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Technical Analysis Glossary
Technical analysis is a means of being secure as
a trader in the stock market. It provides the discipline on how to be able to
predict movement in prices by studying past market data on price and volume.
Alpha-Beta Trend Channel: This
gives a measure of the profit derived from investing riskily on a fund. When
positive, it indicates that the profit is higher than the risk taken.
Arms Ease of Movement: This is
a tool that tries to measure the ease at which prices of stocks in the market
will rise or fall by comparing current prices with volume.
Average True Range: This
measures the periodic changes in the prices of securities
Bollinger Bands: This is a technical analysis tool that
is used to measure the degree of changes in price of securities when compared
with previous prices.
Candlestick Charts: A tool used to understand present
prices and predicting future price actions. By the understanding of this, the
trader knows when best to buy and sell, thereby making more profits in his
transactions.
Chaikin Oscillator: This tool is used to analyze how the flow of
money and price action interact by measuring the final price of securities at
the end of each day’s trading and comparing it with the high and low prices of
securities that were encountered during the day’s trading.
Commodity Channel Index: This
is used to know when the prices of securities have risen either very high or
very low within a very short period of time. It helps the trader to know when
currencies will suffer a pullback. Hence, it helps in effectively managing
cyclical trends.
Commodity Selection Index: This
is a tool that helps the trader in knowing commodities that are suitable for
short term trading. Commodities of this kind are highly volatile and can give
quick gains for lesser risks on investments.
Cutler's RSI: This is used to find out conditions where
securities have either been overbought or oversold.
Demand Aggregate: This is the total amount of stocks
demanded in the market.
Demand Index: This tool is used to predict future prices on
securities by combining price and volume. Most times, the volume tends to get to
the peak before prices do.
Detrend: This is eliminating the impact of time on a
trend by using retrogression and other statistical techniques to make it easier
to predict likely cyclical patterns.
Directional Movement Index: This
tool is used to know if an instrument is giving a trend or not.
Elliott Wave Theory: This
states that the stock market can be well predicted by understanding patterns of
waves (that repeat themselves).
Fibonacci Ratios and Retracements: This
is used to predict where and when favorable and unfavorable conditions will be
encountered. This can be done by dividing the vertical distance of two extreme
positions on the stock market chart by Fibonacci ratios. The ratios are commonly
used as 23.6%, 38.2%, 50%, 61.8% and 100%.
Gann Square: This
method is used to predict future support or resistance levels by counting from
the origin. The origin is the price at which the instrument is always low or
high..
Haurlan Index: This is an indicator that is used to measure
the size of the market.
Head and Shoulder Pattern: This
is a description of the pattern a chart can achieve when it rises and falls
abruptly. This happens if the chart rises first to a very high position then
falls back very rapidly, rising again the second time to a point higher than the
first rise and then falling again sharply. Finally, it rises again but this
time, not as high as the second one. The resulting chart will look like a head
and shoulders by the combination of the first and third rise (the shoulders) and
the second rise (the head).
Herrick Payoff Index: This
compares the relationship among daily changes in price, volume and open interest
to know the amount of money flowing into or out of a futures contract.
Kagi Chart: This is a chart used in determining
price movements so that a trader can know when best to buy stocks. It differs
from candlestick chart in that it is independent of time.
MACD (Moving Average Convergence/Divergence): This
is an Absolute Price Indicator. That is, it shows the relationship between two
moving price averages (a fast and a slow Exponential Moving Average) by taking
the difference of their prices.
McClellan Oscillator: A
tool used for short and intermediate term trading. It measures the rate at which
money enters or leaves the market. The results are used to determine overbought
and oversold conditions in the stock market.
Momentum: This is the rate of change in price of stocks.
Moving Averages: This is a technical analysis tool that
helps the trader know an average value of the price of a security for a defined
period of time. It is best suitable for a volatile market.
Norton High/Low Indicator: This
tool picks bottoms and highs on long term price charts. In doing this, it
combines results obtained from the Demand Index and Stochastic study.
Notis %V: This is used to measure how volatile or
inconsistent the market is by dividing the market into two parts: The downward (DVLT)
and the upward (UVLT) parts using its two separate indicators.
On Balance Volume: This uses cumulative total volume in
the market and price changes to detect momentum.
Parabolic: This is a strategy that uses the reverse
method known as “SAR” (Stop –And-Reversal). It states that if stock trading is
below the parabolic SAR, one can sell. But buying is rather encouraged if the
stock market is above the parabolic SAR.
Point and Figure Charts: This
chart provides daily changes in price so that the investor can know the present
stock prices as well as become able to use emerging trends to know when to buy
or sell securities.
Price Patterns: This is a way of analyzing the stock
market to know whether prices of security have risen, fallen or remained stable.
A rising price pattern occurs when there are more buyers than sellers. A falling
price pattern occurs when there are more sellers than buyers. Finally, a stable
price pattern occurs when the number of buyers and sellers are equal.
Random Walk Index: This is a tool that tries to find out
the cause of changes in price of securities. It tries to explain if the changes
in price are following a trend or if they are just random (without a defined
direction).
Rate of Change: This is a momentum oscillator that
expresses the change in price of stocks as ratios or percentages by comparing
current and previous prices.
Relative Strength Index: This
is a tool used to analyze the strength of the market by comparing the closing
prices at the end of a trading period. In summary, it states that in a strong
market, prices will close higher while in a weak market, prices will close
lower.
Renko Chart: This chart disregards the changes in time and
volume as it measures price movement.
Stochastic: This is a momentum indicator that compares the
closing price of a security to the security’s price range over a certain period
of time. When the current price is above the high range, it indicates that there
is buying pressure while a selling pressure is indicated when it is near the low
range.
Stoller STARC Bands: STARC
means Stoller Average Range Channels. It is used to give meaning to the
volatility of a market by using the Average Time Range (ATR).
Swing Index: This compares previous prices of a security in
a particular period of study with the current prices to know what the actual
price of the security might be.
Time Cycles: The knowledge of this helps the investor to be
successful in trading. It helps to know how the market is likely going to move.
Trading Index: This is an indicator that explains whether the
market is bullish or bearish.
Trix: This means Triple Exponential Average. It is
used to show markets that have been overbought or oversold.
Volume Accumul: This is a tool used to modify results
from On Balance Volume Tool. It gives a more accurate and precise value of a
day’s volume by expressing only a percentage of it as positive or negative.
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