Terms Start With N

 

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

NARROW RANGE DAY: A trading day with a narrower price range relative to the previous day’s price range.
NATURAL and UNNATURAL Methods or Systems: Bassetti’s half humorous identi?cation of “natural methods” of analysis, such as chart analysis, which looks directly at market data, as opposed to “unnatural methods” which place an algorithm between the data and the analysis, such as moving averages, oscillators, etc.
NATURAL HEDGE: Bassetti’s formulation of a technique recommended by Magee whereby a portfolio is always somewhat long and somewhat short. It is an imperfect hedge intended to cushion downside (or upside) risks. E.g., long the DIA and short its members (or their proxies) which are in downtrends.
NECKLINE: In a Head-and-Shoulders Pattern, it is the line drawn across the two reaction lows (in a Top), or two rally highs (in a Bottom), which occur before and after the head. This line must be broken by 3% to con?rm the Reversal. In a Diamond Pattern, which is similar to a Head-and-Shoulders Pattern, the neckline is bent in the shape of a V or inverted V.

Near Term: (Also Short Term) Up to two months; usually three to five weeks.

NEGATIVE DIVERGENCE: When two or more Averages, indexes, or indicators fail to show con?rming trends.

Terms Start With M

 

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

Market Analysis: Using a prescribed discipline to study the market. Common analysis disciplines are “Fundamental Analysis,” Technical Analysis,” “Quantitative Analysis,” etc.

Mark Up: Phase following accumulation when prices rise relatively easily.

Medium or Intermediate Term: Five weeks to six months; usually three to five months.

Momentum Indicators: Market indicators generally related to price and volume, which attempt to determine overbought and oversold conditions and the underlying strength or weakness of current market trends. Most are moving averages.

Moving Average: Average of price or volume over a period of time that is used to smooth trends of minor fluctuations.

Mutual Fund: A Mutual Fund is a professionally managed investment that pools the capital of thousands of investors to trade in stocks, bonds, options, futures, currencies, or money market securities. Funds have different objectives. They may vary from very aggressive and volatile, to those that only buy blue chip stocks. Mutual Funds hold a large number of securities and therefore offer investors the opportunity to diversify, as well as the benefits of portfolio management.

MARGIN: The minimum amount of capital required to buy or sell a stock.The rate, 50% of value in 2005, is set by the government. In a commodity, margin is also the minimum, usually about 10%, needed to buy or sell a contract. But the rate is set by the individual exchanges. The two differ in cost as well. In a stock, the broker lends the investor the balance of the money due and charges interest for the loan. In a commodity, margin is treated as a good faith payment. The broker does not lend the difference, so no interest expense is incurred.

Terms Start With L

 

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

Liquidation: Phase following distribution, when prices decline relatively easily.

Liquidity: Ability of the market to absorb significant increases in volume with minor price fluctuations.

Long Term: More than six months; usually one complete bull-bear cycle, normally averaging four to five years.

LADDERING: A practice some Wall Street underwriters used in the tulipomania of the 1990s. Consists of selling IPO shares for the pre-opening price to insider customers in exchange for their agreement to buy more in the public offering at higher prices. Caused extreme volatility and big run ups in early days of IPOs. An unethical form of price manipulation.

LEVERAGE: Using a smaller amount of capital to control an investment of greater value. For example, exclusive of interest and commission costs, if you buy a stock on 50% margin, you control $1 of stock for every 50 cents invested or leverage of 2-to-1.

LIMIT MOVE: A change in price which exceeds the limits set by the exchange on which the futures contract is traded.

LIMIT ORDER: A buy or sell order which is limited in some way, usually in price. For example, if you placed a limit order to buy IBM at 100, the broker would not ?ll the order unless he could do so at your price or better,i.e., at 100 or lower.

LIMIT UP, LIMIT DOWN: Commodity exchange restrictions on the maximum upward or downward movements permitted in the price for a commodity during any trading session day.

LINE, DOW THEORY: A Line in the Dow Theory is an Intermediate Sideways Movement in one or both of the Averages (Industrial and/or Transportation)in the course of which prices ?uctuate within a range of 5% (of mean price) or less.

Terms Start With I

 

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

INDUSTRIAL AVERAGE: Like Dow–Jones Industrial Average.

INSIDE DAY: A day in which the daily price range is totally within the prior day’s daily price range.

INSIDERS: Individuals who possess fundamental information likely to affect the price of a stock, but which is unavailable to the public. An example would be an individual who knows about a merger before it is announced to the public. Trading by insiders on this type of information is illegal.

IPO: Initial Public Offering.

INTERMEDIATE TREND: In Edwards and Magee, the term Intermediate or Secondary refers to a trend (or pattern indicating a trend) against the Primary (Major) Trend which is likely to last from 3 weeks to 3 months, and which may retrace one third to two thirds of the previous Primary Advance or Decline.

INVERTED BOWL: It is opposite of Rounding Top.

ISLAND REVERSAL: A compact trading range, usually formed after a fast rally or reaction, which is separated from the previous move by an Exhaustion Gap, and from the move in the opposite direction which follows by a Breakaway Gap. The result is an Island of prices detached by a gap before and after. If the trading range contains only one day, it is called a One-Day Island Reversal. The two gaps usually occur at approximately the same level. By itself, the pattern is not of major signi?cance; but it does frequently send prices back for a complete retracement of the Minor Move which preceded it.

Terms Start With H

 

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

HEAVY VOLUME: The expression “heavy volume,” as used by Edwards and Magee, means heavy only with respect to the recent volume of sales in the stock you are watching.

HEDGING: To try to lessen risk by making a counterbalancing investment.In a stock portfolio, an example of a hedge would be to buy 100 shares of XYZ stock, and to buy one put option of the same stock. The put would help protect against a decline in the stock, but it would also limit potential gains on the upside.

HISTORICAL DATA: A series of past daily, weekly, or monthly market prices.

HOOK DAY: A trading day in which the open is above/below prior day’s high/low and the close is below/above prior day’s close with narrow range.

HORIZONTAL CHANNEL: When the Tops of the rallies and Bottoms of the reactions form along lines which are horizontal and parallel to one another, the area in between is called a Horizontal Trend Channel. It may also be called a Rectangle during the early stages of formation.

HORIZONTAL TRENDLINE: A horizontal line drawn across either the Tops or Bottoms in a sideways trending market.

Terms Start With G

 

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

Gap: When stock’s high and low prices on a given day do not overlap the stock’s high and low of the previous day. In other words, when instrument trades above the previous day’s high or trades below the previous day’s low and remains in that direction. When a gap initiates a trend, it is called a breakaway gap; an exhaustion gap ends or reverses a trend, and measuring gaps usually duplicate the most recent move before the gap.

Terms Start With F

 

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

Financial Futures: Futures contracts based on financial instruments such as U. S. Treasury Bonds, Fed Funds, and other interest rate-sensitive issues, currencies and stock market indices.

Futures Contract: Exchange-traded contracts that give the holder the obligation to buy or receive a certain amount of a product at a specific prices on a specific date. Futures are used by business as a hedge against unfavorable price changes and by speculators who hope to profit from such changes.

FALLING WEDGE: An Area Pattern with two downward slanting, converging trendlines. Normally, it takes more than 3 weeks to complete, and volume will diminish as prices move toward the apex of the pattern. The anticipated direction of the breakout in a Falling Wedge is up. Minimum Measuring Formula: a retracement of all the groundlost within the Wedge. (See also Wedge.)

FALSE BREAKOUT or FALSE SIGNAL: A breakout which is con?rmed but which quickly reverses and eventually leads the stock or commodity to a breakout in the opposite direction. Indistinguishable from premature breakout or genuine breakout when it occurs.

FAN LINES: A set of three secondary trendlines drawn from the same starting high or low, which spread out in a Fan shape. In a Primary Uptrend, the fan would be along the tops of the Secondary (Intermediate) Reaction. In a Primary Downtrend, the fan would be along the bottoms of the Secondary (Intermediate) Rally. When the third
Fan Line is broken, it signals the resumption of the Primary Trend.

FLAG: A Continuation Pattern. A ?ag is a period of congestion, less than 4 weeks in duration, which forms after a sharp, near vertical, change in price. The upper and lower boundary lines of the pattern are parallel, though both may slant up, down, or sideways. In an uptrend, the pattern resembles a Flag ?ying from a mast, hence the name. Flags are also called Measuring or HalfMast Patterns because they tend to form at the midpoint of the rally or reaction. Volume tends to diminish during the formation, and increase on the breakout. Minimum Measuring Formula: add the distance from the breakout point, which started the preceding “Mast” rally or reaction, to the breakout point of the Flag.

FLOATING SUPPLY: The number of shares available for trading at any given time. Generally, the outstanding number of shares less shares closely held and likely to be unavailable to the public. Shares of a company held by its employee pension fund, for example, would not generally enter the trading stream and could be subtracted from the outstanding shares.

FUNDAMENTALS: Information on a stock pertaining to the business of the company and how it relates to earnings and dividends. In a commodity, it would be information on any factor which would affect supply or demand.

Terms Start With E

 

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

Extended: When a stock has advanced or declined to, or in excess of, its trend parameters and a consolidation is anticipated.

Exchange: The market that performs and tracks the actual trades in equities and other financial instruments. Major exchanges include the New York Stock Exchange (NYSE) and the NASDAQ.

END RUN: When a breakout of a Symmetrical Triangle Pattern reverses its direction and trades back through axis Support (if an upside breakout) or Resistance (if a downside breakout), it is termed an end run around the line , or for short. The term is sometimes used to denote breakout failure in general.

EQUILIBRIUM MARKET: A price area that represents a balance between demand and supply.

EX-DIVIDEND: The day when the dividend is subtracted from the price of the stock.

EX-DIVIDEND GAP: The gap in price caused when the price of a stock is adjusted downward after the dividend payment is deducted.

EXERCISE: The means by which the holder of an option purchases or sells shares of the underlying security.

EXHAUSTION GAP: Relatively wide gap in the price of a stock or commodity which occurs near the end of a strong directional move in the price. These gaps are quickly closed, most often within 2 to 5 days, which helps to distinguish them from Runaway Gaps, which are not usually covered for a considerable length of time. An Exhaustion Gap cannot be read as a Major Reversal,or even necessarily a Reversal. It signals a halt in the prevailing trend, which is ordinarily followed by some sort of area
pattern development.

EXPIRATION: The last day on which an option can be exercised.

EXPONENTIAL SMOOTHING: A mathematical method of forecasting which assumes future price action may be forecast by using a weighted average of past periods; a mathematical series in which greater weight is given to more recent price action. A method of trend identi?cation.