Trading Glossary A-Z

A phase where institutional investors quietly buy shares over time, often seen as a flat or slightly rising price pattern with increasing volume.

A trend strength indicator ranging from 0-100. Values above 25 indicate a strong trend, while values below 20 suggest a weak or ranging market.

The highest price a security has ever reached in its trading history. Breaking ATH often signals strong bullish momentum.

A bullish pattern where price moves between two parallel upward-sloping trendlines, indicating a sustained uptrend.

A bullish continuation pattern characterized by a flat upper resistance line and a rising lower trendline. Breakouts typically occur upward with increased volume.

The lowest price a seller is willing to accept for a security. The difference between bid and ask is called the spread.

A volatility indicator that measures the average range between high and low prices over a specified period. Used for stop loss placement and position sizing.

Testing a trading strategy on historical data to evaluate its performance before risking real capital.

A bearish continuation pattern that forms after a sharp decline, followed by a brief consolidation that slopes upward before continuing lower.

A market condition where prices decline 20% or more from recent highs, typically accompanied by widespread pessimism and negative sentiment.

A false signal that suggests a stock's rising price trend has reversed when it hasn't, trapping short sellers.

The highest price a buyer is willing to pay for a security. Sellers receive the bid price when selling at market.

A volatility indicator consisting of a middle band (SMA) with upper and lower bands set 2 standard deviations away. Price touching bands can signal overbought/oversold conditions.

A price gap that occurs at the start of a new trend, often with high volume, signaling the beginning of a significant move.

When price moves above resistance or below support with increased volume, signaling a potential new trend. Breakouts are key entry signals for swing traders.

A bullish continuation pattern that forms after a sharp rise, followed by a brief consolidation that slopes downward before continuing higher.

A market condition where prices rise 20% or more from recent lows, typically accompanied by optimism and strong investor confidence.

A false signal that suggests a declining trend has reversed when it hasn't, trapping buyers who go long.

The force of buying activity in the market, often measured by volume on up days versus down days.

A chart type showing open, high, low, and close prices. The body shows open-to-close range, while wicks show the full range.

A price pattern bounded by two parallel trendlines (support and resistance) that contains price movement.

An indicator that determines if a market is trending or trading sideways. Values above 61.8 suggest consolidation; below 38.2 suggest trending.

Extremely high volume that often marks the end of a trend, indicating exhaustion of buying or selling pressure.

The final price at which a security trades during a regular trading session. Often considered the most important price of the day.

Additional signals or indicators that support a trading decision. For example, volume confirming a breakout.

A price area where trading activity is concentrated, often acting as future support or resistance.

A period where price trades in a narrow range, indicating indecision. Often precedes a significant move in either direction.

A chart pattern that suggests the current trend will resume after a brief pause. Examples include flags, pennants, and triangles.

A trading approach that goes against prevailing market sentiment, buying when others are fearful and selling when others are greedy.

A 3-wave pattern (labeled A-B-C) that moves against the main trend direction. Corrective waves follow impulse waves in Elliott Wave Theory.

A bullish continuation pattern resembling a tea cup. The cup forms a U-shape, followed by a smaller consolidation (handle) before breaking out. Success rate: ~65%.

Private exchanges where large institutional orders are executed away from public exchanges to minimize market impact.

A trading style where all positions are opened and closed within the same trading day, avoiding overnight risk.

A temporary recovery in a declining stock, followed by a continuation of the downtrend. Not a true reversal.

A bearish signal when a shorter-term moving average crosses below a longer-term moving average (e.g., 50-day below 200-day).

A bearish pattern where price moves between two parallel downward-sloping trendlines, indicating a sustained downtrend.

A bearish continuation pattern with a flat lower support line and a descending upper trendline. Breakouts typically occur downward.

A rare reversal pattern that resembles a diamond shape, formed by expanding then contracting price action.

A phase where institutional investors quietly sell shares over time, often appearing as a topping pattern with high volume.

When price moves in one direction while an indicator moves in the opposite direction, often signaling a potential reversal.

A candlestick with nearly equal open and close prices, creating a cross shape. Indicates indecision and potential reversal.

A bullish reversal pattern forming a 'W' shape where price tests a support level twice before reversing upward.

A bearish reversal pattern forming an 'M' shape where price tests a resistance level twice before reversing downward.

A series of lower highs and lower lows, indicating sellers are in control and prices are generally declining.

The peak-to-trough decline during a specific period, expressed as a percentage. Used to measure risk and portfolio volatility.

A form of technical analysis that identifies recurring price patterns called waves. Markets move in 5-wave impulses and 3-wave corrections.

A moving average that gives more weight to recent prices, making it more responsive to new information than a simple moving average.

A two-candle reversal pattern where the second candle completely engulfs the body of the first. Bullish engulfing signals reversal up; bearish engulfing signals reversal down.

The price level at which a trader enters a position. In pattern trading, entries are often placed above resistance (longs) or below support (shorts).

A gap that occurs near the end of a trend, often with high volume, signaling that the trend is running out of steam.

When Wave 3 extends beyond the typical 1.618 Fibonacci ratio of Wave 1, often reaching 2.618 or higher in strong trends.

When price breaks above resistance or below support but quickly reverses, trapping traders who entered on the breakout.

An imbalance in price created by a large candle that leaves a gap between the wicks of surrounding candles. Price often returns to fill these gaps.

A bullish reversal or continuation pattern with converging downward-sloping trendlines. Breakouts typically occur upward.

Price levels beyond 100% used to project potential profit targets. Common extensions: 127.2%, 161.8%, 261.8%.

Diagonal lines drawn from a significant low or high using Fibonacci ratios, creating dynamic support and resistance levels.

Horizontal lines indicating potential support/resistance levels based on Fibonacci ratios. Key levels: 23.6%, 38.2%, 50%, 61.8%, 78.6%.

Vertical lines at Fibonacci intervals from a significant point, used to predict when price reversals might occur.

When price returns to cover a previous gap, often before continuing in its original direction.

A continuation pattern that forms a rectangular consolidation against the prior trend. Bull flags slope down; bear flags slope up.

A sideways corrective pattern where Wave A and B are roughly equal, and Wave C fails to exceed Wave A's low.

The anxiety that an exciting opportunity might be missed, often leading to impulsive trading decisions at unfavorable prices.

A reversal pattern consisting of at least five consecutive bars where the middle bar has the highest high or lowest low.

Evaluating securities by examining financial statements, industry conditions, and economic factors rather than price patterns.

A price area where no trading occurred, visible as empty space on a chart. Gaps often get 'filled' as price returns to cover the gap.

A strategy that trades in the direction of a gap, expecting momentum to continue after a strong gap up or down.

A bullish signal when a shorter-term moving average crosses above a longer-term moving average (e.g., 50-day above 200-day).

The ratio 1.618 (or 61.8%), derived from the Fibonacci sequence. Considered the most important Fibonacci level in trading.

A bearish candlestick with no lower wick and a long upper wick, indicating sellers rejected higher prices.

A bullish reversal candlestick with a small body at the top and a long lower wick, indicating buyers rejected lower prices.

A bearish candlestick at the top of an uptrend with a small body and long lower wick, warning of potential reversal.

A bearish reversal pattern with three peaks: the middle (head) being highest, flanked by two lower peaks (shoulders). Neckline break confirms the pattern.

A price peak that exceeds the previous peak, indicating bullish momentum and uptrend continuation.

A price trough higher than the previous trough, confirming uptrend strength.

A powerful bullish pattern where a stock doubles (100%+ gain) then consolidates in a tight range before continuing higher.

A breakout from a horizontal resistance level that has been tested multiple times. One of the highest probability patterns.

A comprehensive indicator showing support/resistance, trend direction, and momentum. Price above the cloud is bullish; below is bearish.

A 5-wave pattern (labeled 1-2-3-4-5) that moves in the direction of the larger trend. Wave 3 is typically the strongest.

A candle whose high and low are contained within the previous candle's range, indicating consolidation and potential breakout.

The percentage of a company's shares held by institutions like mutual funds, pension funds, and hedge funds.

A bullish reversal pattern with three troughs: the middle (head) being lowest, flanked by two higher troughs (shoulders).

A charting method developed in 18th century Japan that displays open, high, low, and close prices in a visual format.

A trading day where price makes a new high (or low) then reverses to close below (or above) the previous day's close.

An indicator that follows price action, confirming trends after they've begun. Examples: moving averages, MACD.

An indicator that attempts to predict future price movements. Examples: RSI, Stochastic, momentum oscillators.

An order to buy or sell at a specific price or better. Provides price control but may not execute in fast-moving markets.

The ease with which a security can be bought or sold without significantly affecting its price. High liquidity = tighter spreads.

Buying a security with the expectation that its price will rise, allowing the trader to sell at a higher price for profit.

A price peak below the previous peak, indicating bearish momentum and potential downtrend.

A price trough below the previous trough, confirming downtrend continuation.

A trend-following momentum indicator showing the relationship between two moving averages. Signal line crossovers indicate buy/sell signals.

Borrowed funds from a broker to trade securities. Increases both potential profits and potential losses.

The total market value of a company's outstanding shares, calculated as share price × total shares outstanding.

A firm that provides liquidity by continuously quoting both buy and sell prices, profiting from the bid-ask spread.

An order to buy or sell immediately at the best available price. Guarantees execution but not price.

A price target calculated by measuring the height of a pattern and projecting it from the breakout point.

The rate of change in price movement. Strong momentum suggests trend continuation; weakening momentum may signal reversal.

A bullish three-candle reversal pattern: large red candle, small body (star), and large green candle that closes above midpoint of first candle.

An indicator that smooths price data by calculating the average price over a specified period. Common periods: 20, 50, 200 days.

The support or resistance line connecting the lows (or highs) in head and shoulders patterns. Break of neckline confirms the pattern.

A cumulative volume indicator that adds volume on up days and subtracts volume on down days, measuring buying/selling pressure.

The first price at which a security trades when the market opens. Often reflects overnight news and sentiment.

A consolidation area before a strong move, representing institutional entry zones. Price often returns to these areas for support/resistance.

A condition where a security has risen too far too fast, potentially due for a pullback. Often indicated by RSI above 70.

A condition where a security has fallen too far too fast, potentially due for a bounce. Often indicated by RSI below 30.

A continuation pattern that forms a small symmetrical triangle after a sharp move, typically lasting 1-3 weeks before breakout.

A calculated price level used to identify potential support and resistance. Based on previous high, low, and close prices.

The process of determining how many shares or contracts to trade based on account size and risk tolerance. Critical for capital preservation.

A long-term trading style holding positions for weeks to months, focusing on major trends rather than short-term fluctuations.

A trading method that relies solely on price movement and patterns without using indicators, focusing on candlesticks and chart patterns.

A predetermined price level where profits are taken. Often based on pattern measurement, Fibonacci extensions, or risk/reward ratios.

A temporary price reversal against the prevailing trend. Pullbacks offer lower-risk entry points for trend-following traders.

A sustained increase in prices, often occurring after a decline or during a strong uptrend.

A market condition where price oscillates between horizontal support and resistance levels without establishing a trend.

A continuation pattern where price bounces between parallel horizontal support and resistance lines before breaking out.

A comparison of a stock's performance to a benchmark or sector, identifying leaders and laggards.

A price level where selling pressure historically prevents further price increases. Breaking resistance is bullish.

When price returns to a previous breakout level to test it as new support (or resistance), confirming the breakout.

A chart pattern that signals the current trend is ending and a new trend in the opposite direction is beginning.

The relationship between potential loss (risk) and potential gain (reward). A 1:3 ratio means risking $1 to potentially make $3.

A bearish reversal pattern with converging upward-sloping trendlines. Breakouts typically occur downward.

A bullish reversal pattern forming a gradual U-shaped curve at market bottoms. Also called a saucer bottom.

A momentum oscillator measuring speed and magnitude of price changes on a 0-100 scale. Above 70 is overbought; below 30 is oversold.

A gap that occurs in the middle of a trend, indicating strong momentum and often marking the halfway point of the move.

See Rounded Bottom. A gradual, bowl-shaped reversal pattern indicating accumulation.

An ultra-short-term trading style taking small profits from tiny price movements, often holding positions for seconds to minutes.

A rapid decline in prices driven by heavy selling pressure, often triggered by negative news or market conditions.

A bearish reversal candlestick with a small body at the bottom and a long upper wick, indicating rejection of higher prices.

Selling borrowed shares with the expectation of buying them back at a lower price, profiting from price decline.

A rapid price increase caused by short sellers covering their positions, creating a feedback loop of buying pressure.

The difference between expected trade price and actual execution price, often occurring in fast-moving or illiquid markets.

A moving average calculated by adding closing prices over a period and dividing by the number of periods.

A candlestick with small body and long wicks on both sides, indicating indecision between buyers and sellers.

The difference between bid and ask prices. Tighter spreads indicate higher liquidity and lower trading costs.

A momentum indicator comparing closing price to price range over a period. Above 80 is overbought; below 20 is oversold.

A predetermined price level where a losing trade is closed to limit losses. Essential for protecting capital.

When price briefly moves beyond a key level to trigger stop losses before reversing, often orchestrated by larger players.

A price level where buying pressure historically prevents further price decreases. Breaking support is bearish.

A price bar with a higher high than the bars on either side. Used to identify resistance and trend direction.

A price bar with a lower low than the bars on either side. Used to identify support and trend direction.

A trading style that holds positions for days to weeks, capturing 'swings' in price. Less time-intensive than day trading.

A neutral continuation pattern with converging trendlines. Direction of breakout determines the trend continuation.

The price level where profits are taken. Often calculated using pattern measurement rules or Fibonacci extensions.

The study of past price movements and patterns to predict future price action, using charts and indicators.

The measured move following a triangle pattern, typically equal to the widest part of the triangle.

The minimum price increment for a security. For most stocks, one tick equals $0.01.

The period used for chart analysis (e.g., daily, weekly, 4-hour). Multiple time frame analysis provides better context.

A stop loss that moves with price, locking in profits while allowing the trade room to run. Trails by a fixed amount or percentage.

The general direction of price movement. Trends can be upward (bullish), downward (bearish), or sideways.

A diagonal line connecting swing highs (downtrend) or swing lows (uptrend) to identify trend direction and potential support/resistance.

A continuation pattern with converging trendlines. Types include ascending, descending, and symmetrical triangles.

A bullish reversal pattern where price tests a support level three times before breaking higher.

A bearish reversal pattern where price tests a resistance level three times before breaking lower.

When Wave 5 fails to exceed the end of Wave 3, indicating weakness in the trend.

A series of higher highs and higher lows, indicating buyers are in control and prices are generally rising.

A sharp reversal pattern where price drops quickly then recovers just as quickly, forming a V shape.

The degree of price variation over time. High volatility means larger price swings; low volatility means smaller, more stable movements.

The number of shares or contracts traded. High volume confirms breakouts; low volume suggests weak moves.

A chart showing the amount of trading activity at different price levels, identifying high-volume nodes as key support/resistance.

The average price weighted by volume, used by institutions as a benchmark. Price above VWAP is bullish; below is bearish.

The third wave in an Elliott impulse sequence. Typically the longest and strongest wave with the highest momentum.

The process of labeling waves on a price chart according to Elliott Wave rules, identifying the market's position within the wave structure.

A pattern with converging trendlines. Rising wedges are bearish; falling wedges are bullish.

Rapid price movements in both directions, triggering stop losses on both sides. Common in choppy, range-bound markets.

The thin lines extending from a candlestick body, showing the high and low prices during the period.

A momentum oscillator measuring overbought/oversold levels on a scale of 0 to -100. Above -20 is overbought; below -80 is oversold.

The income return on an investment, typically expressed as an annual percentage based on the investment's cost or current value.

A sharp corrective pattern with an A-B-C structure where the C wave typically extends beyond the A wave.

A price area (rather than exact level) where support, resistance, or significant activity is expected to occur.