Public Glossary

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Technical Analysis Glossary

Terms in this glossary: Click a term to jump to it, or scroll down the page.
Accumulation Analysis Average Bear Bearish Breakout Bull Bullish Buyer Chart Chartist Close Confirmation Congestion area	Continuation (pattern) Demand Derivative Distribution Dow Theory Fade Financial instrument Flat Fundamental Fundamental analysis Gap Gearing High	Index Inside day Intra-day Intrinsic value Investing Leverage Limit (day) Long Low Moving average Neutral Objective Objective (analysis)	Open Open interest Outside day Over bought Oversold Parabolic Pattern Period Price Rejection Resistance Retracement Return	Reversal Reversal (pattern) Security Seller Short Square Stochastic Stop Strong (market) Subjective Supply Support Swing Target	Technicals Tick Time frame Time stop Trade Trader Trading Trading range Trend Trend line Volume Weak (market) Whipsaw

Accumulation	Used to describe a base pattern on a chart where strong long term holders buy under-valued securities to hold for a subsequent mark up phase. Strong holders are mainly professionals and weak holders are generally the public.
Analysis	A process of examining the detailed composition of a situation in order to identify the condition of the market.
Average	The precursor to today’s sophisticated price index. The prices for a basket of financial instruments is totalled and divided by the number of instruments. The earliest one — the Dow Jones Average — is still in popular use today. See also moving average.
Bear	A market participant who believes prices are likely to fall and is looking to sell financial instruments. Is interchangeable with seller.
Bearish	A pessimistic outlook for prices held by bears/sellers.
Breakout	A price move one tick above the last high or above the boundary of a congestion area or pattern. Also below the last low or below the boundary of a congestion area or pattern.
Bull	A market participant who believes prices are likely to rise and is looking to buy financial instruments. Is interchangeable with buyer.
Bullish	An optimistic outlook for prices held by bulls/buyers.
Buyer	A market participant who looks to purchase a financial instrument. Their motivation will be to profit from an appreciation in the price, take profits on a short trade or to cut loses on a short trade.
Chart	The graphical representation of market action.
Chartist	One who studies charts. Now generally replaced by ‘technical analyst’.
Close	The last price at which a market trades in a period. In a futures market, the settlement price is often used in place of the actual last trade.
Confirmation	Two or more chart signals with the same implication.
Congestion area	Price action over a period that is confined to a relatively narrow range. Also known as a trading range.
Continuation (pattern)	A configuration on a price chart that, on the balance of probabilities, leads to the resumption of the prior trend. Its classification is confirmed when price breaks out of the pattern in the direction of the prior trend.
Demand	The aggregate of bids by buyers at a given price.
Derivative	A tradeable instrument which derives its value from some other instrument. Futures, options and warrants are all derivatives. Derivative markets are usually highly leveraged.
Distribution	Used to describe a top pattern on a chart where strong long term holders sell to weak short term holders over valued securities that they have held through the mark up phase. Strong holders are mainly professionals and weak holders are generally the public.
Dow Theory	A theory developed by Charles Dow, first editor of The Wall Street Journal, the principles of which underlie most of modern technical analysis. Dow’s theory was further enunciated by William Hamilton, who followed him as editor of The Wall Street Journal and finally by Robert Rhea in his book The Dow Theory.
Fade	A jargon term meaning to take the opposite side of a trading situation.
Financial instrument	A tradeable written undertaking which establishes ownership and payment rights between parties.
Flat	Describes a trader who has no position in the market, i.e. neither long nor short. See square.
Fundamental	Relating to factors that determine prices.
Fundamental analysis	The study of the factors that determine prices of financial instruments.
Gap	A gap occurs when the price opens above the high of the previous period and trades higher or when the price opens below the low of the previous period and trades lower.
Gearing	See leverage.
High	The highest price at which a security traded during a time period or the highest value for an index for a time period.
Index	A numerical measure of the way the prices of a weighted or unweighted basket of financial instruments has changed over some base period.
Inside day	A period in which the range of the latest period is entirely within the range of the previous period.
Intra-day	Where used in relation to charting prices it means that the time period is less than a day. Common intra-day time intervals are five minutes and hourly. Where used in relation to trading it refers to traders who open and close trades within the one day, not generally holding positions overnight.
Intrinsic value	An estimate of the objective current value of a financial instrument, determined by fundamental analysis.
Investing	The exchanging of money for a financial instrument in the expectation of an income stream and/or a capital gain. Essentially identical to trading, except the emphasis will tend to be on a longer time frame and the income stream will tend to be the prime component of total return.
Leverage	The relationship between the trader’s equity in a position and the amount of debt funding it. The higher the proportion of debt, the higher the leverage. High leverage allows very high gains from small moves in price, but also places equity at risk from small price movements. Is the same as gearing.
Limit (day)	In some futures market, there are limits placed on how far price can rise or fall in a given day. This means that trading can completely cease on that day if there are neither buyers nor sellers within the limit range.
Long	To buy a financial instrument with a view to selling it later at a higher price.
Low	The lowest price at which a security traded during a time period or the lowest value for an index for a time period.
Moving average	A trend following indicator which smoothes the price to show the direction of the underlying trend.
Neutral	Where a trader holds no position. See also flat and square.
Objective	Refers to the result of measuring an aspect of price action with a view to predicting the extent of a likely price move. Same as target.
Objective (analysis)	Those parts of analysis that can be demonstrated logically by reference to facts — the opposite of subjective, where the analysis relies on the opinion or judgement of the analyst.
Open	The price of the first trade of a time period. If a price index is being charted, it may be the value of the index at the end of the first of the regular periods for which the index is calculated.
Open interest	The sum total of all open contracts in a futures market.
Outside day	A period in which the range of the latest period is entirely outside the range of the previous period.
Over bought	A level of price coinciding with extreme levels of a momentum oscillator above the centre line.
Oversold	A level of price coinciding with extreme levels of a momentum oscillator below the centre line.
Parabolic	The Parabolic Time/Price System is a trading system based on: The assumption of trading a trend and the expectation of price to move — stops generated are driven by an acceleration factor based on the time elapsed. The acceleration factor means the stops generated trace a pattern like a parabola.
Pattern	A term used generally in all areas of technical analysis to describe any configuration on a price chart from one period to many periods. See also continuation pattern and reversal pattern.
Period	A length of time over which prices are recorded and used for analysis. Common periods are a day, a week or a month.
Price	The value at which a trade takes place on a financial market. In this subject, it also refers to the value of an index or a market average.
Rejection	A term used to describe the way prices sometimes reach a peak or trough and then immediately recoil from that level.
Resistance	A level on the chart where the security has traded before and which will tend to interrupt or reverse a subsequent up trend.
Retracement	The idea that swings in a trend retrace the previous swing in full or in part.
Return	The object of trading or investing. Total return comprises any income stream and any capital gain.
Reversal	A general term to describe a change in direction of price movement.
Reversal (pattern)	In bar charting, a configuration on a price chart that, on the balance of probabilities, leads to a change in the direction of the prior trend. Its classification is confirmed when price breaks out of the pattern in the direction opposite to the prior trend.
Security	Any financial instrument.
Seller	A market participant who looks to sell a financial instrument. Their motivation will be to profit from a fall in the price, take profits on a long position or to cut losses on a long position.
Short	To sell a financial instrument that is not already owned with a view to buying it back later at a lower price.
Square	A position where a trader is neither long nor short, i.e. not in the market. Also known as being flat or having a neutral position.
Stochastic	The name of an indicator that measures momentum of price change with reference to how near the market closes to the high or low of the recent range.
Stop	An order placed in a futures market to buy or sell if the market trades at a specified price. In stock markets, and any other market where stop orders are not accepted, ‘stop’ is used to denote the level at which a trader intends to give a buy or sell order if the market trades at that level. Stops are most commonly used to limit losses on an open position and, in this case, are often referred to as a ‘stop-loss’. However, stops may also be used to close a profitable trade (take-profit stop) at a target level or to initiate a trade, say on a price break out from a pattern. A stop order may also be used to enter a trade if an instrument trades at the level specified.
Strong (market)	A bull or rising market.
Subjective	Those parts of analysis that rely upon the opinion or judgement of the analyst — the opposite of objective.
Supply	The aggregate of offerings by sellers at a given price.
Support	A level on the chart where the security has traded before and which will tend to interrupt or reverse a subsequent down trend.
Swing	A general term for a price movement in one direction — essentially a short-term trend.
Target	The result of measuring an aspect of price action with a view to predicting the extent of a likely price move. Same as objective.
Technicals	Measurements of market activity, principally price, volume and open interest.
Tick	The smallest change permitted in the price of a futures contract. However, the term is used more widely for prices recorded on any market trade by trade. This may derive from the sound made by pre-electronic quote machines (ticker tape machines, or just tickers) whenever a trade came through.
Time frame	A measure of time used in analysis, e.g. one minute, hourly, daily, weekly, monthly and yearly. Can also be used more generally as in short medium or long term.
Time stop	A time limit on the holding of a position, after which it is intended to be closed, either automatically or by action of the trader.
Trade	A transaction, either buying or selling, on a financial market.
Trader	A person who buys or sells with the objective of making a capital gain.
Trading	The exchanging of money for a financial instrument in the expectation of an income stream and/or a capital gain. Essentially identical to investment, except the emphasis will tend to be on a shorter time frame and capital gain will tend to be the prime component of total return.
Trading range	Price action over a period that is confined to a relatively narrow range. Also called a congestion area.
Trend	A succession of either higher highs and higher lows (an up trend) or lower highs and lower lows (a down trend). The trend is determined by the price action.
Trend line	A line connecting lows in an up trend or highs in a down trend.
Volume	The total number of financial instruments traded in a period. Sometimes proxies are used when data is unavailable.
Weak (market)	A bear or falling market
Whipsaw	Rapid reversal of trading signals—usually at a loss.