end of the trading day. Contrast this with position trading, where stocks or securities may be held for longer periods.
Declining: A market stage of a stock that is characterized by a downtrend with subsequently lower highs and lower lows.
Descending Triangle: A sideways price pattern between two converging trendlines in which the upper trendline is descending while the lower line is flat. This is generally a bearish pattern.
Directional Movement Indicator (DMI): An indicator that plots a positive +DI line measuring buying pressure and a negative -DI line measuring selling pressure. The DMI pattern is bullish as long as the +DI line is above the -DI line. The Average Directional Index line is derived from this system and is based on the spread between the +DI and -DI lines.
Distribution: The systematic selling of a security without significantly affecting the price. After an advance, a stock may start forming a top and trade sideways for an extended period. While this top forms, a security's shares may experience distribution as well-informed traders or investors seek to unload positions. A quiet distribution period is usually subtle and not enough to put downward pressure on the price. More aggressive distribution will likely put downward pressure on prices.
Divergence: A situation that occurs when two lines on a chart move in opposite directions vertically. People often look for divergences by comparing a stock's direction to the direction of its RSI, its MACD or it’s Stochastic Oscillator. There are two kinds of divergences: positive and negative. A positive divergence occurs when the indicator moves higher while the stock is declining. A negative divergence occurs when the indicator moves lower while the stock is rising.
Double Bottom: A bullish reversal chart pattern showing two consecutive troughs that are roughly equal, with a moderate peak in-between, concluding with a resistance breakout.
Double Top: A bearish reversal chart pattern displaying two prominent peaks that are roughly equal, with a moderate trough in-between, concluding with a support break.
Dow Theory:One of the oldest and most highly regarded technical theories. A Dow theory buy signal is given when the Dow Industrial and Dow Transportation averages close above a prior rally peak. A sell signal is given when both averages close below a prior reaction low. Down Trendline: A straight line drawn down and to the right above successive rally peaks. The longer the down trendline has been in effect and the more times it has been tested, the more significant it becomes. A violation of the down trendline usually signals a reversal of the downtrend

Elliott Wave Analysis: An approach to market analysis that is based on repetitive wave patterns and the Fibonacci number sequence. An ideal Elliott wave pattern shows a five wave advance followed by a three wave decline.
Envelopes: Lines that are placed at fixed percentages above and below a moving average line. Envelopes help determine when a market has traveled too far from its moving average and is overextended
Ex-Dividend Date: The first day of the ex-dividend period. If an investor does not own the stock before the ex-dividend date, they will be ineligible for the dividend payout. The exchanges automatically reduced the price of the stock by the amount of the dividend for all pending transactions that have not been completed by the ex-dividend date.
Extended (in price): A term describing a stock that has risen past its pivot point. Such a stock is considered a risky investment because it has already begun its advance and is more likely to reverse.
Falling Wedge: A bullish pattern that begins wide at the top and contracts as prices move lower toward a resistance breakout.
Fibonacci Numbers: The Fibonacci number sequence (1,2,3,5,8,13,21,34,55,89,144,) is constructed by adding the first two numbers to arrive at the third. The ratio of any number to the next number is 61.8 percent, which is a popular Fibonacci retracement number. The inverse of 61.8 percent is 38.2 percent, also used as a Fibonacci retracement number. It is the ratio of the Fibonacci sequence that is important and valuable, not the actual numbers in the sequence.
Flag: A continuation chart pattern that generally lasts less than three weeks and resembles a parallelogram that slopes against the prevailing trend. The flag represents a minor pause in a dynamic price trend.
Fundamental Analysis: A market analyst that relies on economic supply and demand information as opposed to focusing on charts and market indicators for a technical analysis.
Futures: Futures contracts are forward contracts, meaning they represent a pledge to make a certain transaction at a future date. These exchange-traded contracts require the delivery of a commodity, bond, currency, or stock index, at a specified price, on a specified future date.
Head and Shoulders Bottom: A bullish reversal pattern marked by three (or more) prominent troughs with a middle trough (the head) that is lower than the other troughs (the shoulders). When the trendline (neckline) connecting the peaks at the top of the pattern is broken, the pattern is complete.
Head and Shoulders Top: A bearish reversal pattern marked by three (or more) prominent peaks with a middle peak (the head) that is higher than the other peaks (the shoulders). When the trendline (neckline) connecting the troughs at the bottom of the pattern is broken, the pattern is complete. .
Indicator: A value, usually derived from a stock's price or volume that an investor can use to try to anticipate future price movements. Indicators are divided into two groups: trend following or lagging and momentum or leading. Lagging indicators tell you what prices are doing now, or in the recent past, so they are useful when stocks are trending. A moving average is an example of a lagging indicator. Leading indicators are designed to anticipate future price action and many come in the form of oscillators. RSI is an example of a momentum indicator.
Industry: A grouping of companies in the same line of business. Industry groupings are more specific to the business than sector groupings
Initial Public Offering (IPO): The first offering of common stock to the public.
Intermarket Analysis: An additional aspect of market analysis that takes into consideration the price action of related market sectors. The four sectors are currencies, commodities, bonds, and stocks. International markets are also included. This approach is based on the premise that all markets are interrelated and impact on one another.
Keltner Channels: The Keltner Channel is a moving average band indicator whose upper and lower bands adapt to changes in volatility by using the average true range. The Keltner Channel is used to signal price breakouts, show trend, and give overbought and oversold readings.
There are many variations to calculating the Keltner Channel, but generally speaking a moving average (10 or 20-period) of the typical price [(High + Low + Close)/3] is used to construct the midline. Then the average true range is calculated over a time period (same as midline, 10 or 20-period) and multiplied by a multiple (usually 1.5); the calculated number is then added to the midline to form the upper Keltner Channel and subtracted from the midline to form the lower Keltner Channel.
Key Reversal Day: a one-day chart pattern where prices sharply reverse during a trend. In an up trend, prices open in new highs and then close below the previous day's closing price. In a downtrend, prices open lower and then close higher. The wider the price range on the key reversal day and the heavier the volume, the greater the odds that a reversal is taking place.
Laggard: An industry or company that is under performing the market.
Leader: An industry or company that is outperforming the market.
Limit Order: An order to buy or sell a security at a specific price. As opposed to a market order, limit orders might not be filled immediately if the market moves away from the specified price.
Line Chart: Price charts that connect the closing prices of a given market over a span of time that form a curving line on the chart. This type of chart is most useful with overlay or comparison charts that are commonly employed in intermarket analysis. It is also used for visual trend analysis of open-end mutual funds.
Linear (Arithmetic) Scaling: On a linear (arithmetic) scale chart, the spacing between each point on the vertical scale is identical. Thus the vertical distance between 10 and 20 is the same as the vertical distance between 90 and 100. While this kind of scaling is intuitive and easy to recreate by hand, linear scaling should not be used on charts with large vertical ranges. A move from 10 to 20 is much better than a move from 90 to 100, but on a linear scale they both appear the same.
Liquidity: The ease with which a stock may be bought or sold in volume on the marketplace without causing dramatic price fluctuations. A large volume of trading and a large pool of interested buyers and sellers characterize a highly liquid stock.
Logarithmic (Percentage) Scaling: On a logarithmic scale chart, the vertical spacing between two points corresponds to the percentage change between those numbers. Thus, on a log scale chart, the vertical distance between 10 and 20 (a 100% increase) is the same as the vertical distance between 50 and 100. Because these charts show percentage relationships, logarithmic scaling is also called "percentage" scaling. It is also called "semi-log" scaling because only one of the axes (the vertical one) is scaled logarithmically.
Low Pole (LP): A situation on a Point and Figure Chart that occurs when a down column that falls 3 boxes or more reverses to an up column. The reversal retraces more than 50% of a down move that has an odd number of "O's", or retraces more than 62.5% of a down move that has an even number of "O's". Because it is not an actual P&F buy signal but offers a good probability of leading to one, this formation is considered a "buy alert".
MACD Histogram: A visual representation of the difference between the MACD line and the MACD signal line. The plot of this difference is presented as a histogram, making the centerline crossovers and divergences easily identifiable.
Market Capitalization: Also known as market cap, it is the total market value of a company (number of shares outstanding multiplied by the price of the stock). Market Order: An order to buy or sell a security at the prevailing market price. Sometimes referred to as "at the market", these orders are usually filled immediately by the market maker. A sell order placed at the market will most likely be filled at the bid price and a buy order will be filled at the ask price. .
McClellan Oscillator: A breadth indicator derived from each day's net advances (the number of advancing issues less the number of declining issues). Similar to MACD, the McClellan Oscillator is a momentum indicator that is applied to the advance/decline statistics. As a momentum indicator, the McClellan Oscillator attempts to anticipate positive and negative changes in the AD statistics for market timing. Buy and sell signals are generated as well as overbought and oversold readings. Traders may also look for positive or negative divergences to time their trades. Advancing Issues - Declining Issues Calculate both the 19 & 39-day exponential moving average (EMA) of [Advancing Issues - Declining Issues] Plot the result of the 19-day EMA minus the 39-day EMA
Momentum: A leading indicator measuring a security's rate-of-change. The ongoing plot forms an oscillator that moves above and below 100. Bullish and bearish interpretations are found by looking for divergences, centerline crossovers and extreme readings.
Money Flow Index (MFI): A volume-weighted momentum indicator that measures the strength of money flowing in and out of a security. It compares "positive money flow" to "negative money flow" to create an indicator that can be compared to price in order to identify the strength or weakness of a trend. The MFI is measured on a 0 - 100 scale and is often calculated using a 14 day period.
The Money Flow Index (MFI) uses price and volume and the concept of accumulation distribution to create an overbought and oversold indicator that is helpful in confirming trends in prices and warning of potential reversals in prices. The inputs to the Money Flow indicator are given below:
- Typical Price: (High + Low + Close) / 3
- Money Flow: Typical Price x Volume
- Positive Money Flow: The Money Flow on days where the Typical Price is greater than the previous day's Typical Price.
- Negative Money Flow: The Money Flow on days where the Typical Price is less than the previous day's Typical Price.
- Money Ratio: Positive Money Flow / Negative Money Flow .
- y Flow Index: 100 - [100 / (1 + Money Ratio)]
- In additon to being an excellent confirmation tool, the Money Flow Index can warn of potential price reversals. Money Flow Index divergences is next
Multicollinearity: Multicollinearity is a statistical term for a problem that is common in technical analysis. That is, when one unknowingly uses the same type of information more than once. One needs to be careful and not utilize technical indicators that reveal the same type of information
On Balance Volume (OBV): One of the first and most popular indicators to measure positive and negative volume flow, the OBV was introduced by Joe Granville in 1963. The concept behind the indicator is that volume precedes price. OBV is a simple indicator that adds a period's volume when the close is up and subtracts the period's volume when the close is down. A cumulative total of the volume additions and subtractions form the OBV line. This line can then be compared with the price chart of the underlying security to look for divergences or confirmation. The stock price made higher highs, generally considered a bullish signal; however, the On Balance Volume technical analysis indicator made lower lows. Volume on down days was on average larger than volume on up days.
On Balance Volume is a valuable technical analysis tool that combines both price and volume to confirm price action or warn of potential weakness or lack of conviction by buyers and sellers
Open Interest: The number of options or futures contracts that are still unliquidated at the end of a trading day. A rise or fall in open interest shows that money is flowing into or out of a futures contract or option, respectively. In futures markets, rising open interest is considered good for the current trend. Open interest also measures liquidity. Open Interest (OI) is the number of contracts outstanding in the marketplace. Open Interest only applies to futures and option contracts. Changes in open interest either confirms price action or acts as a warning of a potentially weakening trend.
A hypothetical situation is given next to help grasp the concept of Open Interest:
A new futures contract expiration month is opened for trading. Currently, no one has bought or sold a futures contract.
A trader (Trader #1) buys a futures contract, but in order for this to happen, someone has to sell that trader the future. Therefore, for every buyer there is an equal and opposite seller (Trader #2). When this transaction occurs, the open interest is increased from zero to one. There is now one contract outstanding in the marketplace.
Trader #3 decides to sell a future and subsequently another trader (Trader #4) has to buy that futures contract; therefore, open interest is now at two.
Trader #1 goes to the marketplace and sells his/her futures contract. Trader #3 decides to buy back his/her short future. After the transaction takes place, Trader #1 no longer owns a futures contract. Similarly, Trader #3 no longer owns a futures contract. Effectively, the marketplace has one less futures contract outstanding. The open interest went down to one.
Interpreting Open Interest
Open Interest is a helpful tool in analyzing the strength of a price move. There are four main interpretations of Open Interest:
If price increases and Open Interest increases, then their is strength behind the price move higher.
If price decreases and Open Interest increases, then their is strength behind the price move lower.
If price increases and Open Interest decreases, then their is weakness behind the price move higher.
If price decreases and Open Interest decreases, then their is weakness behind the price move lower.

Oscillator: An indicator that determines when a market is in an overbought or oversold condition. When the oscillator reaches an upper extreme, the market is overbought. When the oscillator line reaches a lower extreme, the market is oversold.
Overbought: A technical condition that occurs when prices are considered too high and susceptible to a decline. Overbought conditions can be classified by analyzing the chart pattern or with indicators such as the Stochastic Oscillator and Relative Strength Index (RSI). Or, a security is sometimes considered overbought when the Stochastic Oscillator exceeds 80 and when the Relative Strength Index (RSI) exceeds 70. It is important to keep in mind that overbought is not necessarily the same as being bearish. It merely infers that the stock has risen too far too fast and might be due for a pullback.
Oversold: A technical condition that occurs when prices are considered too low and ripe for a rally. Oversold conditions can be classified by analyzing the chart pattern or with indicators such as the Stochastic Oscillator and Relative Strength Index (RSI). A sharp decline from 30 to 15 in 2 weeks might lead a technician to believe that a security is oversold. Or, a security is sometimes considered oversold when the Stochastic Oscillator is less than 20 and when the Relative Strength Index (RSI) is less than 30. It is important to keep in mind that oversold is not necessarily the same as being bullish. It merely infers that the security has fallen too far too fast and may be due for a reaction rally.
Paper Trade: A hypothetical trade that does not involve any monetary transactions. Paper trading is a risk-free way to learn the ropes of the market.
Parabolic SAR: An indicator that sets trailing price stops for long or short positions. Also referred to as the "stop-and-reversal indicator", Parabolic SAR is more popular for setting stops than for establishing direction or trend. If the trend is up, buy when the indicator moves below the price. If the trend is down, sell when the indicator moves above the price.
Pennant: A continuation chart pattern that is similar to the flag, except that it is more horizontal and resembles a small symmetrical triangle. Like the flag, the pennant usually lasts from one to three weeks and is typically followed by a resumption of the prior trend.
Percent Investment Advisors Bullish: A measure of stock market bullish sentiment that is published weekly by Investor's Intelligence. When only 35% of professionals are bullish, the market is considered oversold. A reading of 55% is considered to be overbought.
Percentage Price Oscillator (PPO): An indicator based on the difference between two moving averages expressed as a percentage. The PPO is found by subtracting the longer moving average from the shorter moving average and then dividing the difference by the shorter moving average
Pivot Point: The point at which resistance disintegrates and the stock price begins to rise past the prior resistance level. This point can be considered the optimal time to buy as the bulls are gaining strength.
Point & Figure Chart: A type of chart consisting of columns of X's (showing price rises) and O's (showing price falls) arranged on a square grid. When the index increases, a rising column of black X's is created – a rally. When the index falls, a descending column of red O's appears – a decline.
Point and Figure Buy Signal: P&F Buy and Sell signals are very simple patterns that should be confirmed before placing a trade. The P&F Buy signal is used when calculating the various Bullish Percent indices. When the last signal on the chart was a buy signal, that is, the last breakout was a column of Xs going higher than the previous column of Xs and no sell signal (no column of Os breaking below the previous column of Os) has happened since the buy signal.
Point and Figure Price Objective: The price that a stock should reach based on recent P&F chart signals
Point and Figure Sell Signal: P&F Buy and Sell signals are very simple patterns that should be confirmed before placing a trade. The P&F Buy signal is used when calculating the various Bullish Percent indices. When the last signal on the chart was a sell signal, that is, the last breakout was a column of Os going lower than the previous column of Os and no buy signal (no column of Xs breaking above the previous column of Xs) has happened since the sell signal.
Position Trading: A style of trading characterized by holding open positions for an extended period of time. Contrast this with day trading, where a trader buys, and then sells out of a position before the market closes that day.
Positive Directional Indicator (+DI): When the ADX Indicator is selected, Sharp Charts plots the Positive Directional Indicator (+DI), Negative Directional Indicator (-DI): and Average Directional Index (ADX). With the black, green and red color scheme on Sharp Charts, +DI is the green line that measures the force of the up moves. The default setting is 14 periods.
Price By Volume: A horizontal histogram that overlays a price chart. The histogram bars stretch from left to right starting at the left side of the chart. The length of each bar is determined by the cumulative total of all volume bars for the periods during which the closing price fell within the vertical range of the histogram bar.
On an up day, the volume is multiplied by the percentage price increase between the current close and the previous time-period's close. This value is then added to the previous day's Price Volume Trend value.
On a down day, the volume is multiplied by the percentage price decrease between the current close and the previous time-period's close. This value is then added to the previous day's Price Volume Trend value.
Price Channels: Similar to Bollinger Bands, price channels form boundaries above and below the price line and can be used as indicators of volatility. Specifying a number of periods that will chart an n-period high or low around the price line creates Price channels.
Price Oscillator (PO): An indicator based on the difference between two moving averages that is expressed as either a percentage or in absolute terms. The abbreviation PPO refers to the Percentage Price Oscillator, and APO refers to the Absolute Price Oscillator.
Price Patterns: Patterns that appear on price charts possessing predictive values. Patterns are divided into reversal and continuation patterns.
Price Relative: A calculation that compares the performance of one security to another. It is often used to compare the performance of a particular stock to a market index.
Proxy: A security or index whose correlation with another security or index is so strong that it is used as a substitute for the other
R Squared: The measure of diversification that determines how closely a particular fund's performance parallels an appropriate market benchmark over a period. The market is understood to have an R Squared of 100%. Therefore, a fund with an R Squared of 95% contains 95% of the market's diversification and risk. The remaining 5% is unique to the fund manager's actions. .
Range: The distance between the high price and the low price for a given time period. For example, the daily range is equal to the day's high minus the same days low.
Rate-of-Change (percent): A momentum oscillator that measures the percent change in price from one period to the next. The plot forms an oscillator that fluctuates above and below the zero line as the rate-of-change moves from positive to negative. The oscillator can be used as any other momentum oscillator by looking for higher lows, lower highs, positive and negative divergences, and crosses above and below zero for signals.
[(Current Price / Price n periods ago) - 1] x 100
Ratio Analysis: The use of a ratio to compare the relative strength between any two entities. A rising ratio indicates that the numerator in the ratio is outperforming the denominator. Trend analysis can be applied to the ratio line itself to determine important turning points.
Reaction High: An intermittent peak that forms as a security fluctuates. Whether a security is trending up, trending down or moving sideways, intermittent peaks and troughs form due to changes in supply and demand. Defining reaction highs usually depends on the minimum criteria set for time intervals and price movements.
Reaction Low: An intermittent trough that forms as a security fluctuates. Whether a security is trending up, trending down or moving sideways, intermittent peaks and troughs form due to changes in supply and demand. Defining reaction lows usually depends on the minimum criteria set for time intervals and price movements.
Reaction Rally: After a decline, an advance that does not surpass the high from which the decline began is known as a reaction rally. A reaction rally, also referred to as a retracement, typically retraces from 1/3 to 2/3 of the previous decline.
Rectangle: A continuation chart pattern where prices move sideways between two different levels for a period of time and then continue moving in the direction of the previous trend.
Relative Strength Index (RSI): A popular oscillator developed by Welles Wilder, Jr. and described in his self-published 1978 book "New Concepts in Technical Trading Systems". RSI is plotted on a vertical scale from 0 to 100. Values above 70 are considered overbought and values below 30, oversold. When prices are over 70 or below 30 and diverge from price action, a warning is given of a possible trend reversal.
Resistance: Resistance is a price level at which there is a large enough supply of a stock available to cause a halt in an upward trend and turn the trend down. Resistance levels indicate the price at which most investors feel that prices will move lower.
Retracement: A decline that retraces a portion of a previous advance, or an advance that retraces a portion of a previous decline. Retracements typically cover 1/3 to 2/3 of the previous move, and a retracement of more than 2/3 typically signals a trend reversal.
Reversal - Inside Day: A two-period chart pattern that suggests a potential reversal or deceleration of the current trend. The relationship of the two periods has the follow characteristics:
Reversal - Outside Day: A two-period chart pattern that suggests a potential reversal or deceleration of the current trend. The relationship of the two periods has the follow characteristics:
Reversal Amount: In Point & Figure charts, the reversal amount is the number of boxes required to be retraced to cause a reversal, and thus, a move to the next column and opposite direction. When a smaller reversal amount is set for the same data, reversals will be more frequent, and longer-term price trends will be more difficult to identify. Increasing the reversal amount removes columns corresponding to less significant trends.
Reversal Pattern: A chart pattern that occurs before an existing trend reverses direction. For example, a Head and Shoulders reversal pattern marks a change in trend. A break below neckline support indicates that the H&S pattern is complete and the prior up trend has reversed
Reversal Spike: Market turns that happens very quickly with little or no transition period. Spikes often occur when a market has become very overextended in one direction, when a sudden piece of adverse news causes a sudden reversal. Reversal spike highs (aka blow offs) and lows (aka selling climaxes) can signal a reversal or deceleration of a trend, but unfortunately they are very difficult to forecast.
Reverse Stock Split: A stock split, which reduces the number of outstanding shares and increases the per-share price proportionately.
Reward-to-Risk Ratio: A calculation equal to the potential reward divided by the potential risk of a position. A long position entered at 100 with potential reward estimated at 120 and potential risk of 90 would have a reward-to-risk ratio of 20:10, or 2 to 1. Generally, a higher reward-to-risk ratio is a more appealing trade. For a long position, potential reward might be based on breakout projections, resistance levels or retracement estimates. Potential risk might be based on support levels, stop or loss requirements.
Rising Wedge: A bearish pattern that begins wide at the bottom and contracts as prices move higher toward a support break.
Rounding Bottom: Also known as a saucer bottom, it is a reversal chart pattern representing a long consolidation period that turns from a bearish bias to a bullish bias. .
Scan: A list of stocks, sorted and filtered according to criteria that vary with the scan.
Sector: A group of companies that generate revenue in similar ways, and tend to rise and fall with the economic cycle. Sectors are commonly broken down into smaller groups called industries. The sectors tracked by the Standard and Poor Index are Basic Industries, Financials, Technology, Industrials, Energy, Consumer Staples, Consumer Services, Utilities, and Transport/Cyclical.
Sell Signal: A condition that indicates a good time to sell a stock. The indicator will determine the exact circumstances of the signal that an analyst is using. For example, it's often considered a sell signal when the RSI crosses down through the 50 levels. .
Sentiment Indicators: Psychological indicators that attempt to measure the degree of bullishness or bearishness in a market. These are contrary indicators and are used in much the same fashion as overbought or oversold oscillators. Their greatest value is when they reach upper or lower extremes.
Shakeout: A situation where many scared investors exit their positions due to unfavorable news or uncertainty regarding the stock or industry. The dot-com bust was characterized by numerous shakeouts causing many to abandon their dot-com positions, often at great losses.
Short Selling: The process of selling a stock with the hope of buying it back at a lower price (sell high, buy low). Short sellers are bearish and believe the price will decline. Short selling involves borrowing stock (usually from the broker) to sell short and using margin to finance the borrowing. If the price of the stock in question advances too far, the short seller will receive a margin call and be required to put up more money. A short squeeze occurs when the price advances so fast that short sellers are forced to cover their positions (buy the stock back), which drives prices even higher.
Signal Line: Also known as a "trigger line", it is a moving average of another indicator that is used to generate simple buy and sell signals. Probably the most used signal line is the one that is built into the MACD Indicator display. The signal line is the exponential moving average of the MACD line. A buy signal is generated when the MACD line crosses above the signal line and a sell signal is generated when the MACD line crosses below the signal line.
Slope: A simple indicator equal to the change in price divided by the number of time periods. A positive slope begins low and rises over time with a steeper rise illustrating a greater slope. A negative slope begins high and declines over time with a steeper decline illustrating a more negative slope. .
Split: The division of a stock into multiple shares. In a 2-for-1 split, the stockholder's shares will double in quantity, though the value of each stock will be halved. A stock split is usually an attempt to make high stock prices seem more attractive to investors and generally occurs in the face of new highs
Spring: A situation that occurs when prices break below support, but soon reverse course and move back above support. Prices are said to "spring" back from their support break and indicate that the bulls are still alive. A spring can also be referred to as a failed (bearish) signal and is considered bullish. Generally, the reversal should occur within 1-3 days of the support break for the failed signal to be considered valid. This is the opposite of an up thrust.
Standard Deviation (volatility): A statistical term that provides a good indication of volatility. It measures how widely values (closing prices for instance) are dispersed from the average. The larger the difference between the closing prices and the average price, the higher the standard deviation will be and the higher the volatility. The closer the closing prices are to the average price, the lower the standard deviation and the lower the volatility.
StochRSI: An oscillator used to identify overbought and oversold readings in RSI. Because RSI can go for extended periods without becoming overbought (above 70) or oversold (below 30), StochRSI provides an alternative means to identify these extremities. StochRSI is found by applying the stochastic formula to RSI readings – hence its name. As an indicator of RSI, it measures the value of RSI relative to its high/low range over a set number of periods. When RSI records a new low for the set period, StochRSI will be at 0. When RSI records a new high for the set period, StochRSI will be at 100.
Stocks Above Their 200-day Moving Average: A market breadth indicator that represents the number of stocks in a given group that have closing prices that are currently above their 200-day simple moving average. Common techniques for using this indicator include locating overbought/oversold levels and finding positive or negative divergences between this indicator and the underlying group's composite index.
Stocks Above Their 50-day Moving Average: A market breadth indicator that represents the number of stocks in a given group that have closing prices that are currently above their 50-day simple moving average. Common techniques for using this indicator include locating overbought/oversold levels and finding positive or negative divergences between this indicator and the underlying group's composite index.
Stop Loss Order: An instruction to the broker to buy or sell stock when it trades beyond a specified price. They serve to either protect your profits or limit your losses. .
Summation Index: A cumulative sum of all daily McClellan oscillator readings that provides longer-range analysis of market breadth.
Support: A price level at which there is sufficient demand for a stock to cause a halt in a downward trend and turn the trend up. Support levels indicate the price at which most investors feel that prices will move higher
Swing Charting: A concept based on the use of a filter. Once prices have moved by the distance specified by this filter, a new line is drawn next to the previous one. In a nutshell, it is a chart that shows up and down price movement of a minimum size regardless of the time it takes.
Symmetrical Triangle: A sideways chart pattern between two converging trendlines in which the upper trendline is declining and the lower trendline is rising. This pattern represents an even balance between buyers and sellers, although the prior trend is usually resumed. The breakout through either trendline signals the direction of the price trend

Top-Down Approach: An approach to market analysis used by both fundamental and technical analysts. It often begins with a more "macro" analysis of the overall market through major indices before concentrating on the market at a more "micro" level. Strong and weak sectors of the market are analyzed before focusing on individual stocks within select groups.
Topping: A period where the stock or market is "catching its breath" after an advance, characterized by a flat trading range without any noticeable trend. It is common to see a topping period after a lengthy increase of the stock price. Topping may be a sign of distribution.
Trailing Stop: A stop-loss level set above or below the current price that adjusts as the price fluctuates. For a long position, a trailing stop would be set below the current price and would rise as the price advances. Should the price decline and reach the trailing stop, then a stop-loss would be triggered and the position closed. As long as the price remains above the trailing stop, the position is held. Indicators such as the Parabolic SAR or moving averages can be used to set trailing stops. .
Trend: Refers to the direction of prices. Rising peaks and troughs constitute an up trend; falling peaks and troughs constitute a downtrend. Horizontal peaks and troughs characterize a trading range. Trends are generally classified into major (longer than a year), intermediate (one to six months), or minor (less than a month).
Trendlines: Straight lines drawn on a chart below reaction lows (in an up trend) or above rally peaks (in a downtrend) that determine the steepness of the current trend. The breaking of a trendline usually signals a trend reversal.
Triangles: Sideways price patterns in which prices fluctuate with converging trendlines. The three types of triangles are the symmetrical, the ascending, and the descending.
Triple Bottom: A price pattern with three equal lows followed by a breakout above resistance.
Triple Top: A price pattern with three prominent peaks, similar to the head and shoulders top, except that all three peaks occur at about the same level.
TRIX: A momentum indicator showing the percent rate-of-change of a triple exponentially smoothed moving average. Like other oscillators, TRIX oscillates around a zero line. Its triple exponential smoothing makes it an excellent filter of market noise and it functions well as a leading indicator of market trends
Typical Price: The typical price is the average of the high, low and close. Typical Price = (High + Low + Close)/3
Ultimate Oscillator: An oscillator that attempts to combine information for several different time periods into one number. Three different time periods are used, typically a 7-day period, a 14-day period, and a 28-day period. The resulting oscillator is "bounded" in that it moves between 0 and 100 with 50 as the centerline. 70 and 30 are used as overbought/oversold levels.
Up Trendline: A straight line drawn upward and to the right below the reaction lows. The longer the up trendline has been in effect and the more times it has been tested, the more significant it becomes. Violation of the trendline usually signals that the up trend may be changing direction.
Up thrust: A situation that occurs when prices break above resistance, but soon reverse course and break back below resistance. Price are said to "thrust" up, but cannot maintain the upward momentum and soon decline. The up thrust can also be referred to as a failed (bullish) signal and is considered bearish. Generally, the reversal should occur within 1-3 days of the resistance breakout for the failed signal to be considered valid. This is the opposite of a spring.
Volume: The number of trades in a security over a period of time. On a chart, volume is usually represented as a histogram (vertical bars) below the price chart.
Washout Day: A selling climax or high volume decline that "washes out" all the sellers and paves the way for buyers to take over. This may also take the form of a high volume hammer after an extended decline.
Wedge: A reversal chart pattern characterized by two converging trendlines that connect at an apex. The wedge is slanted either downwards or upwards demonstrating bullish or bearish behavior respectively
Weekly Reversal: An upside weekly reversal is present when prices open lower on Monday and then on Friday close above the previous week's close. A downside weekly reversal opens the week higher but closes down by Friday.
Weighted Average: A moving average that uses a selected time span, but gives greater weight to the more recent price data. Weighted Close A weighted average of the high, low and close that places more weight on the closing value by counting it twice.
Whipsaw: A whipsaw occurs when a buy or sell signal is reversed in a short time. Volatile markets and sensitive indicators can cause whipsaws. For example, a whipsaw would occur if a position trader initiates a long position on a bullish MACD crossover and has to close it the next day because of a bearish moving average crossover. The signal was reversed and the trader had to exit quickly.
Wilder, Welles: Developer of the RSI indicator and the Directional Movement Indicator (DMI) system.
Williams’s R: Developed by Larry Williams, Williams’s %R is a momentum indicator much like the Stochastic Oscillator and is especially popular for measuring overbought and oversold levels. The scale ranges from 0 to -100 with readings from 0 to -20 considered overbought, and readings from -80 to -100 considered oversold. Typically, Williams’s %R is calculated using 14 periods and can be used on intraday, daily, weekly or monthly data.