Traders Glossary

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Account History: History of performed trades on a specific account on the MT4 platform.

Actionary Waves: In Elliott Wave Theory, there are waves that move in the direction of the trend of one larger degree.

ADP Non-Farm Employment Change: Estimated change of US employed people, excluding the farming and the government sector. Released by Automatic Data Processing, Inc. about two days before the official NFP report.

ADX: Advance Directional Movement Index. It’s a technical indicator designed by Welles Wilder to determine the presence of price trend. A reading above 25 indicates the presence of a trend. Buy/Sell signals are provided by the crossing of +DI and -DI.

Arbitrage: The simultaneous buying and selling of a financial instrument in different markets to take advantage of different pricing.

Ascending Trendline: An upward sloping line connecting two or more bottoms.

Ask: The price at which a trader accepts to buy a financial instrument.

Asset Allocation: Refers to portfolio diversification among stocks, bonds, commodities, cash and other asset classes.

Automated trading system: A computer program that submits orders to electronic exchanges based on a set of pre-defined instructions.

Average Hourly Earnings: A change in the labour pay excluding the farming sector. Released monthly by the Bureau of Labour Statistics.

Absolute Drawdown: The lowest point a trader’s balance reaches below the Initial Deposit.

Accumulation/Distribution: A technical Indicator developed by Mark Chaikin. When the close price is above the midpoint of the daily range, then a positive number is returned implying buying pressure (accumulation). Similarly, when the close price is below the midpoint of the range, then a negative number is returned implying a selling pressure (distribution). The daily volume is multiplied by the above number to determine the weight of the price in the calculation of the indicator.

Calculation: [ (close – low) – (high – close) x volume] / (high – low).

Adaptive Moving Average: A technical Indicator developed by Perry Kaufman to account for market volatility.

Advance Block: A Japanese candlestick bullish reversal pattern. Also known as Three White Soldiers. It consists of three long white candles with short or non-existent shadows. Each open is below the previous close. Each close is above the previous close.

Aggregate Risk: When a bank or financial body is exposed to forex contracts from a single customer.

Algorithmic Trading: Step by step programming instructions on how to carry out trading orders in electronic financial markets. Discipline and emotion- free trades are the advantages of this type of trading.

Alligator: A technical Indicator designed by Dr. Bill Williams. It consists of 3 moving average lines: The Alligator’s Jaw (blue line) is a 13-period Smoothed Moving Average shifted into the future, by 8 bars. The Alligator’s Teeth (red line) is an 8-period Smoothed Moving Average shifted into the future by 5 bars. The Alligator’s Lips (green line) is a 5-period Smoothed Moving Average shifted into the future by 3 bars.

Andrews’ Pitchfork: A technical analysis tool developed by Dr. Alan Andrews. It is drawn by selecting 3 major consecutive tops and bottoms. The result is a line study of 3 parallel lines acting just like support and resistance.

Ascending Trend Channel: A technical analysis price pattern, where price action is contained within two upward sloping parallel lines. The basic line is drawn through the bottoms, whereas the return line is drawn through the tops.

Asian Session: Trading activity between 11:00 pm (GMT+2) and 08:00 am (GMT+2).

Asset: An item/resource of value.

ATR: The Average True Range is an indicator developed by Welles Wilder to measure volatility.

Wilder believed that high ATR readings occur at bottoms after a strong downtrend characterized by “panic” sell-off. Low ATR readings are usually found at tops and during periods of consolidation.

Trend reversals are usually accompanied by high ATR values, whereas sideways movements or weak trends are accompanied by low values.

The True Range is the greatest of the following:

  • The difference between the current period’s high and low
  • The absolute value of the difference between the previous period’s close and current period’s high
  • The absolute value of the difference between the previous period’s close and current period’s low

The Average True Range is the moving average of the true range values.

Balance: The amount of money in the account, excluding credit and the floating profit of currently open orders.

Bank Rate: The rate at which a country's central bank lends money to its domestic banks.

Bar Chart: The western technique for price charting, comprising of a vertical line representing the price range of a certain period. The highest point represents the high price and the lowest point on the vertical line represents the low price. A tick to the left represents the opening price whereas a tick to the right represents the closing price.

Bar Up: The current bar’s closing price is higher than that of the previous bar.

Barrel: Unit of volume used contract sizes for Brent, Crude Oil and other petroleum products. One barrel is equal to 42 US gallons.

BBA Mortgage Approvals: Previous month’s approved mortgages by the members of the British Bankers’ Association. Released monthly.

Bear Candle: The close of the candlestick is lower than the open price, revealing negative sentiment.

Bear Trap: A short-lived breakout below a bottom triggering a sell entry. After the false breakout, prices switch direction.

Bearish Reversal: Certain price formations that signal the end of an uptrend and the beginning of a downtrend.

Bears Power: A technical analysis oscillator developed by Alexander Elder. It is the difference between the lowest price of a period and 13-period exponential moving average. A buy signal is triggered when the Bears Power index is below zero and rising while a trend indicator (i.e. moving average) is pointing upwards.

Belt Hold (or Shaven Bottom): A Japanese candlestick pattern signalling a bullish reversal. It forms at the end of a decline or near a support area. The candle has a long white body and very small or non-existent lower shadow, that is, Shaven Bottom. It reveals the determination of the bulls to push prices higher.

Bitcoin: A decentralized digital currency used for peer-to-peer transactions. It was introduced in 2009 by a programmer using the name Satoshi Nakamoto. The number of bitcoins in circulation will not exceed 21 million.

Bond Yield: The annual interest divided by the value the bond was purchased.

Breakaway (bullish): A five-candle bullish reversal formation. The first candle is a long black body trading in the direction of the decline, showing off the bears’ strength. The second candle is black, and of a regular size gapping below-reaffirming the downward move. The third and fourth candles are black bodies of regular size, closing lower than the previous close. Finally, a long white body is formed that closes in the gap created by the first two candlesticks.

Brent Oil: Brent is considered one of the major benchmarks for crude oil pricing globally. It contains 0.37% Sulphur and has an API gravity of 38.06.

Broker: An intermediary between the traders and the liquidity providers. It facilitates in the execution of clients’ orders.

Bull Candle: The close of the candlestick is higher than the open price, revealing positive sentiment.

Bull Trap: A short-lived breakout above a top, triggering a buy entry. After the false breakout, prices switch direction.

Bullish Reversal: Certain price formations that signal the end of a downtrend and the beginning of an uptrend.

Bushel: A unit of measurement for agricultural commodities.

Buy Limit: A pending order to buy at a predefined price lower than the market price in anticipation that the market will eventually rise.

Buy Order: To place an order to own a financial instrument.

BW Zone Trade: A technical analysis indicator developed by Bill Williams. If the Momentum (Awesome Oscillator) and Acceleration (Accelerator Oscillator) are in sync then there is a very strong trend.

Green Zone: Both AO and AC are green; strong bullish trend.

Red Zone: Both AO and AC are red; strong bearish trend.

Grey Zone: Both Oscillators have different colours; in transition.

Price bars are painted to reflect the current zone.

Bar Down: The current bar’s closing price is lower than that of the previous bar.

Base Currency: The first currency in a pair is called the base currency. For example, in USD/JPY pair, USD is the base currency.

Basis Point: One percent of one percent. Usually used for changes in Interest Rates where references are less than one percent. 1bp = 0.0001.

Bear: A trader whose outlook on the market or a specific financial instrument is negative. A trader who expects prices to fall.

Bear Market: When the prices of certain financial instruments, or markets are declining.

Bearish: The belief that the market or specific financial instrument will fall.

Bearish Sentiment: The negative outlook towards a financial instrument or market.

Belt Hold (or Shaven Head): A Japanese candlestick pattern signalling a bearish reversal. It forms at the top of an uptrend or near a resistance area. The candle has a long white body and very small or non-existent upper shadow, that is, Shaven Top. It reveals the determination of the bears to push prices lower.

Bid: The price at which a trader is prepared to sell a financial instrument.

Bond: A debt instrument, where the issuer borrows money from the buyer, with the obligation to repay the principal and predefined interest at the maturity date.

Bottom: A significant low on the price chart where buying pressure overcomes selling pressure.

Breakaway (bearish): A five-candle bearish reversal formation. The first candle is a long white body trading in the direction of the uptrend, showing the bull's’ strength. The second candle is white, and of a regular size gapping above-reaffirming the upward move. The third and fourth candles are white bodies of regular size, higher than the previous close. Finally, a long black body is formed that closes in the gap created by the first two candlesticks.

Breakaway Gap: The beginning of an upward/downward movement after a sideways price pattern. Breakaway gaps do not usually get filled, especially when accompanied by heavy volume.

Bretton Woods Agreement: In 1944, representatives from 44 allied nations met in the town of Bretton Woods, New Hampshire USA, to discuss monetary policies in order to rebuild the international economic system. The delegates agreed to tie their currencies to gold and the US Dollar and maintain an exchange rate within a parity band of 1%.

Broadening Formation: A bearish pattern, it can also be called a megaphone or expanding triangle. Its Trend Lines diverge, as opposed to all other triangles which converge.

Bull: A trader whose outlook on the market or a specific financial instrument is positive. A trader who expects prices to rise.

Bull Market: When the prices of certain financial instruments or markets are rising

Bullish: The belief that the market or a specific financial instrument will rise.

Bulls Power: A technical analysis oscillator developed by Alexander Elder. It is the difference between the highest price of a period under study and a 13-period exponential moving average. A sell signal is triggered when the Bulls Power index is above zero and falling while a trend indicator (i.e. moving average) is pointing downwards.

Buy Limit Order: An order to carry out a transaction at, or lower than, a specified price, the word 'limit' referring to the specified price.

Buy Stop: A pending order to buy at a predefined price higher than the market price, in anticipation that the market will continue to rise.

Cable: It is the nickname used for the currency pair of GBPUSD. It is also used to refer to the British pound itself. Communication between Europe and North America was conducted through a transatlantic cable in the Atlantic Ocean.

CAD: Canadian Dollar. The currency of Canada. It is subdivided into 100 cents.

Call Option: It gives a trader the right to buy a financial instrument at a specific price, before the expiration date.

Capital Gains: The appreciation in the value of capital assets.

Cash Settlement: The method of settling financial instruments by cash rather than physical delivery.

CB Consumer Confidence: A monthly survey that reflects prevailing consumer attitudes, buying intentions and economic activity for the months ahead. Released by the Conference Board Inc. in the US.

CBOT: Chicago Board of Trade. It is a futures and options exchange. Part of the CME Group.

Central Bank Intervention: A Central Bank buys or sells its currency in the foreign exchange market in order to raise or lower the value of its currency in respect to another currency. It does so with the primary goal of establishing a more competitive international trading environment.

CFD: Contract for Difference - it is a financial derivative where traders have the opportunity to trade assets without owning them. The buyer and the seller enter into a contact where the seller agrees to pay the buyer the difference between the entry and the exit price provided the difference is positive. If the difference is negative, then the buyer pays the seller.

CFTC: Commodities Futures Trading Commission - the US Commodity Futures Trading Commission was created in 1974 with the aim of fostering open, transparent, competitive, and financially sound markets. By working to avoid systemic risk, the Commission aims to protect market users and their funds, consumers and the public from fraud, manipulation and abusive practices related to derivatives and other products that are subject to the Commodity Exchange Act (CEA).

Channels: A technical analysis tool, similar to the concept of a trendline. At times prices fluctuate between two parallel lines, the basic trendline and the channel or return line. Channels may be used to trigger buy/sell signals and calculate price targets. Once a breakout from the channel takes place, the price is expected to move a distance equal to the width of the channel.

Chart Shift: An MT4 chart setting that when enabled, shifts the chart from the left window border to the shift label (a grey triangle in the upper part of the window) of the chart.

CHF: Swiss Franc. The currency of Switzerland and Liechtenstein. It is subdivided into 100 Rappen.

Chicago Board Options Exchange: The world’s largest options exchange.

Chicago PMI: The Chicago Purchasing Managers’ Index is a monthly survey where purchasing managers (in Illinois, Indiana and Michigan) are asked to rate employment, production, new orders, prices, supplier deliveries and inventories. A reading above 50 is bullish for the US Dollar while a reading below 50 is bearish. Released monthly by ISM-Chicago Inc.

Choppy Market: A sideways market.

Cleared Funds: Funds in an account that are available for withdrawal or investment.

Client Terminal: Part of the MT4 Trading Platform that allows traders to receive live incoming prices, open and manage orders, perform technical analysis, write, backtest and optimize trading robots, and develop indicators and scripts.

Closing Market Rate: Otherwise known as closing price, this is the final rate that a security is traded at on a specific day, candle or timeframe.

CME Group: One of the largest exchanges in the world. It is comprised of four exchanges - CME, CBOT, NYMEX and COMEX.

Collateral: An asset offered by the borrower to the lender to secure the loan.

Commodity Block Currency: A country’s currency that is highly correlated with the price of a specific commodity.

Concealing Swallow: A Japanese candlestick pattern signalling a bearish reversal.

It forms at the top of an uptrend or near a resistance area.

It consists of four candlesticks.

The first two long black bodies confirm the strength of the downward movement. Third black candle is smaller. It gaps lower, recording a new low but also produces a relatively long upper shadow extending into the body of the previous Marubozu. The last session is a long black candle that completely (including shadows) engulfs the previous candlestick range thus recording a new low.

Continuing Jobless Claims: A US report that indicates the number of individuals on unemployment benefits. A high reading is negative for the US Dollar, whereas a low reading is positive. Released monthly by the US Department of Labour.

Contract Month: The month at which a futures contract expires.

Contrarian Trading: The principle of contrarian trading assumes that when the larger majority of the traders agree on the direction of the market then they are usually wrong. A true contrarian will trade in the opposite direction.

Corrective Wave: In Elliott Wave Theory, a corrective wave is a wave against the trend. Waves 2, 4 and a-b-c are considered corrective.

Cover: A buy order of a financial instrument to close an existing short position. Also known as short covering.

Crude Oil: Unrefined petroleum found in liquid form and composed mostly of hydrocarbons, organic compounds and small amounts of metal.

Cryptocurrency: Digital currency in which encryption is used to regulate the generation of units of currency. It operates independently of the traditional banking system. Bitcoin, Ethereum and Litecoin are the most popular cryptocurrencies.

Currency: A means of exchange in the form of paper, metal or digital money.

Currency Futures: A contract that specifies the price that a currency can be bought or sold at, or on a set future date. Future contracts are often used by investors to hedge against risk.

Candlestick Chart: A price charting method that originated in Japan in the 18th century. Merchants devised a system to predict future prices based on traders’ emotions. It makes use of all available prices; open, high, low and close. It consists of a rectangle (the body) which is white if the close is higher than the open, or black if the open is higher than the close price. A vertical line runs through the body representing the high at the top and the low price at the bottom.

Capital Expenditure: Money used to acquire, improve or upgrade physical assets such as buildings, infrastructure, and equipment.

Capital Loss: The result of selling a capital asset at a lower price than the purchase price.

Carry Trade: When an investor borrows at low interest rates so they can buy assets that are likely to produce higher interest rates.

Cash Flow: The amount of money going into and out of a business.

CCI: Commodity Channel Index - a technical analysis oscillator developed by Donald Lambert. It compares the current typical price ([High + Low + Close] / 3) with a simple moving average over a selected period of time usually 14 or 20. The oscillator values are normalized by using a divisor based on mean deviation. The majority of the values (about 70%) fluctuate between -100 and +100. Buying opportunities are suggested above +100 and selling opportunities below -100 while the same levels may be considered as overbought and oversold by others.

Central Bank: A state’s financial institution that oversees the monetary policy, commercial banking system, manages state’s currency so as to be attractive for international trade, manages inflation and interest rates.

Certificate of Deposit: A low-risk savings certificate with a fixed interest rate and maturity date.

Chaikin Oscillator: A technical analysis oscillator developed by Marc Chaikin. It’s the difference between a 3-period EMA and a 10-period EMA of the Accumulation/Distribution Indicator. It generates buy/sell signals when crossing above/below the zero line.

Chart: A Graphical representation of price using a candlestick, bar or line chart.

Chartist: A technical analyst whose primary working tool is the price chart.

Claimant Count - UK: A monthly report that measures unemployment in the United Kingdom. Released by the United Kingdom's Office of National Statistics (ONS).

Clearing: It is the process of reconciling purchases and sales of various financial instruments.

Closed Position: When a position is closed, the transaction has been completed – whether the position was long or short, or whether it was profitable or incurred losses.

Closing Price: The final price at the end of a period (i.e. timeframe).

Commission: An amount the trader is charged by the broker for facilitating a trade.

Commodity: A natural resource or agricultural product. There are two broad types - hard commodities and soft commodities. Hard commodities include for example crude oil, gold, silver and iron ore. Soft commodities include for example wheat, rice, soybean and corn.

Confirmation: In Technical Analysis, price is considered the most reliable indicator. Chart patterns are filtered by indicators and confirmed by price. For example, price makes a new high in a buy setup or a new low in a sell setup.

Consumer Price Index: The CPI is a measure of the change in the cost of a fixed basket of products and services. Released monthly by the US Bureau of Labour Statistics.

Correction: A temporary interruption of the prevailing trend in the opposite direction.

Cross Rate: The exchange rate between two currencies that do not involve the US Dollar.

Crude Oil Inventories: A weekly report that measures the change in Crude Oil stocks (i.e. barrels). It includes domestic and Customs-cleared foreign crude oil stocks held at refineries, in pipelines, in lease tanks and in transit to refineries.

Released by the Energy Information Administration.

Currency Appreciation: When a currency increases in value against another.

Currency Pair: The pair formed by two different currencies which are traded in a forex transaction. For example: EUR/USD.

Current Account: The sum of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid). A current account surplus is positive for the country’s currency whereas a low balance is viewed as negative.

Cycle Lines: A technical analysis tool that draws vertical lines at equal intervals on the price chart to forecast future cycles.

Daily Chart: A graph that illustrates the intraday movements of a financial instrument.

Day Trade: A trade opened and closed within one day.

Deflation: It is the decrease of the average price of a representative number of goods and services. It is the opposite of inflation.

Demo Account: A trading account which is funded with virtual money, giving the trader a chance to explore the markets and test the trading platform they're using before investing real money in a live trading account.

Depreciation: The reduction in a currency’s value.

Depth of Market: The number of open buy and sell orders placed for a financial instrument at varying prices.

Divergence: Usually at the end of a trend, prices move in the direction of the prevailing trend where the oscillator moves in the opposite direction.

DJIA: Dow Jones Industrial Average - A stock market index composed of 30 stocks of large American companies. It’s based on Charles Dow’s 1884 stock market average composed of nine railroad and two manufacturing companies. The index grew to include 30 stocks by the year 1928. It is used to gauge stock market activity and the country’s economic health.

Doji: A Japanese candlestick formation that has equal (or almost equal) opening and closing price. It signals indecision.

Double Bottom: A technical analysis reversal price pattern. After an established downtrend, the last bottom fails to move lower than the previous bottom and prices rise above the last top.

Dow Theory: Charles Dow’s idea of market behavior as published in a series of editorials in the Wall Street Journal during the early 1900’s.

Basic principles:

  • The averages discount everything
  • The market has three trends
  • Major trends have three phases
  • The averages must confirm each other
  • Volume must confirm the trend
  • A trend is assumed to be in effect until it gives definite signals that it has reversed

Downside Tasuki Gap: A Japanese candlestick pattern signaling a bearish continuation.

It forms during a downtrend.

It consists of three candlesticks. The first and second are black candles with a gap in between them. The third is a white candle that opens in the real body of the previous candle and closes within the gap without filling it completely.

Drawdown: When the value of an investment drops, the length between its peak and its low is called the drawdown.

Durable Goods: Consumer products such as house appliances, devices and equipment that usually last more than 3 years.

Dark Cloud Cover: A Japanese candlestick pattern signaling a bearish reversal. It forms at the top of an uptrend or near a resistance area.

During the course of an upward movement, a long black candlestick closes below the midpoint of the previous long white candle. The black candle opens above the previous high.

DAX: Deutscher Aktien Index (German Stock Index) is an index of 30 large German company shares.

Depression: When real GDP declines more than 10% or a recession that lasts 2 years or more.

Descending Triangle: It is mostly a continuation pattern. It constitutes a pause in the market after which a decisive breakout will resume in the direction of the prevailing trend –i.e. a downtrend. It requires 4 data points, 2 highs and 2 lows. The lower side of the triangle connecting the lows is horizontal, while the upper side connecting the highs is sloping downwards. A breakout of the triangle has minimum measuring implications - equal to the height of the pattern.

Direct Quote: The exchange rate of a currency pair expressed in terms of the foreign currency for 1 unit of domestic currency. The base currency represents the domestic currency whereas the quote represents the foreign currency. For example, USD/EUR = 0.90120.

Discretionary Trading: Trading based on the trader’s experience and intuition, to decide whether to take a trade or not, under the current market conditions.

Doji Star: A Japanese candlestick pattern. In a downward movement, a Doji gaps below a long black candle but fails to move substantially lower as it closes where it opened. It has possible bullish implications.

Donchian Channel: A technical analysis tool developed by Richard Donchian. It plots the highest high and lowest low of the last n candlesticks. It is used to measure volatility and identify support and resistance levels.

Double Crossover: The use of two moving averages to generate trading signals. A buy signal is generated when the shorter moving average crosses above the longer moving average. A sell signal is generated when the shorter moving average crosses below the longer moving average.

Double Top: A technical analysis reversal price pattern. After an established uptrend, the last top fails to exceed the previous top and prices fall below the last bottom.

Downtrend Channel: A Technical Analysis tool where prices are trending downwards between two parallel lines. The basic trendline is drawn by connecting the tops of the price action and the channel (or return line) which is parallel to it. Channels act as support and resistance levels. The basic trendline (resistance) may be used for opening sell positions in the direction of the downtrend. The channel (or return) line may serve as target for closing a short position.

ECN Broker: A broker who uses Electronic Communications Networks (ECNs) to provide its clients with direct access to liquidity providers.

EMA: Exponential Moving Average

EMA takes into account all available prices in its calculation and assigns more weight to the most recent prices.

EMA = (Price current – EMA previous) * multiplier + EMA previous

Where multiplier = 2/Periods + 1

Employment Change: Monthly report of current month’s employment numbers compared to the previous month. An increase of employed people is good for the currency where a decrease is negative.

Engulfing Pattern (Bearish): A Japanese candlestick pattern signalling a bearish reversal.

It forms at the top of an uptrend or near a resistance area.

It consists of two candlesticks.

A long black candlestick is formed at the top of an up-trend, preceded by a small white candlestick. The body of the small white candlestick is completely engulfed by the body of the long black candlestick.

Envelopes: It’s a Technical Analysis indicator formed by two simple moving averages. One of them is shifted upward and the other one downward by a fixed percentage. The percentage is analogous to market volatility. The two shifted moving averages define the upper and lower bands of the envelope. Buy signals are generated when prices reach the lower band whereas sell signals are generated when prices reach the upper band.

EUR: Euro. The currency of the eurozone. It is subdivided into 100 cents.

European Central Bank: The ECB was established in 1998, located in Frankfurt (Germany), to manage the euro, keep prices stable and conduct EU economic & monetary policy. Its main aim is to keep prices stable, thereby supporting economic growth and job creation.

Evening Doji Star: A Japanese candlestick pattern signalling a bearish reversal.

A long white candlestick forms in the direction of the prevailing trend, signifying that the upward movement is still in force. The next session gaps above, forming a small candle, in this case a Doji that acts as an obstacle to further rise. A long black candle drives the market lower, well into the long white candle’s body and more specifically, below its mid-point -Indicating a bearish reversal.

Existing Home Sales: It’s an annualized report that measures sales and prices of existing single-family homes in the US overall, and gives breakdowns for the West, Midwest, South, and Northeast regions of the country.

Economic Sentiment Indicator: Monthly survey of consumers’ confidence that indicates the trend of the European economy. A positive reading is good for the Euro. Released by the European Commission.

Elliott Wave Theory: Technical Analysis theory developed by Ralph Nelson Elliott. Financial Markets follow a form of 5 waves. Three impulse waves (1, 3 and 5) in the direction of the trend and two corrective waves (2 and 4) in the opposite direction. One complete cycle is made up of 8 waves.

Empire State Manufacturing Index: Monthly survey of manufacturers in New York State. Participants are asked to report changes on a variety of economic indicators- from the previous month and six months ahead. A reading above zero is good for the currency where a reading below zero is negative.

Engulfing Pattern (Bullish): A Japanese candlestick pattern signalling a bullish reversal.

It forms at the bottom of a downtrend or near a support area.

It consists of two candlesticks.

A long white candlestick is formed at the end of a downtrend, preceded by a small black candlestick. The body of the small black candlestick is completely engulfed by the body of the long white candlestick.

Equidistant Channel: It’s a technical tool to draw a channel (uptrend or downtrend).

The distance between the two parallel lines (basic trendline and return line) is equal.

Eurozone: The European Union member states that adopted euro as their currency.

Evening Star: A Japanese candlestick pattern signalling a bearish reversal.

A long white candlestick forms in the direction of the prevailing trend, signifying that the upward movement is still in force. Next session gaps above, forming a small candle that acts as an obstacle to further rise. A long black candle drives the market lower, well into the long white candle’s body and more specifically, below its mid-point-Indicating a bearish reversal.

Exchange Rate: The rate at which one currency can be exchanged for another.

Expert Advisor: It’s an automated set of detailed programming instructions on how to open, modify and close trading positions without human intervention.

Factory Orders: A monthly survey showing orders for immediate or future delivery, placed with manufacturers. It provides an indication of future business trends. Released by the Census Bureau.

Fair Value: The current price at which an asset could be sold on the open market.

Fed Monetary Policy Report: Report submitted semi-annually to Congress containing discussions of "the conduct of monetary policy and economic developments and prospects for the future”, along with testimony from the Federal Reserve Board Chair.

Federal Reserve: It is the central bank of the United States. It was established in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve's’ responsibilities:

  • Monetary Policy
  • Bank and financial institution regulation and supervision
  • Financial System stability and containment of the financial markets systemic risks
  • Financial services to the U.S. government, U.S. financial institutions and foreign official institutions.

Fed’s Beige Book: The Fed’s publication about current economic conditions and prospects across the 12 Federal Reserve Districts: Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.

Released eight times per year by the Federal Reserve.

Fibonacci Arcs: It is a technical analysis tool that is drawn between two major points - top and bottom. The arcs are drawn centred on the second point intersecting the line connecting the two major points at 38.2%, 50% and 61.8%. The theory holds that prices are expected to find support and resistance at the arcs.

Fibonacci Expansion: It is a technical analysis tool that is drawn between three points on the price chart. The first point signifies the beginning of wave 1, the second point the end of wave 1 and the third wave the end of wave 2. The tool, displays three lines at 61.8%, 100% and 161.8% the length of wave 1(i.e. the distance between the first and the second point). These lengths (i.e. expansions) are drawn starting from the end of wave 2 (i.e. third point). The theory holds that at these levels, (i.e. expansions) significant changes may be expected, for example, the end wave 3.

Fibonacci Numbers (Sequence): They are attributed to Leonardo Fibonacci, an Italian Mathematician. Each number in the sequence is composed by the sum of the two previous numbers. The sequence is: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233 etc.

Fibonacci Time Zones: It is a technical Analysis tool that is comprised of vertical lines spaced at Fibonacci intervals: 1, 2, 3, 5, 8, 13, 21, 34, 55, etc. The tool is placed on two points on the price chart to define the time interval unit. The theory holds that significant price changes are expected at the vertical lines, that is, time intervals.

Fill: The completion of an order.

Filtering (candlesticks)

Applying Oscillator overbought and oversold levels in candlesticks analysis, premature patterns are ignored (i.e. filtered out) hence increasing the success probability of the candlestick patterns.

Final GDP: Annualized change of the Gross Domestic Product (GDP), the economic output of a country.

It measures:

  • Personal consumption
  • Business investment
  • Government spending
  • Net exports

It reveals whether an economy is expanding or contracting.

Flag: Continuation price pattern composed of a parallelogram with slanting sides against the trend and preceded by an almost straight-line move called a flagpole. The flagpole and the breakout of the parallelogram are accompanied by heavy volume.

The flag pattern causes a brief pause in the market that lasts less than 3 weeks.

Flat Correction: An a-b-c correction against the prevailing trend. It follows a 3-3-5 wave pattern.

FOMC: It is responsible for conducting the nations (USA) monetary policy.

FOMC Funds Rate: An FOMC tool to control inflation and short-term interest rates. Scheduled eight times per year. It is the interest rate at which banks and other depository institutions lend money to each other. Released by the Federal Reserve.

FOMC Press Conference: Scheduled four times per year. During the conference the FOMC Statement is read and the Fed’s Chair answers press questions regarding the monetary policy. High market volatility is usually expected.

Forex Signal System: A system which gives out signals to traders to help them decide whether a specific time is suitable to buy or sell a currency pair.

Forex Spot Rate: The current exchange rate that a currency pair can be bought or sold at.

Futures Contract: An agreement between two parties - a buyer and a seller- where the seller agrees to sell an asset to the buyer at a predetermined price, date, quantity and quality.

G20 Meeting: A group of 20 countries represented at the highest level by heads of state/government and at the ministerial level by ministers of finance and central banks governors.

They meet to discuss global and economic issues.

The group consists of the following countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, South Africa, Saudi Arabia, South Korea, Turkey, United Kingdom, United States of America, The European Union (represented by the European Council).

Gann Grid: A technical analysis tool developed by W. D. Gann. To draw a Gann Grid, attach the tool at an initial point on the chart. A second point is needed to set the cell grid size.

The resultant Grid consist of multiple lines at 45 degrees angle.

On the Gann Grid, there are three control points. By moving the first and the last points, the size of the grid cell may be set/modified. The middle point is used to move the Gann Grid on the chart keeping the dimensions intact.

Gann considered the 45 degrees line as the most important in representing long-term trendlines.

Based on Gann’s theory, prices:

  • Above the ascending 45 degrees line indicate an uptrend. Further acceleration of the upward movement may find resistance at the higher 45 degrees lines.
  • Below the ascending line. imply possible change in trend direction. Further fall of the prices may find support at the lower 45 degrees lines.
  • Below the descending 45 degrees line, indicate a downtrend. Further fall of the prices may find support at the lower 45 degrees lines.
  • Above the descending line, imply a possible change in trend direction. Further rise of the upward movement may find resistance at the higher 45 degrees lines.

Gap: Unused area on the price chart between two candlesticks. It may occur at Monday’s open or during high impact or unexpected news.

GBP: Pound Sterling. The currency of United Kingdom of Great Britain and Northern Ireland, Guernsey, Isle of Man, Jersey. It is subdivided into 100 pence.

Go Short: To sell a financial instrument with the expectation that it will decline in price.

Grid: It’s an MT4/MT5 chart property. When selected, grid is shown on the price chart.

Gross Loss: The monetary sum of all unprofitable trades.

GTC: A pending order that remains in effect until it is executed or cancelled by the trader.

Gann Fan: A technical analysis tool developed by W. D. Gann. To draw a Gann Fan, attach the tool at a major bottom/top and drag the mouse to the necessary length.

The resultant Gann Fan consists of seven lines at the following angles:

Time x PriceDegrees
1x882,5
1x475
1x371,25
1x263,75
1x145
2x126,25
3x118,75
4x115
8x17,5

Gann considered the 45 degrees line the most important line, where the market has some form of balance. Prices above the 45 degrees line indicate an uptrend, where below - a downtrend. During an uptrend, prices will find resistance at the lines above the 45 degrees line. When prices break below the 45 degrees line. then a possible reversal may be expected.

Consequently, prices are expected to find support at the lines below the 45 degrees line.

Similarly, in a downtrend the lines above the 45 degrees line will act as resistance, where the lines below will be support.

Gator Oscillator: It’s a technical analysis oscillator developed by Bill Williams. It consists of two histograms, above and below zero. The histogram above the zero-line shoes the difference between the teeth (red line) and the jaw (blue line) of the Alligator. The histogram below the zero line show the difference between the lips (green line) and the teeth (red line) of the Alligator. A histogram bar is coloured green when the value is greater than the previous bar’s value and in red colour when the value is less than the previous bar’s value.

The Gator Oscillator helps to understand what the Alligator does:

  • Sleeps - Both bars are red
  • Eats – Both bars are green
  • Awakes – After sleeping, one bar is green and one bar is red
  • Fills out – After eating, one of the bars is red

Go Long: To buy a financial instrument with the expectation that it will rise in price.

Goods Trade Balance: Economic report that shows the difference in value between imported and exported goods. A positive number (i.e. more exports than imports) is good for the currency. Released monthly.

Gravestone Doji: A Japanese candlestick formation that has an equal (or almost equal) opening and closing price. The Gravestone Doji only has a long upper shadow. It has possible bearish implications when at the top of an uptrend or near a resistance area.

Gross Profit: The monetary sum of all profitable trades.

Hammer: A Japanese candlestick pattern signalling a bullish reversal. The presence of a hammer at the end of a downtrend or decline, alerts for a possible bullish reversal. Traders enter the market with short positions, pushing prices even lower in the direction of the prevailing trend, to form the lower shadow. Eventually, the downward move is proven short-lived, as bulls take over the control and manage to close the session at the upper area of the candle. This forms the real body; whose length is 2-3 times shorter than the lower shadow.

Hanging Man: The presence of a Hanging Man at the end of an uptrend or upward move, alerts for a possible bearish reversal. Traders enter the market with short positions, pushing prices lower against the direction of the prevailing trend, to form a long lower shadow. Eventually, the bulls take over the control and manage to pull the session higher at the upper area of the candle. This forms a small real body; whose length is 2-3 times shorter than the lower shadow.

Harami (Bullish): A Japanese candlestick pattern signalling a bullish reversal. A small candlestick body of either colour follows a candlestick of a long black body. The colour of the small candlestick is not important. The bearish decline is running out of steam as shown by the presence of the small candle which signals uncertainty, as it is contained by the previous long body. The weakness of the market to push prices lower and the presence of the pattern at the end of a decline, signals possible bullish implications.

Harami Cross (Bullish): A Japanese candlestick pattern signalling a bullish reversal. Just like Harami, a small candlestick body- (Doji in this case) follows a candlestick of a long black body. The bearish decline is running out of steam as shown by the presence of the Doji, which signals uncertainty as it is contained by the previous long body. The weakness of the bearish market to push prices lower and the presence of the pattern at the end of a decline, signals possible bullish implications.

Hedge: Investors use hedging to protect themselves by reducing the risk that may be caused by adverse market movements. Hedging means making two opposing investments, minimizing the losses which could be incurred by price fluctuations.

Heiken Ashi: It is a price charting technique that filters out noise.

It uses modified open, high, low and close prices:

  • haClose = (Open + High + Low + Close) / 4
  • haOpen = (Previous haOpen + Previous haClose) /2
  • haHigh = Max(High, haOpen, haClose)
  • haLow = Min(Low, haOpen, haClose)

Heiken Ashi makes trend identification, retracements and reversals easier:

  • Uptrend is identified as a series of white bodies.
  • Strong Uptrend is defined as a series of long white bodies with and no lower shadows.
  • Downtrend is identified as a series of black bodies.
  • Strong Downtrend is defined as a series of long black bodies and no upper shadows.
  • Weak trends are defined by the presence of smaller bodies.
  • Retracement is defined by the presence of smaller bodies and the presence of upper and/or lower shadows.
  • Reversal is defined by the presence of a Doji or colour change.

High Price: The highest price that a financial instrument is traded during a specific timeframe.

Homing Pigeon: A Japanese candlestick pattern signalling a bullish reversal.

It forms at the bottom of a downtrend or near a support area.

It consists of two black candlesticks.

The decline continues to record lower prices as reflected by the presence of a long black candle. Next session is characterized by a smaller black body that is completely engulfed by the previous long black body, signalling weakness, setting the stage for a bullish reversal.

Harami (Bearish): A Japanese candlestick pattern signalling a bearish reversal. A small candlestick body of either colour follows a candlestick of a long white body. The colour of the small candlestick is not important. The bullish move is running out of steam as shown by the presence of the small candle which signals uncertainty, as it is contained by the previous long body. The weakness of the market to push prices higher and the presence of the pattern at the end of an upward move, signals possible bearish implications.

Head and Shoulders: A Technical Analysis price pattern signalling a bearish reversal. It consists of three tops and two bottoms. The highest top is known as the Head where the top to the left is known as the Left Shoulder and the top to the right is known as the Right Shoulder. The line connecting the two bottoms is known as the neckline. A prerequisite of any reversal is the existence of a trend, an uptrend in this case. In the course of an uptrend, as defined by consecutive higher tops and higher bottoms, the presence of a lower top warns for a potential reversal. A decisive break of the neckline signals the end of the prevailing uptrend and the beginning of a downtrend. If volume is available, then heavy volume should accompany the breakout below the neckline.

Hedge Funds: Investment funds that invest in a wide range of assets to reduce risk.

High Frequency Trading: Automated trading, placing a big number of trades on high volumes and speed.

Identical Three Crows: A Japanese candlestick pattern signalling a bearish reversal. While the market is in an uptrend or near a resistance area, the presence of a long black body signals an alert for traders. The second candle is a long black candle that opens at or near the first candles’ close. Both the second and third candles close lower than the previous candle close.

Impulse Waves: In Elliott Wave Theory, these waves move in the direction of the wave of one larger degree. For example, in a complete cycle (8 waves), impulse waves 1, 2 and 3 move in the direction of the wave of one larger degree. Also, the corrective waves a and c move in the direction of the wave of one larger degree.

In Neck Line (Bullish Continuation): A Japanese Candlestick pattern signalling bullish continuation. In the course of an uptrend a small black candle opens above the high of the prior long white body and closes just below the prior close.

Indicator: Technical tools based on inductive statistics and mathematical formulas, which use price data, volume and open interest in order to identify future price trends.

Inflation: A sustained increase in the price of goods and services that reduces the purchasing power of money.

Interest Rate: The cost of borrowing money, usually expressed as a percentage and calculated on an annualised basis.

Internal Trendline: It runs through the price action, connecting internal tops and bottoms rather than extreme lows (uptrend line) or extreme highs (downtrend line).

Intraday Trading: Usually, opening and closing a position within the day.

Inverted Hammer: A Japanese candlestick pattern signalling a bullish reversal. An Inverted Hammer formed at the end of a downtrend or at a support area has bullish reversal implications. Traders enter the market with long positions but eventually the sellers’ pressure overcomes buyers’ pressure and the candlestick closes at the lower area of the inverted hammer. The small body and the absence of a lower shadow reveals the weakness of the bears who are unable to maintain the downward move. The body of the Inverted Hammer is 2-3 times shorter than the upper shadow.

Japanese Candlesticks: A charting method that has gained a lot of popularity recently, because the charts are more visually appealing than bar charts that reflect the same information. They are also generally easier to read and interpret. The chart makes it easier to see the relationship between the open and close and the high and low of price movements. They also give a more accurate depiction of market sentiment.

There are two types of Candlestick; the first Candle has a white or hollow body which indicates that the market is moving upwards, as there is more buying than selling interest. As the Close price is higher than the Open price, the white candlestick depicts the positive sentiment in the market and the fact that bulls are in control. The longer the body is, the stronger the buying interest.

A filled (black) body which indicates that the market is moving downwards indicates that there is more selling than buying interest. As the Close price is lower than the Open price, the black candlestick depicts the negative sentiment in the market and the fact that bears are in control. The longer the body is, the stronger the selling interest.

The lines above and below the body of the candlestick are called “Shadows” or “Wicks”. The upper shadow reveals the price levels above the body that have been tested but eventually rejected. Similarly, the lower shadow reveals the price levels below the body that have been tested but eventually rejected.

Juglar Cycle: One of the popular cycles in Time Cycle Analysis. Clement Juglar supported that a cycle of approximately 9 years, is presented in many areas of economic activities.

JOLTS Job Openings: Number of job openings that need to be filled within 30 days. These include full-time, part-time, permanent, short-term and seasonal openings. Released monthly by the Bureau of Labour Statistics.

JPY: Yen. The currency of Japan.

Keltner Channel: A technical analysis indicator developed by Chester Keltner. The upper band is drawn twice the value of the average true range (ATR) calculated over 10 periods above a 20-period exponential moving average of typical prices. The lower band is drawn the same distance below the exponential moving average. A positive signal is generated when price closes above the upper band. Similarly, a close below the lower band indicates a negative signal.

Kicking (Bullish): A Japanese candlestick pattern signalling a bullish reversal. In the course of a decline, a long white candle gaps above the previous black Marubozu and rallies higher, closing at the high of the session, demonstrating strong bullish power.

Kiwi: It is the nickname of the New Zealand Dollar (NZD). Flightless bird and national symbol of New Zealand.

Kondratieff Cycle: One of the longer cycles in Time Cycle Analysis. Discovered by the Russian Economist Nikolai D. Kondratieff. He supported that a cycle of approximately 54 years is present in prices and many areas of economic activities. Also, known as K Wave.

Kagi Charts: A price charting technique independent of time. It is plotted as a series of connected vertical lines. The thickness and direction of the lines, reflect the price action:

  • An uptrend is displayed as series of thick vertical lines
  • A downtrend is displayed as series of thin vertical lines

A buy signal is generated when price moves above the most recent high whereas a sell signal is in place when it moves below the last low.

Kicking (Bearish): A Japanese candlestick pattern signalling a bearish reversal. During the course of an uptrend, a long black candle gaps below the previous white Marubozu and then declines lower closing at the low of the session, demonstrating strong bearish power.

Kitchin Wave: One of the popular cycles in Time Cycle Analysis. Discovered by Joseph Kitchin. He supported that a 40-month cycle was present in the stock markets.

Labour Cost: It shows the hourly costs of maintaining employees. Released quarterly by Eurostat.

Labour Productivity: A quarterly report that measures the real gross domestic product per hour worked. Released by Statistics Canada.

Latency: In the financial markets, latency refers to time units (usually milliseconds) required for a trade order to be sent and executed by the broker’s server.

Latter Top: A Japanese candlestick pattern signalling bearish reversal. During the course of an upward move, three long white candles- each opening and closing higher than the previous one, re-establishes the rally. Even though the fourth candle gaps above the previous body, it attempts to extend into the previous candle’s body, as shown by the relatively long lower shadow, but eventually retreats making a new high. It then forms a small white body. The last candle is a long black body that opens below the previous body - signalling a reversal.

Leading Economic Index: A monthly report that shows the performance of the Japanese Economy. Released monthly by the Cabinet Office (Japan).

Limit Order: An order to execute a trade at a specific price or a better one.

Line Chart: A price chart that uses only the closing price for each period. A line connects all closing prices on the chart. Extra information such as open, high and low prices are sacrificed for simplicity.

Linearly Weighted Moving Average: A technical analysis indicator. It is a moving average that assigns more weight to more recent prices. As a result, it is more sensitive to price changes compared to the Simple Moving Average.

Logarithmic Scale Charts: Price charts that use log scales show equal distances for similar percentage change. For example, the distance on the chart for a price move from 1.5000 to 3.0000 will be the same as a move from 5.0000 to 10.0000 as they both represent the same (100% change) percentage change.

Long Legged Doji: A Japanese candlestick pattern signalling indecision. It has long upper and lower shadows. The open price and the close price are equal.

Long White Body: A Japanese candlestick pattern signalling a bullish reversal. It forms at the end of a downtrend or a support area. It consists of a long white body and small shadows.

Lot: A lot is a standardized quantity of the instrument you are trading. In forex, one lot is 100,000 units of a particular currency.

Low Price: The lowest price that a financial instrument is traded during a specific timeframe.

Labour Force Participation Rate: The percentage of population (eligible to work) that is either looking for a job or already has a job. Released monthly by the Bureau of Labour Statistics.

Lagging Indicator: A technical indicator that triggers buy and sell signals with a lag.

Latter Bottom: A Japanese candlestick pattern signalling bullish reversal. During the course of a downward move, three long black candles- each opening and closing lower than the previous one, re-establishes the decline. Even though the fourth candle gaps below the previous body, it attempts to extend into the previous candle’s body, as shown by the relatively long upper shadow, but eventually retreats making a new low. It then forms a small black body. The last candle is a long white body that opens above the previous body- signalling a reversal.

Leading Indicator: A technical indicator showing signs of possible change of direction, before the actual price changes direction. An indicator in the overbought area implies that prices may rebound, while in the oversold area it implies that prices may bounce back. Similarly, positive divergence between the price and the indicator implies price may change to the upside, while a negative divergence may hint for a reversal to the downside. Volume is another class of indicators that forecast price action. During an uptrend, volume should increase as buying pressures increases. If volume doesn’t follow through then it hints for a reversal. In a downtrend, volume should be heavier as selling pressure increases. If heavy selling pressure is not accompanied by increased volume then it hints that the downtrend is coming to an end and that a reversal is imminent.

Leverage: Leverage is offered by brokers to maximize traders' buying power by giving them the ability to deposit a small amount of funds and trade larger volumes. Leverage is expressed as a ratio form, so if it is 1:100 for example, a trader's buying power is magnified 100 times. Leverage provides opportunities for multiplied profits but at the same time one may have multiplied losses as well.

Limit Price: The specific price referred to in limit order.

Linear Regression Channel: A Technical Analysis tool used for trend identification for a set of prices under a period of study. It is attached on the chart by selecting the first price representing the beginning of the trend and then dragging the mouse to the second price in the direction of the trend.

It consists of three lines:

  • Linear Regression Trendline
  • Upper Channel Line
  • Lower Channel Line

The Linear Regression Trendline, is an equilibrium line that is, a straight line run through a set of prices using the statistical technique of best fit (or least squares) for a period under study. The Upper and Lower Lines are parallel to and equidistant from the Trendline. The distance between either Line and the Trendline, represents the maximum close price deviation from the Regression Trendline.

Liquidity: The volume available in the market for a specific currency pair.

Long Black Body: A Japanese candlestick pattern signalling a bearish reversal. It forms at the end of an uptrend or a resistance area. It consists of a long black body and small shadows.

Long Position: Taking a long position on a currency means that you buy it. In a currency pair, you buy the first of the two currencies – the base currency.

Loonie: The nickname of the Canadian Dollar (CAD).

MACD: The Moving Average Convergence/Divergence is a momentum oscillator developed by Gerald Appel. It is the difference between a 12 period and a 26 period Exponential Moving Average plotted usually as a histogram above (difference is positive) or below (difference is negative) the zero line. A 9 period Simple Moving Average of MACD is known as the Signal Line.

MACD follows the general rules of oscillator analysis:

  • Confirmation of the trend is in place when MACD crosses the zero line.
  • Early Buy signals (or reversal warning) are triggered when MACD crosses above the Signal Line when below the zero line.
  • Early Sell signals (or reversal warning) are triggered when MACD crosses below the Signal Line when above the zero line.
  • Overbought/Oversold signals are triggered when the 12 period EMA pulls away from the 26 period EMA.
  • MACD is unbounded and as such, there no overbought and oversold lines.
  • Divergence follows the rules for positive and negative divergence.

Margin Call: This is a notification which alerts you that you need to deposit more money in your trading account, to ensure that there is sufficient margin to keep existing positions open.

Mark-to-Market: The value an open position would be if it were closed at the current market rate.

Market Order: An order for a trade to be executed instantly at the best available price.

Market Profile: A technical analysis tool developed by J. Peter Steidlmayer to allow traders to get information about the activity in the futures pit. It displays price distribution and reveals who is in control of the market:

  • Short-term traders
  • Long-term traders

Maximum Drawdown: It is the maximum top-to-bottom decline in the value of a position or portfolio.

Meeting Lines (Bearish): A Japanese candlestick pattern signalling a bullish reversal. During the course of the uptrend, the presence of a long white candlestick confirms the strength of the prevailing direction of the market. While the sentiment is clearly positive, the next session gaps even higher, creating an open window. Eventually the session closes lower but at the same level as the previous session’s close.

MetaEditor: A programming environment for the development of Expert Advisors, Indicators and Scripts.

Middle Rate: The exact price between the Bid and Ask prices.

Minimum Bid Rate: The interest rate that banks have to pay when borrowing from the European Central Bank. It is set 8 times per year by the European Central Bank.

Model: Historical data modelling for back testing Expert Advisors. There are three available methods:

  • Open Prices only (fastest method to analyse the bar just completed)
  • Control Points (the nearest less timeframe is used)
  • Every tick (based on all available least timeframes)

Momentum: It measures the speed of price changes rather price itself. It displays the rate of ascent or descent.

Monetary Policy Statement: The monetary policy statement of a nation’s Central Bank. It communicates the committee’s decision on policy measures, interest rates their economic outlook and hints for future decisions. It is released by the nation’s Central Bank.

Money Management: It is an important factor in trading the financial markets. It involves, position size, stop loss, diversification, asset allocation and reward to risk ratio.

Morning Doji Star: A Japanese candlestick pattern signalling a bullish reversal. A long black candlestick forms in the direction of the prevailing trend, signifying that the decline is still in force. Next session gaps below, forming a small candle, in this case a Doji that acts as an obstacle to further decline. A long white candle drives the market higher, well into the long black candle’s body and more specifically above its mid-point, indicating a bullish reversal.

Moving Average: A trend following indicator. It is a series of averages of sequential data subsets. It may be used as a curving trend line that follows the price action. Buy signals are seen when prices cross above the moving average whereas sell signals are in place when prices cross below the moving average. There are many moving average calculation methods:

  • Simple
  • Exponential
  • Time Series
  • Linearly Weighted
  • Triangular
  • Cantered
  • Variable
  • Adaptive
  • Volume Adjusted

The major difference between the calculation methods is the weight attached to the most recent prices.

Moving Average of Oscillator (OsMA): A technical oscillator that plots the difference between MACD and the Signal Line.

Extremely high readings warn for overbought conditions whereas extremely low readings warn for oversold conditions. A crossing above the zero-line signals uptrend confirmation while a crossing below the zero-line signals downtrend confirmation.

Margin: This refers to the amount of money needed in your account to maintain an open position.

Margin Level: It is the ratio of Equity to Margin used for your open positions and indicated as a percentage. It indicates the “health” of your account.

Market (Terminal Tab): An application store where traders can buy trading indicators, expert advisors, scripts and other applications.

Market Execution: The order will be filled at the next available price.

Market Maker: A broker who is willing to buy and sell financial instruments in order to facilitate trading and liquidity.

Market Rate: The current quote for a currency pair.

Marubozu: A Japanese candlestick of a long body with very small (or non-existent) upper and lower shadows. The colour of the body may be either black or white.

Matching High: A Japanese candlestick pattern signalling a bearish reversal. At the end of an uptrend, a long white candlestick and a smaller white candle that follows, share the same closing price. Even though the second candle opens lower than the previous close, it doesn’t manage to move lower and eventually it closes at the same price as the previous session. This is indicative of a possible top. Since the market failed to record a new high, a resistance may have been formed and a possible reversal may be in place.

McClellan Oscillator: A market breadth indicator. It was developed by Sherman and Marian McClellan. It is the difference of a 19-period EMA and a 39-period EMA of advancing minus declining issues in the New York Stock Exchange.

A reading above 100 implies extreme overbought conditions whereas a reading below -100 signals extreme oversold conditions. A buy signal is triggered when the oscillator falls in the area between -70 and -100 and then turns up. Similarly, a sell signal is generated when the oscillator rallies in the area between 70 and 100 and then turns down.

Median Price: The midpoint of a period’s price activity. It is calculated as:

(High + Low) / 2

Meeting Lines (Bullish): A Japanese candlestick pattern signalling a bullish reversal. During the course of the downtrend, the presence of a long black candlestick confirms the strength of the prevailing direction of the market. While the sentiment is clearly negative, the next session gaps even lower, creating an open window. Eventually the session closes much higher but at the same level as the previous session’s close.

Micro Lot: A micro lot is equal to 1,000 units of the base currency in a currency pair.

Mini Lot: A micro lot is equal to 10,000 units of the base currency in a currency pair.

Momentum Oscillator: It measures the difference between the current price and the price n periods ago of a financial instrument. If the difference is above the 100-line and rising then it is presumed that the uptrend is accelerating. If the difference is below the 100-line and falling then the downtrend is accelerating. If the difference is above the 100-line and falling then the uptrend is decelerating. Similarly, if the difference is below the 100-line and rising then the downtrend is decelerating. Momentum follows the general oscillator analysis:

  • A crossing of the oscillator above the 100-line triggers a buy signal.
  • A crossing of the oscillator below the 100-line triggers a sell signal.
  • Divergence between the oscillator and price gives early signals of a reversal.

Overbought/Oversold levels are not easily spotted on the Momentum Oscillator since it is unbounded. Hence, visual inspection is used instead, to identify extreme readings above and below the 100-line.

Money Flow Index: It is a momentum oscillator developed by Gene Quong and Avrum Soudack.

It combines both price and volume. It measures the strength of money flowing in and flowing out of a financial instrument over a period.

There are two general interpretations:

  • Overbought/Oversold: A reading above 80 is considered Overbought and a market top may be in place. A reading below 20 is considered oversold and a market bottom may be imminent.
  • Divergence between the oscillator and price hints at reversals.

Morning Star: A Japanese candlestick pattern signalling a bullish reversal. A long black candlestick forms in the direction of the prevailing trend, signifying that the decline is still in force. The next session gaps below, forming a small candle that acts as an obstacle to further decline. A long white candle drives the market higher, well into the long black candle’s body and more specifically, above its mid-point - Indicating a bullish reversal.

Motive Wave: In Elliott Wave theory, a complete cycle has two phases, Motive and Corrective.

The Motive phase consists of the waves 1, 2, 3, 4 and 5. The Motive wave moves in the direction of the wave of one larger degree.

Nasdaq Composite Index: A stock market index of all shares traded on Nasdaq. It is weighted index according to the stocks’ capitalization.

NFP: High impact, monthly report presenting the change of US employed people, excluding the farming and the government sector. Released, usually, the first Friday of the month by the Bureau of Labour Statistics.

Nominal Value: Also known as face value or par value. It is the price shown on the face of a financial instrument.

NYSE: One of the largest stock exchanges in the world. Located in New York.

Nasdaq: A large stock exchange in New York.

New Home Sales: Monthly report of New Home Sales of new single-family houses. Released by the U.S. Census Bureau and the Department of Housing and Urban Development.

NFA: *Designated by the CFTC as a registered futures association, NFA strives every day to safeguard the integrity of the derivatives markets, protect investors and ensure Members meet their regulatory responsibilities.

Nikkei: A stock market index for the Tokyo Stock Exchange, composed of 225 stocks of large Japanese companies.

No Dealing Desk: When traders have direct access to the interbank market and there is no dealing desk involved in their transactions.

NZD: New Zealand Dollar. The currency of New Zealand, the Cook Islands, Niue, Pitcairn and Tokelau. It is subdivided into 100 cents.

On Neck Line (Bullish Continuation): In the course of an uptrend, a small black candle opens above the high of the prior long white body and closes at the aforesaid high.

Open Interest: The total number of outstanding (long or short) contracts at the end of the trading day. Open Interest applies to futures and options markets.

BuyerSellCommentOpen Interest
New LongNew ShortNew Position
New LongOld ShortNot New Position− −
Old LongNew ShortNot New Position− −
Old LongOld ShortOld Position

Open Price: The initial price at the beginning of a trading period (i.e. timeframe).

Oscillator: It is a statistical tool that fluctuates around a horizontal middle line. At times the oscillator is plotted at extreme high readings, recording an overbought market. Conversely, when the oscillator moves at extreme low readings below the middle line it is recording an oversold market. Some oscillators are bounded i.e. they provide upper and lower boundaries which make overbought/oversold identification easy. In the absence of upper and lower boundaries, a visual inspection will do the trick.

OsMA: Oscillator Moving Average. It displays the difference between MACD and its Signal Line (Moving Average).

Over the Counter: The traditional way of trading forex was ‘over the counter’, meaning traders made forex transactions over the telephone or on electronic devices.

Overnight Position: When a trader’s position is kept open and carried over to the next trading day.

Oversold: When the market drops too far oscillators will reflect that decline with extreme low readings below the middle/equilibrium line, hence identifying oversold conditions. An oscillator at extreme low conditions can be an alert for a reversal. Oscillators usually give false signals in the beginning of a trend as they move too fast in the oversold area.

On Neck Line (Bearish Continuation): In the course of a downtrend, a small white candle opens below the low of the prior long black body and closes at the aforesaid low.

OPEC: Organization of Petroleum Exporting Countries. OPEC’s mission is to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry. The twelve-member states are: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.

Open Position: A position taken on a financial instrument that is subject to profits or losses.

Options: A financial derivative where the buyer has the right to buy/sell an asset by the expiration date. More specifically, Call Options are contracts that give the owner the right (not the obligation) to buy an asset in the future (before or at the expiration date) at an agreed price. Investors buy Call Options when they believe that the value of the underlying asset will increase above the strike price. Similarly, Put Options are contracts that give the owner the right (not the obligation) to sell an asset in the future (before or at the expiration date) at an agreed price. Investors buy Put Options when they believe that the value of the underlying asset will decrease below the strike price.

Here are some examples of different types of Options:

  • Call
  • Put
  • American Style
  • European Style
  • Exchange Treaded Options
  • Over the Counter Options
  • Option Type by Expiration
  • Option Type by Underlying Security
  • Employee Stock Option
  • Cash Settled Options
  • Exotic Options

Oscillator Analysis: Confirms the trend; Determines overextended markets (Overbought/Oversold); Spots divergence between the oscillator and price.

Overbought: When the market rises too far oscillators will reflect that rise with extreme high readings above the middle/equilibrium line, hence identifying overbought conditions. An oscillator at extreme high conditions can be an alert for a reversal. Oscillators usually give false signals in the beginning of a trend as they move too fast in the overbought area.

Overnight Rate: The interest rate at which financial institutions in Canada borrow and lend money among themselves. It is updated 8 times per year and released by the Bank of Canada.

Pending Orders: Orders to buy or sell a financial instrument in the future when certain conditions are met. They consist of limit orders and stop orders.

Buy Limit Order: A predefined price to buy in the future. This is lower than the current market price.

Sell Limit Order: A predefined price to sell in the future. This is higher than the current market price.

Buy Stop Order: A predefined price to buy in the future. This is higher than the current market price.

Sell Stop Order: A predefined price to sell in the future. The price is lower than the current market price.

Personal Consumption Expenditures: A monthly report that measures the total expenditure by individuals. A high reading is seen as positive for the US Dollar. Released by the Bureau of Economic Analysis, Department of Commerce.

Pip: A point in price, or pip for short, is the measure of change in a currency pair in the forex market. The acronym can also stand for a “percentage in point” and “price interest point”. It is a standardized unit and is the smallest unit of measurement by which a currency quote can change. Most currency pairs are measured to five decimal places. For pairs like EURUSD, a pip corresponds to the fourth decimal digit [EURUSD 1.06712]. Yen-based currency pairs like USDJPY are the exception, and are measured to three decimal places and the pip corresponds to the second decimal digit (USDJPY 114.612).

Point: It is the smallest increment of an exchange rate.

Position: A long or short trade taken by a trader.

PPI: A monthly report showing the monthly change in price of finished goods and services charged by producers. It provides an indication of consumer inflation. A high reading is seen as positive for the US Dollar whereas a low reading is perceived as bearish. Released by the Bureau of Labour Statistics.

Profit Factor: The ratio between gross profits and gross losses. Profit Trades: The number of profitable trades.

Parabolic SAR: Parabolic Stop and Reverse is a technical indicator developed by Welles Wilder. It is based on the premise that a strong trend will continue to increase in strength and hence it will follow a parabolic arc. During an uptrend a SAR point starts far from the price and as the price accelerates upwards the SAR points (below the price in an uptrend and above the price during a downtrend) close the gap. When the SAR point reaches the price, the long position is closed and a short is opened. It is a system that is always in the market either as long or short. The points (SAR) serve as trailing stop loss and trailing take profit. It works well during trending markets but it produces many false signals during sideways markets.

Piercing Line: During the course of a decline, a long white candlestick exceeds the midpoint of the previous long black candle. The white candle opens below the previous close or low. It is a bullish reversal pattern.

Pivot Points: Pivot Points are popular technical tools used by traders to identify price direction and get a feel for market sentiment. There are five calculation methods:

  • Standard
  • Fibonacci
  • Camarilla
  • Woodie’s
  • De Mark’s

The Standard pivot point calculation method, also known as the Classic or Floor method, uses the previous period’s high, low and close price to calculate the current period’s direction/sentiment, as well as future support and resistance levels.

Just like the Standard method, the Fibonacci method uses the previous candlestick’s high, low and close price to determine the current period’s direction. Future support and resistance levels are estimated by employing Fibonacci ratios 0.382, 0.618 and 1.00.

Unlike all other pivot point methods, DeMark’s method uses the relationship between the previous period’s close and open prices, to determine which of the 3 formulas to use, when calculating support and resistance. The main Pivot Point is not part of the DeMark method.

Camarilla Pivot Points provide a “road map” for both range and break-out traders, looking for potential turning points in the market. The emphasis is focused on the third support and resistance levels as potential reversals. Also, the fourth support and resistance levels play a key role in accelerating markets in both upward and downward directions.

Woodie’s method is another variation of pivot points. The main pivot point represents the deciding factor of the market’s sentiment and its future direction. The corresponding support and resistance levels provide take profit opportunities and possible turning points.

Unlike other pivot point methods, Woodie’s use the current period’s open price when calculating the main pivot point. Just like the other methods, the daily timeframe is the preferred timeframe for calculations.

Point & Figure: Price charts that display supply and demand. Demand is represented as a column of X’s and supply as a column of O’s. They ignore time and volume. Each box (i.e. X or O) represents a predefined price movement called the box size. Price movement less than the box size is ignored, thus noise is not recorded. A reversal, i.e. a column of X’s, is created after a column of O’s, when there is a price movement to the upside equal to the number of boxes - known as the reversal size. Conversely A reversal, i.e. a column of O’s, is created after a column of X’s, when there is a price movement to the downside- equal to the number of boxes - known as the reversal size. Point and figure charts are named after their box and reversal size, for example 1 x 3.

Profit Taking: Closing a position to take a profit.

Qualitative Analysis: Identifies investment potential by studying unquantifiable factors that affect the market movement, such as traders’ sentiment, Psychology and behaviour. Technical Analysis is a form of Qualitative Analysis, as many concepts and theories such as Elliott Wave Theory, Dow Theory and Cycle Theory study the behaviour of the market participants.

Quantitative Easing: Monetary policy to stimulate economic growth and lift the economy out of stagnation. Central Banks increase money supply in the market by “printing money”, lowering interest rates and making money available to consumers to spend and businesses to invest.

Quote: It’s the price that a financial instrument may be bought (Ask price) or sold (Bid price).

Quantitative Analysis: Identifies investment potential by applying mathematical and statistical models. Technical analysis is a form of quantitative analysis, as indicators and technical tools are based on mathematical and statistical models.

Rally: Upward price movement after a period of sideways movement or decline.

Random Walk Theory: Claims that price changes are serially independent and as such they are random and unpredictable.

Real Body: Also known as body, it is the rectangular area between the open and the close price on a Japanese Candlestick. If the close is higher than the open price then the colour is white; signifying positive sentiment. Conversely, if the open is higher than the close price, the colour is black; suggesting negative sentiment.

Recovery Factor: The ratio of gained profit to maximum drawdown. Regulated Market: A market governed by legislative rules and regulations which are in place to protect investors.

Renko Charts: A price charting method. A price move is registered as a “brick” in the direction of the trend, as long as the move is equal to the box size, i.e. the minimum amount. There are two types of bricks - white and black. A reversal to the downside takes place when a black box emerges after a series of white bricks. Conversely, a reversal to the upside takes place when a white brick is registered after a series of black bricks. The concept of box size helps to smooth out “noise” as price movements less than the box size are not registered.

Reserve Currency: A strong currency that Central Banks and other Financial Institutions hold as part of their currency reserves. Retail Investor: An individual investor who trades the markets for his own benefit rather on behalf of an organization. Usually individual investors invest smaller amounts in contrast to institutional investors.

Reversal: A turning point in the price chart.

Reward-to-Risk Ratio: It is the ratio of potential profits to potential losses. For example, if a trade suffers a 50 pip loss, then the expected return may be 150 pips, if 3:1 reward-to-risk is used.

Risk: The potential of a negative outcome such as underperforming, failing to achieve investment/trading goals or losing money.

Risk Aversion: Refers to the level of tolerance of uncertainty. Traders with risk aversion prefer lower returns with known risks (usually low risk) over higher returns with unknown/uncertain risks (usually high risk).

Round Trip: Refers to the total amount of funds involved in opening and closing a position.

RSI: Relative Strength Index. A popular technical indicator developed by Welles Wilder. It addresses erratic price movements in the markets by smoothing prices using the following formula:

RSI = 100 - (100 / (1+ (Average of n up closes / average of n down closes)))

The default value is 14 but 9 may also be used. RSI is bounded between 0 and 100. When the oscillator moves above 70 it is considered overbought and a reversal warning is indicated. If there is a negative divergence between the price and the RSI, then a potential sell indication is in place. When the oscillator moves below 30 it is considered oversold and hence a reversal alert is indicated. If there is a positive divergence between the price and the RSI, a possible buy indication may be in place.

Range: When price action is confined between a support and a resistance level. Also known as a sideways market, flat market or trendless market.

Recession: A contraction in economic activity. A period of two consecutive quarters of declining Gross Domestic Product (GDP).

Rectangle: A continuation price pattern, when prices are trading in a confined area between two parallel flat lines. It is also known as range or consolidation. Even though it is expected to break out in the direction of the prevailing trend, it is not unusual to break out in the opposite direction. If volume information is available, it may hint in the break out direction well before it happens, as price movement tends to be higher or heavier in the direction of the breakout. Breakout of the range should also be accompanied by heavy volume to be considered valid. Measuring implications are calculated as the width of the range.

Relative Drawdown: The highest percentage drop of Equity.

Relative Vigor Index: A technical indicator based on the premise that during an uptrend, the closing price is usually higher than the open price. Conversely, during a downtrend, the closing price is usually lower than the open price. The calculation formula is:

RVI = (Close – Open) / (High – Low)

For further smoothing, a 10-period Simple Moving Average may be applied on the resulting RVI. Furthermore, a 4-period Signal Line may be constructed by applying a Symmetrical Weighted Moving Average on RVI.

A potential buy signal is triggered when there is a positive divergence between the oscillator and price, especially when RVI is in extreme oversold territory. Conversely, a potential sell signal is in place when there is a negative divergence and RVI is in extreme overbought territory.

Requote: When a broker is not able to fill a trader’s order at the specific price due to an unusually rapid price movement. The broker would then quote the next best available price, seeking the trader’s confirmation to fill the order.

Resistance: A price level usually defined as a previous top, where selling pressure overcomes buying pressure. As a result, prices may find it difficult to break above.

Retail Sales (US): An economic report presenting the US total retail sales as well as the percentage change of the last month. It is based on a survey of about 5000 retail firms. It shows demand in consumer goods which constitutes about 70% of the GDP. Released, monthly by the US Census Bureau.

Return Line: A channel consisting of two parallel lines; the basic trendline and the return or channel line. In an uptrend the return line is drawn by joining the tops of the channel whereas in a downtrend, the return line is drawn by joining the bottoms of the channel. The return line serves as a profit-taking indicator for short-term traders.

Reversal Pattern: A price formation that signifies the end of a trend in one direction and the beginning of a new trend in the opposite direction. The most popular reversal pattern is “Head and Shoulders”.

Rising Three Methods: A Japanese Candlestick bullish continuation pattern. In the course of an uptrend, a long white body is followed by three small candlesticks formed between the previous candle’s range - triggering a pause in the market. The resumption of the uptrend is signalled by the presence of the fifth candle which is a long white body.

Risk Appetite: The amount of risk a trader is willing to take.

Risk Management: It refers to the controls applied to mitigate trading risk, for example:

  • Stop Loss
  • Position Size
  • Reward-to-Risk Ratio

Rollover Rate: In forex, the rollover rate is the interest rate that traders pay or earn when they hold (rollover) a position open overnight.

Safe Haven: A financial instrument or asset where the risk of it losing its value is relatively low.

Sell Stop: A pending order to sell at a predefined price lower than the market price, in anticipation that the market will continue to decline.

Selloff: Substantial sale of a financial instrument with rapidly declining prices. It is usually characterised by panic amongst traders.

Separating Lines (Bearish Continuation): Japanese candlestick bearish continuation pattern. During the course of a downtrend, the appearance of a long white candlestick is common, as a correction is part of the prevailing trend. The Next candlestick is a long black body opening at the same price level as the opening of the previous white candlestick but eventually closing lower, signalling the continuation of the downtrend.

Shadow: The vertical line than extends above and below the body/real body of a Japanese candlestick. It defines the range between the high and the low price for the specific period.

Short Selling: The sale of a financial instrument to be bought later at a lower price.

Side-by-Side White Lines (Bearish Continuation): Japanese candlestick bearish continuation pattern. During a downtrend, a black candlestick is followed by two white candles that gap down-their high price is lower than the black candle’s low price. The two white candles open at about the same price and have a similar body size.

Signal Line: The 9-period Simple Moving Average of the Moving Average Convergence/Divergence (MACD). It may also refer to a moving average of any other oscillator.

Simple Moving Average: A trend following indicator. It also known as arithmetic moving average. It is calculated by adding the closing (other prices may also be used like open, high low, typical, median etc.) price of a number of candlesticks (equal to the time period of the moving average) and then dividing this number by the total number of prices. The result is known as the average. The oldest price is then dropped (i.e. discarded from the calculation) and the same formula is applied to the next prices. Therefore, it becomes the moving average.

Simple Moving Average = [Price(n) + Price(n-1) + Price(n-2) + … + Price(1)] / n

Where n is the period of the moving average.

Slippage: This is when a trader executes an order at a price which is very different to the price, they expected the trade to be executed at. This usually happens during periods of high volatility, when traders use market orders and stop loss orders.

Soft Currency: A currency that is sensitive to political and economic events and thus fluctuates greatly and is generally unstable.

Speculator: A trader in financial markets who aims to gain from anticipated future market moves.

Spot Price: The current market price of a financial instrument.

Standard Deviation Channel: A Technical Analysis tool based on the Linear Regression Trendline and the specified number of Standard Deviations. It is attached on the chart by selecting the first price representing the beginning of the trend and then dragging the mouse to the second price in the direction of the trend.

It consists of three lines:

  1. Linear Regression Trendline
  2. Upper Channel Line
  3. Lower Channel Line
  • 68% of the prices will fall within the range of 1 standard deviation of the Linear Regression Trendline
  • 95% of the prices will fall within the range of 2 standard deviation2 of the Linear Regression Trendline
  • 99.7% of the prices will fall within the range of 3 standard deviations of the Linear Regression Trendline

Prices trading above or below the Channel Lines hint for a reversal.

Stochastic Oscillator: It is a momentum oscillator developed by George Lane. It determines where the price closed relative to a specific price range over a chosen time period. It is based on the premise that prices tend to close near the upper end of the candlestick during upward price movements whereas they tend to close near the lower end of the candlestick during downward movements. It consists of two lines; %K and %D.

%K=(Current Close-Lowest Low)/(Highest High-Lowest Low) x 100

Current Close – represents the latest closing price

Lowest Low – represents the lowest price for a specific time period

Highest High – represents the highest price for a specific period

Specific Period – is by default 5

Range – is the difference of Highest High – Lowest Low

The %D is a 3 (default value) period Simple Moving Average of %K.

The formula for %D is:

%D = SMA (%K,3)

This is known as fast stochastics.

By taking an additional 3-period Simple Moving Average of %D and %K, slow stochastics are calculated:

%K = SMA(%K,3)

%D = SMA(%D,3)

The Stochastic Oscillator ranges between 0 and 100.

A reading of 0 means that the latest closing prices is equal to the lowest price of the price range over the chosen time period. A reading of 100 means that the latest closing price is equal to the highest price recorded for the price range over the chosen time period.

Also, a reading above 80 is considered to be an indication that the market has reached extreme overbought levels, whereas a reading below 20 means that the market has declined to extreme oversold levels.

The Stochastic Oscillators follows the general rules of oscillator analysis:

  • Signals are generated by the crossover between the %K and the %D line.
  • A buy signal is generated when %K crosses above the %D line at the oversold area below 20 and then %D rises above the 20-line.
  • A sell signal is generated when %K crosses below the %D line at the overbought area above 80 and then %D falls below the 80-line.
  • Divergence between price and Stochastics especially at the oversold and overbought areas hints for a potential turning point in the market.

Swap Free Fee: After the swap-free period expires, the account will be charged with the Swap Free Fee for every night it remains open.

Systemic Risk: The risk associated with an event that can trigger substantial uncertainty and loss of confidence in the financial markets, financial system or even the whole economy.

Scalping: A trading strategy that benefits from small price movements.

Sell Limit Order: A pending order to sell at a predefined price higher than the market price in anticipation that the market will eventually decline. Sell Stop Limit: A pending order that combines the Sell Stop and Sell Limit Orders. It allows a trader to specify a price lower than the current price that when reached, a Sell Limit ordered is placed at a higher price level.

Sentiment: The investors’ expectations about the direction of a financial instrument or market.

Separating Lines (Bullish Continuation): Japanese candlestick bullish continuation pattern. During the course of an uptrend, the appearance of a long black candlestick is common, as a correction is part of the prevailing trend. The next candlestick is a long white body opening at the same price level as the opening of the previous black candlestick, signalling the continuation of the uptrend.

Settlement: The transfer of ownership of a financial instrument to a buyer.

Shooting Star: Japanese candlestick bearish pattern. A Shooting Star formed at the end of an uptrend or at a resistance area has bearish reversal implications. Traders enter the market with long positions but eventually the sellers’ pressure overcomes buyers’ pressure and the candlestick closes at the lower area of the Shooting Star. The small body and the long upper shadow reveal the weakness of the bulls, who are unable to maintain the upward move.

Side-by-Side White Lines (Bullish Continuation): Japanese candlestick bullish continuation pattern. During an uptrend, a white candlestick gaps above the previous white candle thus creating a rising window. The third white candle opens near the preceding open, creating a bullish continuation pattern.

Spike: A sudden upward or downward movement in price that happens in a short time period.

Spread: The difference between the Ask and Bid price of a currency pair.

Standard Lot: 100 000 units of the base currency.

Stick Sandwich: Japanese Candlestick bullish pattern. During a downward movement, this three-line pattern consists of two long black candles and a white candle in the middle. The two black candles close at the same price level, while the white candle extends higher than the previous black body. Stop Loss Order: An order placed to close a position when a certain price is reached. These orders are placed to limit loss on a position.

Support: A price level usually defined as a previous bottom, where buying pressure overcomes selling pressure. As a result, prices may find it difficult to break below.

Swap Long/Short: A swap in forex refers to the interest that you either earn or pay for a trade that you keep open overnight. There are two types of swaps: Swap long (used for keeping long positions open overnight) and Swap short (used for keeping short positions open overnight). They are expressed in pips per lot, and vary depending on the financial instrument you’re trading.

Swing Trading: A trading strategy that aims to make potential profits by taking advantage of a financial instrument’s change in price direction.

Swissy: It is the nickname used for the Swiss Franc and USDCHF.

Take Profit Order (T/P): An order placed to close a position once it hits a specific price.

Tentative Trendline: A trendline that joins only two tops or bottoms.

Three Black Crows: A Japanese candlestick pattern signalling a bearish reversal. It forms at the end of a rally or near a resistance area. At the top of the uptrend the presence of three consecutive long black candlesticks signifies the end of the upward move and the beginning of a new move in the opposite direction. Each Marubozu opens above the previous close and concludes below it. The lower shadows are very small if present - thus demonstrating the strength of the decline.

Three Inside Up: A Japanese candlestick pattern signalling a bullish reversal. It forms at the end of a downtrend or near a support area. A small candlestick body of either colour follows a candlestick of a long black body. The colour of the small candlestick is not important. The two candles form a Harami pattern. The bearish decline is running out of steam as shown by the presence of the small candle, which signals uncertainty as it is contained by the previous long body. The weakness of the market to move lower and the presence of the pattern at the end of a decline, signals possible bullish implications. The long white body that follows, extending above the second candle, confirms the bullish reversal.

Three Line Strike (Bullish Continuation): A Japanese candlestick pattern signalling a bullish continuation. During an uptrend, three consecutive long white candlesticks (i.e. Three White Soldiers) signify the strength of the upside momentum. The fourth candlestick, a long black body, opens above the third candle’s close and closes below the first candle’s open in the opposite direction.

Three Outside Up: A Japanese candlestick pattern signalling a bullish reversal. It forms at the end of a downtrend or near a support area. Just like an Engulfing Pattern, a long white candlestick is formed at the end of a downtrend preceded by a small black candlestick. The body of the small black candlestick is completely engulfed by the body of the long white candlestick. The bearish pressure of the prevailing downward move, is overcome by the buyers entering the market aggressively at the end of the decline-forming a long white candlestick with bullish implications. Additionally, the presence of the long white candle at the third session which closes higher than the second candle, confirms the bullish reversal.

Three White Soldiers: A Japanese candlestick pattern signalling a bullish reversal. It forms at the end of a downtrend or near a support area. At the end of the downtrend or decline, the presence of three consecutive long white candlesticks signify the end of the downward move and the beginning of a new move in the opposite direction. Each Marubozu opens below the previous close and concludes above it. The upper shadows are very small if present - thus demonstrating the strength of the ascent.

Time Series Analysis: It is based on the study of the past. To forecast the future, one needs to study previous data.

Top Reversal Day: During the course of an uptrend, the recording of a higher high followed by a lower close (lower than the previous close) suggests a reversal. The wide range of the day (bar or candlestick) and the accompanied heavy volume define the strength of the reversal. Also, known as buying climax.

Tower Top: In the course of a rally a long white candle reaffirms the positive sentiment in the market. The following three candles are of small real bodies, displaying indecision. The last candlestick is a long black body, signalling a reversal.

Trading Cycle: In Time Cycles, a trading cycle is 4 weeks long. It consists of the alpha (2 weeks) and beta (2 weeks) cycles.

Trading Range: It is characterized by equal tops and bottoms. It is also known as sideways or trendless market. It is a state of the market where supply and demand are in equilibrium.

Trading System: A detailed plan on how to trade the financial markets. It is a step-by-step set of instructions on when to enter the market, when to exit with minimal loss once the market goes against you and when to book profits.

Trend: The direction of successive tops and bottoms.

  • Uptrend – Successive higher tops and higher bottoms
  • Downtrend - Successive lower tops and lower bottoms
  • Trendless (Range, Sideways) – Equal tops and equal bottoms

Trend Directions: Trend has three directions

  • Up
  • Down
  • Sideways

Trendline: A very important concept in Technical Analysis. It is a straight line connecting successively higher bottoms during an uptrend or successively lower tops during a downtrend. Trendlines are used to open long positions during an uptrend and short positions during a downtrend. On the other hand, violation of the trendline is an early warning for a reversal.

Tri-Star (Bullish): A Japanese candlestick pattern signalling a bullish reversal. It forms at the end of a downtrend or near a support area. During a prolonged decline, a formation of three consecutive Doji candles, signals that the downward move may be coming to an end. Second Doji gaps below the first and the third candlesticks.

Triple Crossover: A trading method with 3 moving averages: a short-term, medium-term and long-term. A buy signal is triggered in a downtrend when the short moving average crosses above both the medium and the long moving average and in turn, the medium moving average crosses above the long moving average. A sell signal is triggered in an uptrend when the short moving average crosses above both the medium and long moving average and in turn, the medium moving average crosses above the long moving average. Popular triple crossover systems are 4-9-18 and 5-10-20.

Trough: The area below the market price where buying interest overcomes selling pressure. Also, known as bottom or support.

Tweezers (Bearish): A Japanese candlestick pattern signalling a bearish reversal. It forms at the end of a rally or near a resistance area. As the market continues to trade in the direction of the established uptrend, registering higher highs the next session is bearish, pushing prices lower. The matching highs indicate that a possible top may be in place and a reversal may be imminent.

Two Crows: A Japanese candlestick pattern signalling a bearish reversal. It forms at the end of an uptrend or near a resistance area. In the course of an uptrend, the presence of a long white candlestick reaffirms the bullish sentiment. The second candle is a relatively small candle that gaps higher than the previous high but closes lower than its own open price forming a black candle. The third candle is a long black body that opens within the body of the small black candlestick, fills the gap and closes in the body of the long white candlestick, hence signalling a potential bearish reversal.

Take Profit: An order placed to close a position so as to lock profits once it hits a specific price.

Technical Analysis: The study of market action mainly through price charts for the purpose of identifying future price trends in early stages.

Technical Analysis Criticism: Technical Analysis has received some criticism throughout the years.

  1. It is based on self-fulfilling prophecy.
  2. Prices move at random hence markets are not predictable.

Tenkan-sen: One of the lines of Ichimoku Kinko Hyo. It is a 9-period moving average of the mid-prices; (Highest High + Lowest Low)/2 for the last 9 periods. It provides signals when combined with Kijun-sen.

Three Inside Down: A Japanese candlestick pattern signalling a bearish reversal. It forms at the end of an uptrend or near a resistance area. A small candlestick body of either colour follows a candlestick of a long white body. The colour of the small candlestick is not important. The two candles form a Harami pattern. The bullish rally is running out of steam as shown by the presence of the small candle, which signals uncertainty as it is contained by the previous long body. The weakness of the market to move higher and the presence of the pattern at the end of a rally, signals possible bearish implications. The long black body that follows, extending below the second candle’s close, confirms the bearish reversal.

Three Line Strike (Bearish Continuation): A Japanese candlestick pattern signalling a bearish continuation. During a downtrend, three consecutive long black candlesticks (i.e. Three Black Crows) signify the strength of the downside momentum. The fourth candlestick, a long white body, opens below the third candle’s open and closes above the first candle’s close in the opposite direction.

Three Outside Down: A Japanese candlestick pattern signalling a bearish reversal. It forms at the end of an uptrend or near a resistance area. Just like an Engulfing Pattern, a long black candlestick is formed at the end of an uptrend preceded by a small white candlestick. The body of the small white candlestick is completely engulfed by the body of the long black candlestick. The bullish pressure of the prevailing upward move, is overcome by the sellers entering the market aggressively at the top of the rise-forming a long black candlestick with bearish implications. The presence of the long black candle at the third session which closes lower than the prior close, confirms the bearish reversal.

Three Stars in the South (Bullish): A Japanese candlestick pattern signalling a bullish reversal. It forms at the end of a downtrend or near a support area. While the market is in a downtrend, a long black body with a long lower shadow forms in the same direction. The second candle is a small black candle with a relatively long lower shadow as well but above the previous one. The third candle in the pattern is again a small black candlestick with very small or non-existent shadows. The body of the last candlestick is contained within the range of the previous candle.

Tick: During trading hours Bid/Ask prices change as new incoming prices are received. A tick represents any single incoming price quote.

Time Filter: It is applied to the breaking of trend lines, support and resistance. Sometimes a close is needed above or below the line or 2 closes or 2 days or a Friday close to name just few popular filters.

Timing: To determine specific entry/exit points in the market.

Tower Bottom: A Japanese candlestick pattern signalling a bullish reversal. It forms at the end of a downtrend or near a support area. In the course of a decline a long black candle reaffirms the negative sentiment in the market. The following three candles are of small real bodies, displaying indecision. The last candlestick is a long white body, signalling a reversal.

Trade Balance: The difference between a country’s exports and imports. More exports than imports result in a trade surplus. If there are more imports than exports, it results in a trade deficit.

Trading Orders: Some of the most popular orders are

  • Instant Execution
  • Market Order
  • Buy Stop
  • Sell Stop
  • Buy Limit
  • Sell Limit
  • Buy Stop Limit
  • Sell Stop Limit

Trading Platform: Trading software (i.e. MT4) is provided by the broker for traders to place, manage and close positions electronically. The platform provides account management, live market prices, news feeds and charting tools.

Trading Sessions:

The trading hours of the foreign exchange market are divided into 4 broad categories:

  • European (8:00am – 5:00pm)
  • American (1:00pm – 10:00pm)
  • Australian (10:00pm – 7:00am)
  • Tokyo (1:00am – 9:00pm)

Trading Style: There are many different styles of trading to suit a trader’s profile, knowledge and time

  • Day Trading
  • Buy-and-Hold
  • Scalping
  • Mechanical Trading
  • Automated Trading
  • Discretionary Trading
  • Copy Trading
  • Position Trading
  • Trend Following
  • Range-bound Trading
  • Break-out Trading
  • News Trading

Trailing Stop Loss: A stop loss order that is applied on profitable positions to lock in profits. It follows the market price at a distance equal to a predetermined number of points. It is set on the Client Terminal as opposed to the Stop Loss order that is set on the Server.

Trend Classifications: Trends fall under three categories:

  • Major
  • Intermediate
  • Near term trends

Trend Trading: Trading in the direction of the established trend.

Tri-Star (Bearish): A Japanese candlestick pattern signalling a bearish reversal. It forms at the end of an uptrend or near a resistance area. During a prolonged rally, a formation of three consecutive Doji candlesticks, signals that the uptrend may be coming to an end. Second Doji gaps above the first and the third candles.

Triangle: A continuation pattern comprised of two converging sides with at least 4 reversal points (2 tops and 2 bottoms). The opening (height) of the triangle is called the base whereas the intersection of the two sides is called the apex. Three popular types of triangles are:

  • Symmetrical (coil) – Two converging sides. Upper trend line is descending whereas the lower trend line is ascending
  • Ascending – The upper side is flat whereas the lower side is ascending
  • Descending – The lower side is flat whereas the upper side is descending

Volume is usually heavier on the breakout side hence giving hints to which side to expect the breakout. Two measuring techniques are available for triangle breakouts:

  • Height projection – Project the height at the breakout point to estimate the minimum target
  • Parallel line – Draw a parallel line from the top of the base to the triangle side. The minimum target is estimated at the parallel line with an approximate time forecast the intersection of the 2 triangle sides (apex).

Triple Bottoms: During the course of a downtrend the presence of three bottoms at about the same level and the breaking of the corresponding two tops, signal a reversal. Heavy volume (if available) confirms the reversal.

Triple Tops: During the course of an uptrend the presence of three tops at about the same level and the breaking of the corresponding two bottoms, signal a reversal. Heavy volume (if available) confirms the reversal.

Tweezers (Bullish): A Japanese candlestick pattern signalling a bullish reversal. It forms at the end of a decline or near a support area. The market trades in the direction of the established decline forming a long black candle, registering lower lows. The next session registers a matching low and eventually forms a bullish candlestick hence, pushing prices higher. The matching lows indicate a possible reversal may be imminent.

Typical Price: The average of the high, low and closing price of a trading period

(High+Low+Close)/3

Unemployment Rate: The percentage of the labour force that during the last month that had no work but made specific efforts to find employment. Released monthly by the Bureau of Labour Statistics.

Upside Gap Three Methods: Japanese candlestick bullish continuation pattern. In an uptrend, two long white candles with a rising window in between are followed by a long black candle that fills the window (i.e. gap).

Upside Tasuki Gap: Japanese candlestick bullish continuation pattern. During an upward rally, a long white candle is followed by a second long white body that gaps higher in the direction of the prevailing trend. A third candle, black this time, closes (but does not fill) within the gap.

USD: US Dollar. The currency of the United States of America, American Samoa, Bonaire, Sint Eustatius and Saba, the British Indian Ocean Territory, Equador, El, Salvador, Guam, Haiti, the Marshall Islands, Federated States of Micronesia, the Northern Mariana Islands, Palau, Panama, Puerto Rico, Timor-Leste, the Turks and Caicos Islands, United States Minor Outlying, British Virgin Islands, U.S. Virgin Islands. It is subdivided into 100 cents.

Unique Three Rivers Bottom: Japanese Candlestick bullish pattern. A long black candle forms in the direction of the downtrend. The next candle is a hammer that opened higher and tested lower prices levels but eventually rejected as shown by the long lower shadow. The third candle is a small white body formed below the hammer’s body showing signals that the market is not willing to move lower.

Upside Gap Two Crows: Japanese candlestick bearish pattern. During the course of an uptrend a long white body is followed by a shorter black body that gaps higher. A black candle that follows, opens at or above the previous open. It then pushes the market lower, well into the long white candle’s body and more specifically, below the close of the second body but above the close of the first candlestick.

Value Date: The date that the transaction actually takes place.

Volume: The amount of a specific financial instrument which has exchanged hands during a trading day.

VPS: A server that runs 24/7 without any downtime due to internet connectivity, electricity cut-offs or hardware faults. Ideal for automated trading (expert advisors).

Wave: Price action in one of the three market directions: up, down or sideways.

Wedge: A continuation price pattern. It consists of two converging trend lines that intersect at a point called the apex. Wedges usually slant in the opposite direction from the prevailing trend. Hence, a falling wedge appears during an uptrend whereas a rising wedge appears during a downtrend.

Williams’ Percent Range (%R): A technical indicator developed by Larry Williams. It is used to identify extreme price movements i.e. overbought and oversold levels. It uses an upside-down scale. Readings from 0 to -20 imply overbought levels whereas readings between 80 and 100 imply oversold levels. The %R indicator often anticipates reversals as it forms a top and turns down before the underlying financial instrument does and similarly, it forms a bottom and turns up before the price does. To calculate %R, take the difference between the Highest High of the last n periods and the current closing price - this is the dividend. Furthermore, take the difference between the Highest High of the last n periods and the Lowest Low of the last n periods - this is the divisor. Finally multiply the quotient by -100.

Whipsaws: Sudden price movements in the opposite direction, usually leading to false or bad signals. For example, while the price is rallying upwards suddenly it swings direction and follows a downward path until it bounces up again. It is a characteristic of volatile markets.

WTI: West Texas Intermediate: WTI is considered one of the major benchmarks for crude oil pricing globally. It has a low Sulphur content (sweet) and it has a relatively low density (light). Hence, it is also known as Texas Light Sweet. It is listed in the New York Mercantile Exchange's oil futures.

XAU: Gold.

XAG: Silver.

Yield: Yield is the return on an investment and is usually expressed as a percentage.

ZigZag: A technical indicator that draws tops and bottoms - filtering out noise.