In this page you can learn about the commonly used financial and
Above the Market
A limit order to buy or sell a security for a specified price that is higher than the current market price. If the market does not reach the specified price, the order will go unfilled.
Absolute Breadth Index
Developed by Norman Fosback, the ABI is equal to the absolute value of the difference between the advancing issues and the declining issues. It shows how much activity and volatility is taking place on the New York Stock Exchange while totally ignoring the price direction.
Absolute Price Oscillator (APO)
Also known as MACD indicator, APO is calculated by subtracting a longer-term Exponential MA from a shorter-term Exponential MA.
Occurs when the supply of a security is less than the demand. After a decline in price, a stock may start to base and trade sideways for an extended period. In the mean time, 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/D Line)
A momentum indicator that relates price changes with volume. It relates the closing price to the range of prices (intraday high-intraday low). The closer the close is to the high, the more volume is added to the cumulative total.
Privately circulated publications which comment upon the future course of financial markets, and for which a subscription is usually required.
Any trade posting, adjusting, or changes made by specialists or member firm after the official close of the market.
The paying off of debt in regular installments over a period of time.
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.
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.
The date on which a company first publicly announces an impending stock split.
Yearly report made by a company to its stockholders. They usually contain a balance sheet, an income statement, a list of changes in retained earnings, and how income of the corporation was used.
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.
The simultaneous buying and selling of securities to take advantage of price discrepancies. Arbitrage opportunities usually surface after a takeover offer.
A pattern of sideways price movement that follows a stalled uptrend or downtrend of a stock or commodity. Some of these patterns (triangles, flags, wedges etc.) have good predictive value.
Ascending Trend Channel
An ascending line that connects the bottoms of the down waves and is parallel to a trendline The ascending channel line and the trendline form borders on an uptrend.
A sideways price pattern between two converging trendlines in which the lower line is rising while the upper line is flat. This is generally a bullish pattern.
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.
Any possessions that have value in an exchange.
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.
Average True Range (ATR)
An indicator that measures volatility of a security. 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.
A chart of price versus time. The horizontal axis represents the passage of time with the most recent time periods on the right side; while the vertical axis represents the stock's price. For each time period, a vertical line denotes the high and low price of the security; a short horizontal protrusion to the right of the vertical line shows the closing price.
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.
The difference between cash prices and the futures contract prices.
A person who believes prices will decline and might be described as having a "bearish" outlook. Bear markets
A market when prices are declining. Occur when roughly 80% of all stocks decline for an extended period of time.
A signal which suggests that the rising trend of an index or stock has reversed but which proved to be false. Thus trap the bears that acted on the signal with losses. A bear trap is a form of whipsaw and relates to the spring.
The belief that market prices will decline.
Below the Market
A limit order to buy or sell a security for a specific price that is lower than the current market price. If the market does not reach these prices, the order will go unfilled.
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.
A purchase or sale of a large number of shares. Although the term is relative, 10,000 or more shares, or any quantity worth over $200,000 is generally considered a block.
See Reversal Spike-High
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. Examples include DBS, UOB and OCBC.
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.
A comparison of the number of issues traded with the number of issues listed for trading. A rally is considered a suspect if the number of advancing issues is diminishing as the rally develops. Conversely, a decline which is associated with fewer and fewer stocks falling is considered to be a bullish sign.
A price gap that forms on the completion of an important price pattern. A breakaway gap usually signals the beginning of an important price move.
A substantial rise in price above a resistance level or a substantial decline in price below the support level. When a breakout occurs, a price pattern is likely to continue.
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. 1982-87 and 1995-99 have been referred to as bull markets.
A market when prices are rising. Occur when roughly 80% of all stocks advance over an extended period of time.
A signal which suggests that the falling trend of an index or stock has reversed but which proved to be false. Thus trap the bulls that acted on the signal with losses. A bull trap is a form of whipsaw and relates to the spring.
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.
A condition that indicates a good time to buy a stock. The exact circumstances of the signal will be determined by the indicator that an analyst is using. For example, it's considered a buy signal when the price declines while OBV increases.
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. 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 intraday low might place a buy stop below the current price, but near support.
A company's repurchase of it's own shares of stock.
A sudden upward movement of a security's price accompanied by extremely high volume created by investors rushing in to buy the security. This often indicates that a security has been overbought and the price will fall. As it often happens at the end of an up price movement, it typically represents a good time to sell.
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.
The right to buy a stock or commodity future at a given price before a given date. The owner of the call option is speculating that the price of the stock will go up and is therefore bullish.
A form of Japanese charting that has become popular in the West. A narrow line (shadow) shows the day's price range. A wider body marks the area between the open and the close. If the close is above the open, the body is white (not filled); if the close is below the open, the body is black (filled).
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 has not 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 (A/D line). CMF is not influenced by the daily price change, but focuses on the location of the close relative to the range for the period (daily or weekly).
A trading range between two parallel trendlines in which prices move. They can be two parallel upward trendlines (upward channel); or two parallel downward trendlines (downward channel).
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.
A subsequent signal that validates a position stance. Traders and investors sometimes compare the prices with two or more technical indicators to ensure they are pointing in the same direction and confirming one another. For example, confirmation of a bullish trend is when the increasing prices are accompanied by a rising OBV.
A sideways trading range where supply and demand balance out.
A trading range in which prices move until continuing in the same direction as the trend prior to the consolidation area.
Occur in the Consolidation Area. It is 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 Pennant continuation patterns.
Bullish patterns in bear markets and vice versa.
After an advance, price declines, but they do not penetrate the low from which the advance began. Also referred to as a retracement, a correction usually retraces 1/3 to 2/3 of the previous advance.
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 CMF experience centerline crossovers.
Customer Free Balances
The total amount of unused money on deposit in brokerage accounts. These are free funds representing cash which may be employed in the purchase of securities.
A price pattern of movement that regularly occurs in a given time interval.
The process of buying and selling stocks based on a longer-term or primary market move. The cycle approximates the 4-year business cycle, to which such primary movements in stock prices are normally related.
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.
A trading style 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.
A market stage of a stock that is characterized by a downtrend with subsequently lower highs and lower lows.
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 (ADX) is derived from this system and is based on the spread between the +DI and -DI lines.
Occurs when the demand of a security is less than the supply. After an advance in price, a stock may start forming a top and trade sideways for an extended period. In the mean time, well-informed traders and investors may seek to unload positions. In that case, the stock is said to have come under distribution. A quiet distribution period is usually subtle and not enough to put downward pressure on the price. However, an aggressive distribution will likely put downward pressure on prices.
It is the opposite of confirmation. It occurs when two or more indicators move in opposite directions. Traders and investors often look for divergences by comparing a stock's direction to the direction of its indicators. 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. For example, a bearish divergence is when increasing prices are accompanied by falling OBV. Another example of bearish divergence is when price makes a high, pullback then makes a higher high; but RSI makes a high, pullback then makes a lower high.
A reversal chart pattern displaying two prominent peaks. The reversal is complete when the support trough is broken. The double bottom is a mirror image of the top.
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.
Also known as trading band. Envelopes are 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.
In financial market terminology, equity refers to stock. The process by which a company issues stock to raise money is termed equity financing.
An exchange is a physical location where securities are bought and sold. It consists of a primary and a secondary market. The primary market is the financial market where securities are issued and placed whereby the secondary market trades the issued securities.
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.
When buying power is no longer enough to move prices up or when selling power is no longer enough to move prices lower.
A price gap that occurs at the end of an important trend. It signals that the trend is concluding.
Exponential Moving Average (EMA)
A moving average that gives greater weight to more recent data in an attempt to smoothen the moving average.
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.
A breakout of a chart pattern that aborts. To ensure that a breakout is genuine, look for confirmation by several indicators.
A number sequence (i.e. 1,2,3,5,8,...) that 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. It is the ratio of the Fibonacci sequence that is important and valuable, not the actual numbers in the sequence.
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.
A market analysis that relies on economic supply and demand information based on the underlying value of a company in terms of its cash, current assets and earnings; as opposed to focusing to an analysis based on charts and market indicators (technical analysis).
Represents a price range on a chart at which no trading takes place. Also occurs when the high of the day is below the low of the previous day or when the low of the day is above the high of the previous day. Gaps are especially significant when accompanied by an increase in volume.
Head and Shoulders Bottom
A well-known 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 well-known 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.
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, e.g. RSI and MACD.
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.
Any person who directly or indirectly owns more than 10% of any listed stocks, or who is an officer or director of the company in question.
An investor is someone who tends to take a long-term view when buying a security, holding the security for at least several months.
Key Reversal Day
A one day chart pattern where prices sharply reverse during an uptrend or downtrend. In an uptrend, 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.
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.
Price charts that connect the closing prices of a given market over a span of time that form a curving line on the chart.
The ease with which a stock may be bought or sold in volume on the marketplace without causing dramatic price fluctuations. A highly liquid stock is characterized by a large volume of trading and a large pool of interested buyers and sellers.
Moving Average Convergence/Divergence (MACD)
An indicator developed by Gerald Appel. By comparing moving averages, MACD displays trend following characteristics, and by plotting the difference of the moving averages as an oscillator, MACD displays momentum characteristics.
A visual representation of the difference between the MACD line and signal line. The plot of this difference is presented as a histogram, making the centerline crossovers and divergences easily identifiable.
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).
An order to buy or sell a security at the prevailing market price. A sell order will most likely be filled at the bid price and a buy order will be filled at the ask price.
A leading indicator measuring a security's price or volume's rate of expansion. It 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.
Moving Average (MA)
An average of data for a certain number of time periods. It moves because for each calculation, we use the latest x number of time periods' data. By definition, a moving average lags the market. An exponentially smoothed moving average (EMA) gives greater weight to the more recent data, in an attempt to reduce the lag.
New Highs and New Lows
New highs refers to the number of stocks recording their highest price level in 52-weeks. New lows are the number of stocks recording their lowest price level in 52-weeks. As an indicator, new highs and new lows are usually shown as moving averages to smooth the results and are often plotted together for easy comparison.
Stock purchased in units less than 100 shares
On Balance Volume (OBV)
Introduced by Joe Granville, OBV measures positive and negative volume flow. 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 forms the OBV line. OBV line can then be compared with the price chart of the underlying security to look for divergence or confirmation.
An indicator that determines when a market is in an overbought or oversold condition. When the oscillator moves above the 80 level, the market is overbought. When the oscillator line moves down to the 20 level, the market is oversold. Oscillator can also be compared with a security's price to look for divergence or confirmation.
Over The Counter (OTC)
A securities that are traded through a telephone and computer network.
A technical term which means that 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 Stochastic Oscillator and RSI. 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.
A technical term which means that prices are considered too low and may rally in an upward direction. Oversold conditions can be classified by analyzing the chart pattern or with indicators such as Stochastic Oscillator and RSI. 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.
An indicator that sets trailing price stops for long or short positions. Also referred to as the "stop-and-reversal indicator". 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.
A continuation chart pattern that is similar to flag, except that it is more horizontal and resembles a small symmetrical triangle.
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.
A style of trading characterized by holding open positions for an extended period of time. Contrast this with day trading, where a trader buys, then sells out of a position before the market closes that day.
Technical appraisal of a security's future value.
Patterns that appear on price charts possessing predictive values. They are either reversal and continuation patterns.
The predominant movement of a security. When it is up, it is known as a bull market; when it is down, it is known as a bear market.
A security or index whose correlation with another security or index is so strong that it is used as a substitute for the other.
When a security or the overall market falls back from a previous advance.
The distance between the high price and the low price for a given time period. A daily range is equal to intraday high minus intraday low.
Rate of Change (ROC)
A momentum oscillator that measures the percent change in price from one period to the next. 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.
A brisk advance following a decline in prices.
A temporary decline following an advance in prices.
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 Wilder. 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.
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.
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.
A chart pattern that occurs before an existing trend reverses direction, e.g. a Head and Shoulder's reversal pattern. A break below neckline support indicates that the Head and Shoulder's pattern is complete and the prior uptrend has reversed.
Market turns that happen very quickly with little or no transition period.
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. Examples of sectors are financials sector and technology sector.
A security is a tradeable financial instrument with a financial value such as stocks, bonds, options and derivatives.
A condition that indicates a good time to sell a stock.
A sharp price decline accompanied by extremely high volume created by panic stricken investors dumping securities. This often happens at the end of a bear market and typically represents a good time to buy.
The process of buying back stock that has already been sold short.
Short Position (Interest)
The total amount of short sales outstanding on a specific exchange at a particular time.
Selling stock not owned in anticipation of buying it back later at a lower price for a profit. It involves borrowing stock (usually from the broker) to sell short and using margin to finance the borrowing.
Also known as a "trigger line", it is a moving average of another indicator that is used to generate simple buy and sell signals. The popular signal line is the one that is built into the MACD display. 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.
The difference between the bid and the ask. Generally speaking, more liquid (heavy volume) stocks usually have smaller bid/ask spreads. Less liquid stocks (light volume) usually have larger spreads.
A situation that occurs when prices break below the support line, 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 upthrust.
A momentum indicator developed by George Lane that measures the price of a security relative to the high/low range over a set period of time. The Stochastic Oscillator can be used like any other oscillator by looking for overbought/oversold readings, positive/negative divergences and centerline crossovers.
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 the profits or limit the losses.
See Parabolic SAR.
A price level at which there is sufficient demand for a stock to cause a halt in an downward trend and turn the trend up. Support levels indicate the price at which most investors feel that prices will move higher.
A sideways chart pattern between two converging trendlines in which the upper trendline is declining and the lower trendline is rising. The breakout through either trendline signals the direction of the price trend.
The study of market action, usually with price charts, which includes volume and open interest patterns. Compare this to Fundamental Analysis.
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.
A trader is someone who tends to take a short to medium-term view when buying a security. A trader usually relies on market volatility and swings to make profits.
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 can be used to set trailing stops.
Refers to the direction of prices. It can be an uptrend or a downtrend.
Straight lines drawn on a chart below reaction lows (in an uptrend) or above rally peaks (in a downtrend) that determine the steepness of the current trend.
Sideways price patterns in which prices fluctuate with converging trendlines. The three types of triangles are symmetrical, ascending and descending triangles.
A price pattern with three prominent peaks at about the same level. The triple bottom is the mirror image of the top.
The average of intraday high, low and close.
A straight line drawn upward and to the right below the reaction lows. The longer the uptrend 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 uptrend may be changing direction.
A situation that occurs when prices break above resistance, but soon reverse course and break back below resistance. Also 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.
A measurement of change in price over a given period. It is usually expressed as a percentage and computed as the annualized standard deviation of the percentage change in daily price. The more volatile a stock or market, the more money an investor can gain or lose in a short period of time.
The number of trades in a security over a period of time.
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.
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 Moving Average
A moving average that uses a selected time span, but gives greater weight to the more recent price data.
Occurs when a buy or sell signal is reversed in a short time. Volatile markets and sensitive indicators can cause whipsaws.
Developed by Larry Williams, Williams %R is a momentum indicator similar to Stochastics Oscillator and is especially popular for measuring overbought and oversold levels.