Trading Glossary

A momentum oscillator that measures the speed and magnitude of price movements on a scale of 0-100. Readings above 70 indicate overbought conditions, while readings below 30 suggest oversold conditions.

A trend-following momentum indicator showing the relationship between two moving averages. Consists of the MACD line, signal line, and histogram. Crossovers signal potential buy/sell opportunities.

A volatility indicator consisting of a middle band (SMA) and two outer bands at standard deviations. Price touching outer bands may indicate overbought/oversold conditions.

A calculation that averages price data over a specific period, smoothing out fluctuations to show trend direction. Common types include SMA (Simple) and EMA (Exponential).

Price levels where buying (support) or selling (resistance) pressure historically prevents further movement. Key areas for entry/exit decisions.

A reversal pattern with three peaks — the middle (head) higher than the two sides (shoulders). Signals potential trend reversal when neckline is broken.

A bearish reversal pattern where price reaches the same high twice with a moderate decline between. Confirms when price breaks below the support level.

A bullish reversal pattern where price reaches the same low twice. Signals potential upward movement when price breaks above the resistance level.

Consolidation patterns formed by converging trendlines. Ascending triangles are bullish, descending are bearish, and symmetrical can break either way.

A candlestick where open and close prices are nearly equal, forming a cross shape. Signals market indecision and potential reversal.

A bullish reversal candlestick with a small body at the top and a long lower shadow. Appears at the bottom of downtrends, signaling potential reversal.

A two-candle reversal pattern where the second candle completely engulfs the first. Bullish engulfing signals upward reversal; bearish engulfing signals downward.

Horizontal lines indicating potential support/resistance at key Fibonacci levels (23.6%, 38.2%, 50%, 61.8%). Used to predict pullback extent in trending markets.

Study of trading volume to confirm price movements. High volume on breakouts confirms strength; low volume suggests weak moves that may reverse.

A line connecting swing highs or lows to visualize trend direction. Uptrend lines connect higher lows; downtrend lines connect lower highs.

When price moves beyond a defined support/resistance level with increased volume. Often signals the start of a new trend or continuation.

A temporary price decline within an uptrend (or rise within a downtrend). Often provides entry opportunities in the direction of the main trend.

An order to exit a position at a predetermined price to limit losses. Essential for risk management in all trading strategies.