Terms Start With D

 

Important terms starting with D that can be useful for making money in stock market, Forex or any financial market it pays to know them.

Discount: The amount by which the price of an option or future falls below the theoretical value, representing the degree or pessimism of market participants.

Distribution: Process in which demand for a stock is overcome by an expanding supply, which over a period of time has an unfavorable effect on the price of a stock. It is generally a period of trend neutrality in price, but often has high volatility.

Divergence: One measure failing to extend its trend to a new high (or low) while another measure does. This leads to less confidence in continuing the trend. Often said of the Dow Jones Industrial Average versus the Dow Jones Transportation Average. Opposite of confirmation.

Downtick: A transaction that occurs at a lower price than the previous transaction.

Terms Start With C

Important terms starting with C that can be useful for making money in stock market, Forex or any financial market it pays to know them.

Churning: Hesitation in a trend, usually leading to a reaction. Volume is normally relatively high (after an advance), with limited price progress.

Climax: (Climatic lowpoint or climatic highpoint). A sudden end to a trend, accompanied by high volatility and high relative volume.

Concession or Spread: Price differential between trades when blocks of stock are involved.

Confirmation: Two or more trends or momentum measures extending their trends to new highs (or lows) at the same time. The implication is confidence that the trend will continue. Often said of the Dow Jones Industrial Average versus the Dow Jones Transportation Average.

Consolidation: A pause in trend with the expectation the trend will be resumed in the same direction. Usually considerably shorter in time than Stabilization.

Continuation Pattern: Consolidation phase that temporarily interrupts an up or down move and sets the stage for another move in the same direction later on, usually of short duration.

Correction: A movement in the opposite direction of a trend that will not break or reverse that trend. Usually longer in time than a reflex rally or reflex reaction.

Terms Start With B

 

Important terms starting with B that can be useful for making money in stock market, Forex or any financial market it pays to know them.

Back and Fill: Same as Consolidation. See also Stabilization. Trading back and forth in a narrow range.

Bar Chart: Price/time chart that depicts high, low and close data as bars on the vertical axis and time intervals on the horizontal axis. Volume is usually indicated also, as vertical bars on the bottom of the chart under the applicable price data.

Base: Period of accumulation (see above), also called “Bottom.” Can also be described as price level where buyers continue to buy supporting the market.

Bear Market: A long period of time, often a year or more, when the general trend of securities prices is down.

Bear Trap: A false move to the downside that does not initiate a new downtrend, but is actually the final reaction prior to a sustained advance, hence “trapping the bears.”

Block: A single transaction of large number of shares. The NYSE defines transactions of 10,000 shares or more as blocks.

Blow Off: The final phase of an uptrend, ending a mark up phase, when prices rise very rapidly usually on high volume, leading to a sharp reaction. See “Climax.”

Breadth: Net number of stocks advancing versus declining. When advances exceed declines, breadth is positive; when the reverse is true, breadth is negative.

Breakdown: Like “Breakout,” but used to refer to the downside.

Breakout: When stock’s price or volume exceeds previously recorded high or low (or resistance or support level) or some other predetermined criteria. Also called “Penetration.”

Bull Market: A long period of time, usually a year or more, when the general trend of securities prices is up.

Bull Trap: A false move to the upside that does not initiate a new uptrend, but is actually the final rally before a sustained decline, hence “trapping the bulls.” A bull trap can be described as a strong rally in the context of a “Bear Market” which traps buyers into believing that the market is turning to the upside.

Terms Start With A

 

Important terms starting with A that can be useful for making money in stock market, Forex or any financial market it pays to know them.

Accumulation: A time when buyers emerge purchasing securities, generally from distressed sellers. It can be seen as a period when equities are absorbed by expanding demand over a period of time resulting in a possible favorable effect on price or a period of price equilibrium following a decline. This can be viewed as the first phase of a bull trend, or perhaps even the beginning of a bull market.

Advance-Decline Line: Number of stocks advancing divided by the number of stocks declining over a particular time period.

Advisory Services: Newsletters that comment upon and attempt to forecast the course of various markets. They tend to be trend followers and are often overly bullish at tops and overly bearish at bottoms.

Apex: A peak or a point of intersection of two trendlines; the usual connotation that some new trend may evolve as prices approach that intersection.

Arbitrage: Simultaneous buying in one market and selling in another market in order to take advantage of differences in price. As it relates to stock could be the purchase of the aquiree and the sale of the acquirer. In futures could relate to buying one futures contract and selling a like contract to capture price inefficiencies.

Volume Spikes

Volume spikes (not to be confused with price spikes) are most common at the beginning of a trend and at the end of a trend. The beginning of a trend often arises out of a pattern with a breakout, and the end of a trend often occurs on a speculative or panic climax. Higher-than-usual volume tends to occur with each event. By screening for volume, the trader can often find issues that are either ready to reverse or that have already reversed. The usual method of screening for a volume spike is to compare daily volume to a moving average. The trader can look for volume that is either a number of standard deviations from the average volume or a particular percentage deviation from the average. As for interpretation of the spike when it occurs, it is often difficult to determine which variety of spike has occurred until after the spike peaks and you observe the subsequent price action.
Usually there is a reason for a volume spike, but the reason for the spike may be unrelated to the technical issues of price trends and behavior. Of course, heavy trading may be related to a news announcement made about the company. Or, heavy trading volume in a stock can occur if the stock is a component of an index or basket that had a large institutional trade that day.
Options expiring can also influence volume figures. In all spikes, any outside reason must first be investigated because it may have nothing to do with the issue’s trend and price behaviour.

Volume Spike on Breakout

Breakouts are usually obvious. High volume on a gap or on a breakout from a pre-existing chart pattern is usually the sign of a valid breakout. Although breakouts do not necessarily require high volume, many analysts use a spike in volume as a confirmation of the breakout and ignore those without a volume spike.

Volume Spike and Climax

A climax usually marks the end of a trend and either a subsequent reversal or consolidation. Climaxes come in many forms, however, and are not always identifiable except in retrospect. Generally, climaxes occur with one of the short-term reversal patterns. These typically can be price spikes or poles, one- or two-bar reversals, exhaustion gaps, key reversals, or any of the other short-term reversal patterns.