Candlestick Charting Glossary

“A good beginning is the most important of things.” (Japanese proverb) You may also be interested in: Candlestick Patterns at a Glance

This is just a cursory description of the candlestick signals, some of which are rare. And some are more important than others, which is beyond the scope of this basic glossary. Knowing which are most important, and how to correctly recognize and use these candlestick signals, are why the most successful traders and investors enjoy the benefits of our educational resources and candlestick recognition software. For a customized educational or software package designed around your trading or investing needs contact paul@candlecharts.com.

abandoned baby: A very rare Japanese candlestick top or bottom reversal signal. It is comprised of a doji starthat gaps away (including shadows) from the prior and following sessions' candlesticks. This is the same as a Western island top or bottom in which the island session is also a doji.

Abandoned Baby

advance block: In candlestick charting a variation of the three white soldiers in which the last two soldiers (i.e., white real bodies) display weakening upside drive. This weakness could be in the form of tall upper shadows or progressively smaller real bodies. It signifies a diminution of buying force or an increase in selling pressure.

Advance Block

bearish belt-hold: On candlestick there are bullish and bearish belt-holds. A bullish belt-hold is a tall white candlestick that opens on, or near, its low and closes well above the opening price. It is also called a white opening shaven bottom. A bearish belt-hold is a long black candlestick that opens on, or near, its high and closes well off its open. Also referred to as a black opening shaven head.

Belt-Hold Lines

bearish engulfing pattern: A bullish engulfing candlestick pattern is comprised of a large white real body that engulfs a small black real body in a downtrend. A bearish engulfing candlestick pattern occurs when selling pressure overwhelms buying force as reflected by a long black real body engulfing a small white real body in an uptrend

Engulfing Pattern

. belt-hold line: On candlestick there are bullish and bearish belt-holds. A bullish belt-hold is a tall white candlestick that opens on, or near, its low and closes well above the opening price. It is also called a white opening shaven bottom. A bearish belt-hold is a long black candlestick that opens on, or near, its high and closes well off its open. Also referred to as a black opening shaven head.

Belt-Hold Lines

white for a close over the open). bullish engulfing pattern: A bullish engulfing candlestick pattern is comprised of a large white real body that engulfs a small black real body in a downtrend. or near. Also referred to as a black opening shaven head. A bearish engulfing candlestick pattern occurs when selling pressure overwhelms buying force as reflected by a long black real body engulfing a small white real body in an uptrend. Candlestick charts are also called "candle charts. its low and closes well above the opening price. or near. hence their name. It is also called a white opening shaven bottom. The lines above and below the real body are called shadows. candlestick pattern: Candlestick turning point such as a hammer or engulfing patterns. Traditional Japanese candlestick charts whose individual lines look like candles. . The top of the upper shadow is the session high and the bottom of the lower shadow is the session low. its high and closes well off its open. A bearish belt-hold is a long black candlestick that opens on. A bullish belt-hold is a tall white candlestick that opens on.box range: The Japanese candlestick charting expression for a market in a horizontal trading range. bullish belt-hold: On candlestick there are bullish and bearish belt-holds. candles: is a shortened term for a Japanese candlestick." Candlestick Charting candlestick signals: Candlestick reversals or turning points using Japanese candlestick methods. candlestick charts: A method of charting derived by the Japanese in which the open and close range are represented by rectangle called the real body (black for a close under the open.

Its bullish counterpart is the golden cross. and long-legged doji) depending on where the opening and closing are in relation to the entire range. Doji lines are among the most important individual candlestick patterns. They are also components of candlestick patterns. There are different varieties of doji lines (see gravestone. doji: A session in which the open and close on a Japanese candlestick are the same (or almost the same). Counterattack Lines dark-cloud cover: A bearish reversal signal. The bullish counterpart of the dark-cloud cover candlestick pattern is the piercing pattern. Dark-Cloud Cover dead cross: A bearish signal given when a short-term moving average on a Japanese candlestick chart crosses under a longer-term moving average. A pattern that reflects a stalemate between the bulls and bears and thus lessens the force in place before the emergence of the counterattack line. the market gaps sharply lower (higher) on the opening and then closes unchanged from the prior session's close. Southern doji are doji during declines. In an uptrend a long white candlestick is followed by a black candlestick that opens above the prior white candlestick's high (or close) and then closes well into the white candlestick's real body—preferably more than halfway. deliberation pattern: See stalled pattern. Northern doji are doji that appear during a rally. dragonfly.counterattack lines: Following a black (white) candlestick in a downtrend (uptrend). Doji .

The two candlesticks of the tasuki should be about the same size.downside gap tasuki: A downward (or downside) gapping tasuki is when the market gaps down with a black candlestick followed by a white candlestick. Dumpling Tops engulfing patterns: A bullish engulfing candlestick pattern is comprised of a large white real body that engulfs a small black real body in a downtrend. dragonfly doji: A doji with a long lower shadow and where the open. A window to the downside is needed to confirm this as a top. The black candle opens within the white real body and closes under the white candlestick's real body. A bearish engulfing candlestick pattern occurs when selling pressure overwhelms buying force as reflected by a long black real body engulfing a small white real body in an uptrend. The opposite version of this candlestick pattern is the gravestone doji. See the illustration under Doji. Engulfing Patterns . and close are at the session's high. The upward (or upside) gapping tasuki is made of a rising window formed by a white candlestick and then a black candlestick. Its bullish opposite is the frypan bottom. Both types of tasuki are rare on Japanese candlestick charts. dumpling tops: A candlestick charting pattern that is similar to the Western rounding top. high. The close on the black candlestick day is the fight point.

When the market opens a window to the upside. which is a bearish continuation pattern. real bodies that hold within the white candlestick's range. It is ideally comprised of five lines. 2. A tall white candlestick precedes three small. falling window: The same as a Western gap. An exhausting gap is a gap that occurs at the end of an important trend. it becomes a high-price gapping play. If prices gap above this consolidation area. real bodies that hold within the first session's high–low range. also known as measuring gap. The rising three methods is a bullish continuation pattern. A window to the upside confirms this pattern. The falling window is resistance. a rising gap on a daily chart is when today's low is above yesterday's high. and the third is a black candlestick that closes well into the first session's white real body. the market consolidates via a series of small real bodies near the recent highs. A midway gap. the second is a small real body (white or black) that gaps above the first real body to form a star. A long black real body is followed by three small. exhaustion. it is a rising window. frypan bottom: This Japanese candlestick pattern is similar to a Western rounding bottom. The first is the falling three methods. gapping plays: There are two kinds of gapping plays: 1. usually white. Then a black candlestick closes at a new low for the move. High-price gapping play—After a sharp advance. A falling gap is when today's high is below yesterday's low. it is a falling window. If a window opens in a sell off. falling three methods: There are two types on Japanese candlestick charts. This is a bearish signal. A breakaway gap is when the market gaps over a significant resistance area or under a major support area. The opposite of the evening star candlestick pattern is the morning star pattern. It is a bullish candlestick pattern and the rising window should be support. The fifth line of this pattern is a strong white candlestick that closes at a new high for the move. After a sharp price decline. If the middle portion of this candlestick pattern is a doji instead of a spinning top. and breakaway. It is the counterpart of the dumpling top. The first is a tall white real body. the market consolidates . usually black. it is an evening doji star. Frypan Bottom gaps: When there is no price action between two consecutive sessions. They are three main gaps. Windows are continuation candlestick patterns. midway. occurs in the middle of the move. Low-price gapping play.evening star: A top reversal pattern formed by three candle lines on a Japanese candlestick chart. For example.

the lower shadow should be at least twice the height of the real body when candlestick trading.via a series of small real bodies near the recent lows. When this line appears during a downtrend. The hanging man and thehammer are both the same type of candlestick pattern (i. a small real body [white or black]. with little or no upper shadow. it becomes a bearish hanging man. Gapping Plays golden cross: A bullish signal in which a shorter-term moving average crosses above a longer-term moving average. It signals the market has become vulnerable. gravestone doji: A doji in which the opening and closing are at the low of the session. a small real body (white or black) at the top of the session's range and a very long lower shadow with little or no upper shadow. the hanging man's lower shadow should be two or three times the height of the real body. It is the opposite of the dead cross in candlestick charting. at the top of the session's range and a very long lower shadow). under the hanging man's real body. In principle. It is a Japanese candlestick reversal signal at tops. See the illustration under Doji. For a classic hammer. Hammer hanging man: A top candlestick reversal pattern that requires confirmation.. it is a sell signal in candlestick trading. but there should be bearish confirmation the next session with an open. The opposite of this doji is the dragonfly doji. But when this line appears during an uptrend. hammer: An important bottoming candlestick charting pattern. it becomes a bullish hammer. that is. If prices gap under this consolidation. Hanging Man . and better is a close.e. The hammer and the hanging man are both the same lines that are generally called umbrella lines.

2. Harami Cross high-price gapping play: There are two kinds of gapping plays: 1. Most often the second real body is the opposite color of the first real body. The harami implies the immediately preceding trend is concluded. It shows that the market is losing its direction bias that it had before this candle appeared. Low-price gapping play. It is also called a petrifying pattern on candlestick charts. High-price gapping play—After a sharp advance. it becomes a high-price gapping play. If prices gap under this consolidation. If the real body is a doji instead of a small real body. After a sharp price decline. If prices gap above this consolidation area. it is a sell signal in candlestick trading. An important top (bottom) candlestick charting reversal signal especially after a tall white (black) candlestick line. The color of the second real body can be white or black. it is a long-legged doji. harami cross: A harami with a doji on the second session instead of a small real body. and the bulls and bears are now in a state of truce. the market consolidates via a series of small real bodies near the recent lows.harami: A two-candlestick charting pattern in which a small real body holds within the prior session's unusually large real body. high-wave candle: A candlestick with very long upper and lower shadows and a small real body on a Japanese candlestick chart. High-Wave Candle . the market consolidates via a series of small real bodies near the recent highs.

After this white candlestick's low is broken. and piercing pattern. it is a bullish bottom reversal signal with confirmation the next session when candlestick trading (i. thrusting line. Inverted Hammer inverted three Buddha pattern: A candlestick charting three Buddha top is the same as the Western head and shoulders top. a candlestick with a higher open and especially a higher close compared to the inverted hammer's close).. It has the same shape as the bearish shooting star.e.in-neck line: A small white candlestick in a downtrend on a candlestick chart whose close is slightly above the previous black candlestick's low of the session. Compare to on-neck line. In Japanese candlestick terms. the downtrend should continue. In-Neck Line inverted hammer: Following a downtrend. or very little. lower shadow. but when this line occurs in a downtrend. this is a Japanese candlestick line that has a long upper shadowand a small real body at the lower end of the session. There should be no. the three Buddha top is a three mountain top in which the central .

The first is a long black real body. it takes to become The Expert at candles. These are the accurate time tested patterns. the second is a small real body (white or black) that gaps lower to form a star.Remember Nison Candlestick patterns were refined by generations of use. lower shadow: The difference between the session low and the open on a white candle or the close on a black candle. It is a bearish continuation candlestick pattern. High-price gapping play—After a sharp advance. and the third is a white candlestick that closes well into the first session's black real body. long-legged doji: A doji with very long shadows on a candlestick chart. Low-price gapping play. The market should continue to . There are different varieties of doji lines (see gravestone. the market consolidates via a series of small real bodies near the recent lows. If prices gap above this consolidation area. Doji lines are among the most important individual candlestick patterns. Nison candlesticks: There are a lot of so-called teachers out there who have good intentions when it comes to explaining candles. Northern doji are doji that appear during a rally. dragonfly. Its opposite is the evening star candlestick pattern. After a sharp price decline. An inverted three Buddha is the same as the Western inverted head and shoulders. They are also components of candlestick patterns. it becomes a high-price gapping play. Morning Star night attack: The Japanese candlestick trading expression for a large order placed at the close to try to affect the market. morning attack: The Japanese candlestick trading expression for a large buy or sell order on the opening that is designed to significantly move the market morning star: A bottom reversal pattern formed by three candlesticks. it is a sell signal in candlestick trading. If the opening and closing of a long-legged doji session are in the middle of the session's range. on-neck line: A black candlestick in a downtrend is followed by a small white candlestick whose close is near the low of the session of the black candlestick. the market consolidates via a series of small real bodies near the recent highs.mountain is the tallest. Southern doji are doji during declines. In Japanese charting terminology. the line is called a rickshaw man. and long-legged doji) depending on where the opening and closing are in relation to the entire range. it is a three river bottom in which the middle river is the longest. low-price gapping play:There are two kinds of gapping plays: 1. or done the years of research. But the truth is they haven't done the work. If prices gap under this consolidation. northern doji: A session in which the open and close on a Japanese candlestick are the same (or almost the same). 2.

When the close is higher than the open. In a downtrend. A black (or filled-in) real body is when the close is lower than the opening. rickshaw man: The Japanese candlestick charting nickname for the long-legged doji. A star in a downtrend has the Japanese candlestick charting nickname raindrop.move lower after the white candlestick's low is broken. the in-neck line. the real body is white (or empty). a long black candlestick is followed by a gap lower open during the next session. Compare to the on-neck line. and a piercing pattern on candlestick charts. . athrusting line. and the thrusting line. piercing pattern: A Japanese candlestick bottom reversal signal. real body: The rectangular part of the candlestick line. Compare to an in-neck line. On-Neck Line petrifying pattern: The candlestick trading nickname for the harami cross. It is defined by the closing and opening prices of the session on a Japanese candlestick chart. Piercing Pattern raindrop: A small real body (white or black) that gaps away from the large real body preceding it. This session finishes as a strong white candlestick that closes more than halfway into the prior black candlestick's real body.

rising window: The same as a Western gap.rising three methods: There are two types on Japanese candlestick charts. The falling window is resistance. If a window opens in a sell off. Windows are continuation candlestick patterns. It is ideally comprised of five lines. and a smallreal body near the lows of the session that arises after an uptrend. Then a black candlestick closes at a new low for the move. usually white. The bottom of the lower shadow is the low of the session. the market opens at the same opening as the previous session's opposite color candlestick and then closes higher (lower). little or no lower shadow. They represent the extremes of the session. It is a bullish candlestick pattern and the rising window should be support. it is a falling window. separating lines: When. Separating Lines shadows: The thin lines above and below the real body of the candlestick line on Japanese candlestick charts. usually black. in an uptrend (downtrend). real bodies that hold within the first session's high –low range. This is a bearish signal. The lower shadow is the line under the real body. real bodies that hold within the white candlestick's range. When the market opens a window to the upside. The first is the falling three methods. A tall white candlestick precedes three small. The top of the upper shadow is the high of the session. The prior trend should resume after this line on candlestick charts. A long black real body is followed by three small. The upper shadow is the line on top of the real body. shooting star: A bearish candlestick pattern with a long upper shadow. shaven head: A candlestick with no upper shadow on a Japanese candlestick chart. Shooting Star . which is a bearish continuation pattern. The rising three methods is a bullish continuation pattern. it is a rising window. The fifth line of this pattern is a strong white candlestick that closes at a new high for the move.

side-by-side white lines: Two consecutive white candlesticks that have the same open and whose real bodies are about the same size. spinning tops: The Japanese candlestick charting nickname for candle lines with small real bodies. There are different varieties of doji lines (see gravestone. In a downtrend. In an uptrend. on Japanese candlestick charts these side-by-side white lines are still considered bearish (in spite of their white candles since they come after a falling gap). They are also components of candlestick patterns. star: A small real body (white or black) that gaps away from the large real body preceding it. dragonfly. Tasuki Gaps . Doji lines are among the most important individual candlestick patterns. Both types of tasuki are rare on Japanese candlestick charts. it is a bullish continuation candlestick pattern. The two candlesticks of the tasuki should be about the same size. Star tasuki gaps: The upward (or upside or bullish) gapping tasuki is made of a rising window formed by a white candlestick and then a black candlestick. Northern doji are doji that appear during a rally. and long-legged doji) depending on where the opening and closing are in relation to the entire range. if these side-by-side white lines gap higher. A star in a downtrend has the Japanese candlestick charting nickname raindrop. Side-by-Side White Lines southern doji: A session in which the open and close on a Japanese candlestick are the same (or almost the same). The black candle opens within the white real body and closes under the white candlestick's real body. Southern doji are doji during declines. The close on the black candlestick day is the fight point. A downward (or downside or bearish) gapping tasuki is when the market gaps down with a black candlestick followed by a white candlestick.

three Buddha patterns: A candlestick charting three Buddha top is the same as the Western head and shoulders top. it is a three river bottom in which the middle river is the longest. . In Japanese charting terminology. The first is the falling three methods. usually white. Three Crows three methods: There are two types on Japanese candlestick charts. Then a black candlestick closes at a new low for the move. which is a bearish continuation pattern. real bodies that hold within the white candlestick's range. the three Buddha top is a three mountain top in which the central mountain is the tallest. In Japanese candlestick terms. It is ideally comprised of five lines. usually black. A long black real body is followed by three small. Three Buddha three crows: Three relatively long consecutive black candles that close near or on their lows. real bodies that hold within the first session's high –low range. The fifth line of this pattern is a strong white candlestick that closes at a new high for the move. It is a top candlestick reversal pattern at a high-price level or after an extended rally. The rising three methods is a bullish continuation pattern. An inverted three Buddha is the same as the Western inverted head and shoulders. A tall white candlestick precedes three small.

the same highs on a candlestick chart. Three River Bottom three white or three advancing soldiers: This is a candlestick charting pattern is a group of three white candlesticks with consecutively higher closes (with each closing near the highs of the session). or near. Three Soldiers .Three Methods three mountain top: A longer-term topping pattern in which prices stall at. Three Mountain Top three river bottom: When the market hits a bottom area three times on a Japanese candlestick chart. These three white candles presage more strength if they appear after a period of stable prices or at a low price area.

is comprised of one or more tall white candles followed by congestion and then one or more long black candlesticks.thrusting line: A white candlestick that closes in the prior black real body. As part of a rising market. the thrusting line is viewed as bearish (unless two of these patterns appear within a few days of each other). but still under the middle of the prior session's real body. tweezers top and bottom: When the same highs or lows are tested on back-to-back sessions. The opposite candlestick reversal pattern is tower bottom pattern. One or more long black candles are followed by lateral action. on a candlestick chart if both sessions of a harami cross have the same high. Thrusting Line towers: There is a tower top and a tower bottom. In a downtrend. The tower top. a top candlestick reversal pattern formation. The thrusting line is stronger than an in-neck line. An extraordinarily rare candlestick charting pattern. it could have more significance since there would be a tweezers top and a bearishharami cross made by the same two candlestick lines. Towers tri-star: Three doji that have the same formation as a morning or evening star pattern. They are minor reversal signals that take on extra importance if the two candlesticks that comprise the tweezers pattern also form another candlestick indicator. but not as strong as a piercing candlestick pattern. it is considered bullish on a Japanese candlestick chart. For example. Then the market explodes to the upside via one or more long white candlesticks. Tweezers . It is a pattern that looks like it has towers on both sides of the congestion hand.

upside gap two crows: A three-candlestick pattern. It is a bullish candlestick pattern and the rising window should be support. If a window opens in a sell off. The umbrella line looks like an umbrella since it is a candle with a long lower shadow and a small real body at. it is a rising window. A downward (or downside) gapping tasuki is when the market gaps down with a black candlestick followed by a white candlestick. Both types of tasuki are rare on Japanese candlestick charts. Window . upside gap tasuki: The upward (or upside) gapping tasuki is made of a rising window formed by a white candlestick and then a black candlestick. or near. Upside Gap Two Crows window: The same as a Western gap. The two candlesticks of the tasuki should be about the same size. The close on the black candlestick day is the fight point. When the market opens a window to the upside. The falling window is resistance. The first line is a long white candlestick that is followed by a black real body that gaps over the white candle's real body.umbrella lines: The candlestick charting generic name for the hammer and hanging man lines. The third session is another black real body that opens above the second session's open and closes under the second session's close. Windows are continuation candlestick patterns. It is very rare Japanese charting pattern. This is a bearish signal. the top of the trading range. The black candle opens within the white real body and closes under the white candlestick's real body. upper shadow: The difference between the session high and the close on a white candle or the open on a black candle. it is a falling window.

The high and low of the session define the top and bottom of a vertical line.70 is overbought. A break over the resistance area is viewed as bullish.0 indicates more volume in declining stocks. The open is marked with a short horizontal bar attached to the left of the vertical line.com reveal the best methods to combine Nison Candlesticks (candlestick training the right way) with western indicators for your one. blow-offs (also called selling or buying climaxes): A top or bottom reversal. The market and the A/D line should trend in the same direction. Nison is not only the acknowledged master of the previously secret Japanese candlestick techniques. a/d line: A popular indicator that measures the breath of the stock market advance or decline where the number of advancing issues is compared to the number of the declining issues. The bands are usually two standard deviations above and below this 20 period moving average. Prices sharply and quickly thrust strongly in the direction of the preceding trend and then suddenly turns in the opposite direction—usually on high volume.two punch for trading success.0 indicates more volume in rising stocks. As such at candlecharts. The top and bottom bands define potential support and resistance areas.. ascending triangle: A sideways price pattern where the resistance line is horizontal while the support line is ascending.20 is oversold and under . but is also an expert on Western technical analysis with over 35 years real world experience.e. Active investors purchase investments and continuously monitor their activity in order to exploit profitable conditions.com Mr. Price is in on the vertical scale. Blow-offs occur after an extended move. time is on the horizontal scale. a trendline or a congestion zone). The A/D line is usually compared to popular index such as the Dow Jones. Bollinger bands: A popular indicator that plots two bands above the below a 20 period moving average. Reading below 1. A 10 day average of the arms index over 1. bar chart: A graphic representation of price activity. breakaway gap: When prices gap away from a significant technical area (i. The close for the period is marked with a short horizontal bar attached to the right of the vertical line. . A reading above 1. active investing: An investment strategy involving ongoing buying and selling actions by the investor. arms index: Also called the TRIN index. this indicator is a ratio of the average volume of declining stocks divided by the average volume of advancing stocks. bears: A trader or investor who thinks a specific market will move lower.Western Technical Indicator Glossary Steve Nison's Candlecharts.

Or if the faster %K line in stochastics crosses above the slower %D. If prices establish new lows and stochastics do not this is a positive divergence and is viewed as bullish. has the implication that the prior trend should resume. continuation patterns: A pattern whose implications are for a continuation of the prior trend. day trading: A stock trader who holds positions for a very short time (from minutes to hours) and makes numerous trades each day. commodity markets: are markets where raw or primary products are exchanged. that is a bullish crossover. A period of lateral price action within a relatively narrow price band. change of polarity: When old support converts to new resistance. bulls: A trader or investor will thinks a market will move higher. A close under this pattern is viewed as bearish. double top: Price action that resembles a M in which price rallies twice stop at. if a 5 day moving average crosses under a 13 day moving average it is a bearish crossover. This is bullish and there is a measured price target to the upper end of the congestion band. . confirmation: When more than one indicator substantiates the action of another. Consolidation. for instance. down gap: When prices gap lower. This is when the upper resistance line is descending while the lower support line remains horizontal. or near. the same highs. however. or near. this is a negative divergence and is viewed as bearish. if prices reach new highs and stochastics do not. dow theory: One of the oldest technical theories. For instance. or when old resistance converts to new support. These raw commodities are traded on regulated commodities exchanges. Most trades are entered and closed out within the same day. is a continuation pattern. divergence: When the price and an indicator (such as an oscillator like RSI) move in opposite directions. descending triangle: The opposite of an ascending triangle. crossover: When the faster indicator crosses above (bullish crossover) or below (bearish crossover) the slower indicator. consolidation: The same as a congestion zone .breakout: Overcoming a resistance or support level. in which they are bought and sold in standardized contracts. For example. the market is comprised of the trend. crack and snap: When prices break under the support of a horizontal congestion band and then springs back above the "broken support" area. Its main components include the averages discount everything. the same lows. primary trend has three phases and the averages must confirm one another. double bottom: Price action that resembles the letter W in which price decline stops at. down trend: A market that is trending lower as shown by a series of lower highs and/or lower lows. The bearish pattern is completed when the intervening low is closed below. A flag. congestion zone: Also called a box range. The bullish pattern is completed when the intervening high is closed above.

Instead prices pull back under the "broken" resistance line. When this pattern appears upside down it is called an inverse head and shoulders. commercial companies. The classic Elliott wave patterns has 5 waves up called impulse waves and 3 down waves called corrective waves.2. investment management firms. For example. flags and pennants: Continuation patterns in which the market has a sharp advance or decline and then there is a correction that looks like a rectangle or a triangle.13. investment: The action or process of investing money for profit or material result. Prices are thus surrounded by gaps which leaves them isolated like an island. 50% and 62%. exchange and speculate on currencies. inside session: When the entire session's high-low range is within the prior session's range. exponential moving average: A moving average that is exponentially weighted. futures market: A futures exchange. hedge funds.5. a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. A midway gap. Fibonacci numbers: A series of numbers derived by adding the previous number to the current number. They are three main gaps.Popular Fibonacci ratios used by technicians include (rounding off) 38%. a rising gap on a daily chart is when today's low is above yesterday's high. . Example: for a 9 period EMA. that is. exhaustion. The numbers begin 1. falling support line: A support line obtained by connecting a series of lower lows. measured moves: A price target based on using measurements based on prior price action. A close outside of this rectangle or triangle confirms a continuation of the prior move. sell. The forex markets is made up of banks. forex market: The market in which participants are able to buy. market risk: is the risk that the value of a market will go against your trading position.31…. falling off the roof: When prices break above a resistance line from a lateral trading zone and these new highs fail to hold. and then gaps in the opposite direction. also known as measuring gap. If the price penetrates the line that connects the low points of the head (called the neckline). An exhausting gap is a gap that occurs at the end of an important trend. A falling gap is when today's high is below yesterday's low. occurs in the middle of the move.3.8.1. midway. gaps: When there is no price action between two consecutive sessions. central banks. and retail forex brokers and investors. island tops and bottoms: A formation at the extremes of the market when prices gap in the direction of the prior trend. Prices then stay there for one or more sessions. derivatives exchange or futures market is a central financial exchange where people can trade standardized futures contracts. the pattern is completed. head and shoulders: A reversal pattern resembling a head (with the highest peak) and two shoulders (lower peaks). and breakaway. A breakaway gap is when the market gaps over a significant resistance area or under a major support area. The target is for a retest of the lower end of the recent trading zone. today’s close is weighted 20% and yesterday’s ma is weighted by the other 80%.Elliott wave: An approach to market analysis that's based on wave patterns and the Fibonacci number sequence.

There are simple. show negative and positive divergence and they can be used to measure a price move's velocity. . moving average convergence-divergence (MACD) oscillator: A combination of three exponentially smoothed moving averages. weighted and exponential moving averages. point and figure charting: A method of charting that disregards passage of time and displays only changes in prices. Oscillators include RSI. For instance. too fast. The buyer of the option gains the right. this is a negative divergence and is viewed as bearish. resistance level: A level where sellers are expected to enter.moving average: A trend following indicator that is usually used in trending markets. In an uptrend. This oscillator subtracts longer-tern moving average from the shorter-term moving average. reaction: A price movement opposite to the prevailing trend. A column of Xs denotes a rising market and a column of Os reflect the falling market. outside reversal session: Also called a key reversal. MACD. oscillator: A momentum line that fluctuates around a zero value line (or between 0 and 100). If prices establish new lows and stochastics do not this is a positive divergence and is viewed as bullish. At this point the market is vulnerable to a downward correction. oversold: When the market declines too quickly. neckline: A line connecting the lows of the head in a head and shoulders formation or highs of an inverse head and shoulders. but not the obligation. if prices reach new highs and stochastics do not. price oscillator: Also called the moving average oscillator. Stochastics. If prices establish new lows and stochastics do not this is a positive divergence and is viewed as bullish. negative divergence: When the price and an indicator (such as an oscillator like RSI) move in opposite directions. rally: An upward movement of prices. positive divergence: When the price and an indicator (such as an oscillator like RSI) move in opposite directions. The market becomes susceptible to a bounce. Oscillators can help measure overbought/oversold levels. This is an index thatcompares the relative strength of price advances to price declines over a specified period. for example a simple five-day moving average adds the last five days closing prices and divides the total by 5. In a downtrend. an outside reversal session is when the market makes a new low for the move and then closes that session above the prior session’s close. if prices reach new highs and stochastics do not. a move above the neckline of an inverse head and shoulders neckline is bullish. overbought: When the market moves up too far. relative strength index (RSI): An oscillator plotted on a scale between 0 and 100. For instance. this is when prices make a new high for the move and then closes that session under the prior session’s close. A move under the neckline of a head and shoulders top is bearish. option trading: In finance. this is a negative divergence and is viewed as bearish. while the seller incurs the obligation to fulfill the transaction if so requested by the buyer. It shows the average value of securities price over a period of time. to engage in some specific transaction on the asset. etc. an option is a derivative financial instrument that establishes a contract between two parties concerning the buying or selling of an asset at a reference price.

rising support line: A support line connecting higher lows. would be the term "trend change indicator". It means the prior trend should change. trend: The market’s prevalent price direction. As long as the trend changes after a trend reversal pattern appears. reversal session: A session when a new high is made for the move and the market then closes under the prior session's close. that trend reversal worked.2%. and the market then trades sideways the trend reversal pattern was successful. that trend reversal worked. It means the prior trend should change. technical analysis: Looking at the history of prices to gauge the markets health and obtain favorable trade opportunities. Swing traders use technical analysis to look for stocks with short-term price momentum. stock market: The market in which shares are issued and traded either through exchanges or over-the-counter markets. support level: An area where buyers are expected to enter. swing trading: A style of trading that attempts to capture gains in a stock within one to four days. Prices might reverse after a trend reversal pattern. If the market reverses from this sharp selloff it is viewed as a selling climax. and more accurate. and the market then trades sideways the trend reversal pattern was successful. For example the trend could change from upwards to sideways. trading range: When prices are locked between horizontal support and horizontal resistance levels. and more accurate. selloff: A downward movement of prices. Prices might reverse after a trend reversal pattern. trend reversals: Also called reversal indicators. also known as the equity market. There are short term. As long as the trend changes after a trend reversal pattern appears. 50% and 61. would be the term "trend change indicator". intermediate term and long term trends. More appropriate. stochastics: An oscillator that measures the relative position of the closing price as compared to its range over a chosen period. For example the trend could change from upwards to sideways. It does not mean prices are going to reverse. Also called a congestion zone or box range. selling climax: When price push sharply and suddenly lower on heavy volume after an extended decline. This is a misleading term. Thus if a trend reversal appears during an up trend. More appropriate. It does not mean prices are going to reverse. Thus if a trend reversal appears during an up trend. but they may not. swing target: Using the height of a rally or decline to obtain a price target. It is comprised of the faster moving %K line and the slower moving %D line. rising resistance line: A resistance line made by connecting higher highs. .8%. but they may not. The more common retracement levels are 38.retracement: A price reaction from the prior move in percentage terms. reversal indicator: This is a misleading term.

turning points: A time at which a decisive change in a situation or chart occurs. weighted moving average: A moving average in which each of the previous prices is assigned a weighting factor. up trend: A market that is trending higher. . Usually the most recent data is the more heavily weighted and thus considered more important. up gap: A gap that pushes prices higher. When prices suddenly reverse direction forming a price pattern that looks like the letter V for a bottom or an inverted V for atop. the more important the trend line. or lower lows. volume: The total of all contracts or shares traded for a given period. At least two points are needed to draw a trend line. and the greater the volume on the tests.trend line: A line on a chart that connects a series of higher highs. The more often it is tested. V bottom or top: Also called a spike.

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