Charts

Charts
Graphical representations of price, volume and/or other data over a period of time. Commonly used in technical analysis are Bar Charts, Line Charts, Point and Figure Charts, Candlestick Charts and Market Profile.

Charting

Charting
charting refers to graphically illustrating commodity prices and how they change. Technical traders use many types of charts: Bar Charts, Candlestick Charts, Point and Figure Charts, and others.

Chartcraft method

Chartcraft method
A method of point & figure charting that dates back to 1947. It has a default boxsize of 0 and a reversal of 3. The boxsize of 0 sets a box value range from $.25 to $2, depending on the price of the issue. The reversal of 3 means that an X column will change to an O column when the price drops at least three boxes below the highest X in the current column. To reverse from Os to Xs, the price must rise three boxes above the lowest O in the current column.

Characteristic line

Characteristic line
Characteristic Line is the technical term for the best fit or regression line that comes out of regression analysis. It is the line that represents the estimated linear relationship between the dependent variable (the thing we want to explain) and the independent variable (the thing we use to explain it).

Example: Suppose we want to explain the return on IBM by saying that it depends on the Dow Jones Industrial Index. This relationship between IBM and the Dow can be put into a linear equation like this:

RIBM = a + bRDow Jones
The straight line with intercept a and slope b is the characteristic equation.

Channels

Channels
The area between two parallel trendlines, the upper trendline connecting most of the important price peaks or closes and the lower trendline connecting the important lows or closes. Price reversals are expected to occur when prices approach either boundary.

Change

Change
In a futures table, indicates the difference between the closing price on one trading day with the closing price on the previous day.

Chaikin oscillator

Chaikin oscillator
The Chaikin Oscillator is created by subtracting a 10 period exponential moving average of the Accumulation/Distribution line from a 3 period moving average of the Accumulation/Distribution Line.

Candlestick Charts

Candlestick Charts
A charting method developed in Japan in the 1700s. The high and low for the time period are described as shadow and plotted as a single line. The price range between the open and the close is plotted as a box or rectangle on the line. If the market closes above the open, the body of the box is white or empty. If the close is below the open, the body of the box or rectangle is black.

Buy/sell signals or indicators

Buy/sell signals or indicators
Technical indicators which traders use to suggest times at which contracts might be taken on or liquidated. Examples: 1) Trend lines - A possible signal to either liquidate a long position or short a contract is triggered when up trending prices cross and go below an up trend line-example. Conversely, a possible signal to either liquidate a short position or assume a long position is triggered when down trending prices cross and go above a downtrend line. 2) Moving Average - A possible buy or sell signal is triggered when prices cross a moving average. 3) Multiple Moving Averages - In this case, two moving averages are used. One with a shorter averaging period than the other. The possible buy and sell signals are triggered when the shorter average crosses the longer-crossing in the upward direction triggers a possible buy while crossing in the downward direction signals a possible sell.

These are just three examples of what could be hundreds of indicators which traders have developed to aid them in deciding when to enter and exit the market. Traders use these various indicators individually and in combination. They use various indicators and combinations with various commodities and at various times. The practice of using these indicators is widely variable and range from the very simple to the highly complex with some traders using systems which combine many indicators

Broadening Top

Broadening Top
A reversal pattern marked by a succession of at least three generally higher highs alternating with successively lower lows. Occurs after a notable price rise. The pattern is completed by a third breakdown, normally to a significantly lower low.

Breakout

Breakout
A point when the stock's price moves above resistance or below support. When a stock exits the boundaries of an area pattern, or rises above or below support and resistance lines. A technical analysis term, used to indicate a rise in a stock's price above its resistance level (such as its previous high price) or drop below its support level (commonly the last lowest price.) The assumption is that the stock will continue to move in the same direction following the breakout, which generates a buy or sell signal.

Breakdown

Breakdown
A price drop below a significant support level or out of a consolidation pattern. Caused by sellers overwhelming buyers, it usually signals either the beginning or the resumption of a downtrend.

Breakaway Gap


Breakaway Gap
Usually, a high-volume move out of a consolidation pattern. The strength of buying is sufficient to cause the security to jump to higher levels without trading at the intervening prices. A strong, sustained up move is normally indicated.

Breadth Ratio

Breadth Ratio
Computed by dividing the number of advances by the number of declines over a given time period, usually a day or a week.

Breadth

Breadth
A measurement calculated by comparing the number of advancing stocks to the number declining. The more net advances seen in an up market, the greater its breadth; vice versa for down markets.

Bottom Reversal

Bottom Reversal
The change in the direction of price movement/trend which occurs at stock market bottoms.

Bottom

Bottom
The low point in a down move.

Bollinger bands

Bollinger bands
Bollinger Bands plot trading bands above and below a simple moving average. The standard deviation of closing prices for a period equal to the moving average employed is used to determine the band width. This causes the bands to tighten in quiet markets and loosen in volatile markets. The bands can be used to determine overbought and oversold levels, locate reversal areas, project targets for market moves, and determine appropriate stop levels. The bands are used in conjunction with indicators such as RSI, MACD histogram, CCI and Rate of Change. Divergences between Bollinger bands and other indicators show potential action points. As a general guidline, look for buying opportunities when prices are in the lower band, and selling opportunities when the price activity is in the upper band.

Blow-off top

Blow-off top
A steep and rapid increase in price followed by a steep and rapid drop. This is an indicator seen in charts and used in technical analysis of stock price and market trends.

Blow Off

Blow Off
A sharp price rise, accompanied by extraordinary volume; usually the culmination of an extended advance, leading to a sharp reaction.

Beta

Beta
Beta is a measure of a company's common stock price volatility relative to the market. The Market Guide Beta is the slope of the 60 month regression line of the percentage price change of the stock relative to the percentage price change of the S&P 500. Beta values are not calculated if less than 24 months of pricing is available.

Bellwether


Bellwether
A stock viewed as a leader in the market, e.g. "as GM goes, so goes the market." Also a bellwether or benchmark issue in the cash bond market, e.g. the most recently auctioned 10-year bond.

Base

Base
This chart pattern is formed after a decline by a considerable amount of trading occurring within a relatively narrow price range. The formation is completed when an upside breakout occurs.

Back Testing

Back Testing
Optimizing a moving average or trading strategy on historical data.

Back and Fill

Back and Fill
See Consolidation.

Average Balance Volume Line

Average Balance Volume Line
A simple moving average applied to the tick volume based on a comparison of the current and previous period's closes.

Ascending Triangle (or Rising Triangle)

Ascending Triangle (or Rising Triangle)
A chart pattern containing a series of lows, each successively higher than the last, and a series of highs that are at approximately the same level. It is considered a bullish formation when volume increases on the ascending legs. When a breakout through the level of the highs is made, the pattern is completed..

Arms index

Arms index
Also known as a trading index (TRIN)= (number of advancing issues)/ (number of declining issues) (Total up volume )/ (total down volume). An advance/decline market indicator. Less than 1.0 indicates bullish demand, while above 1.0 is bearish. The index often is smoothed with a simple moving average.

Apex

Apex
The point of intersection of two trendlines. A new trend may develop as prices approach the intersection.

ADX- directional movement index

ADX- directional movement index
The Directional Movement Index provides an indication of how much a stock is trending. Since stocks tend to only trend 30% of the time and move sideways the remainder of the time this indicator can prove very useful. There are three lines that make up this indicator. The +DI (Directional Indicator), the - DI (Directional Indicator), and the ADX (Average Directional Indicator). The +DI line measures upward movement, the -DI meansures downward movement. The ADX measures the strength of the prevailing trend. For example: If the +DI crosses over the -DI, or the -DI crosses over the +DI the ADX MUST be rising in order to confirm the signal.

Advances vs. Declines

Advances vs. Declines
(A/D) This is a measure of the number of stocks that have advanced in price and the number that have declined in price within a given time span. The A/D is generally expressed as a ratio and can help indicate the general direction of the market; when a higher number of stocks advance rather than decline on a single trading day, the market is thought to be bullish. The A/D will function best as a confirming indicator and it is often used with other types of analysis as a guide to the trend of the overall market. It is also used occasionally for specific stock/industry groups.
The most common way to display A/D data is with a chart showing the cumulative difference between the advances and the declines on the NYSE. The period can be one week, one month, or any other common time frame but since it is best used to identify new or developing trends, it must be relative to the positions in your portfolio. Compare the A/D chart with that of the DJIA. If the Dow is moving higher but the A/D line is flat or dropping, that is a negative signal and may indicate a future slump. Watch for new highs and lows on the A/D chart. Near market peaks, the A/D line will generally top-out and begin a gradual decline before the overall market. As with all technical indicators, make sure that it confirms other signals.

Advance/Decline Line

Advance/Decline Line
Each day's declining issues are subtracted from the day's advancing issues. The difference is added to (subtracted from if negative) a running total or sum.

Advance/Decline Data

Advance/Decline Data
The number of stocks or bonds or commodities which have advanced in a given time period compared to the number which have declined. The difference (breadth) is considered important in gauging the strength or weakness of the market. Daily observations are the most common.

Accumulation/distribution

Accumulation/distribution
The Accumulation/Distribution is a momentum indicator that associates changes in price and volume. The indicator is based on the premise that the more volume that accompanies a price move, the more significant the price move. Accumulation/Distribution attempts to confirm changes in prices by comparing the volume associated with prices. When the Accumulation/Distribution moves up, it shows that the security is being accumulated, as most of the volume is associated with upward price movement. When the indicator moves down, it shows that the security is being distributed, as most of the volume is associated with downward price movement. Divergences between the Accumulation/Distribution and the security's price imply a change is imminent. When a divergence does occur, prices usually change to confirm the accumulation/distribution. For example, if the indicator is moving up and the security's price is going down, prices will probably reverse. If the days price change is positive then the difference in the daily high and low price is added to the total, and conversely if the daily change is negative then the daily range is subtracted from the total

Accumulation

Accumulation
Process by which, over a period of time, a large or excess supply of stock or futures contracts is absorbed by increasing demand from buyers. Generally, there is little price action until the sellers have been exhausted. Then buyers dominate and price tends to rise.

50% Principle (one-half retracement)

50% Principle (one-half retracement)
After a sustained move in price, this principle holds that a normal correction can be expected to retrace one-half to two-thirds of the advance (or decline) before resuming the main trend.

Technical Analysis is a science

Technical Analysis is a science , which is very easy to learn but very difficult to implement