Technical Analysis Glossary

American Option
A put or call that can be exercised at any time prior to expiration. Most listed stock options, including those on European exchanges, are American-style options.

The examination and evaluation of the relevant information to select the best course of action from among various alternatives.

Generally an employee of a bank, brokerage, advisor, or mutual fund that studies companies and makes buy and sell recommendations, often specializing in a single sector or industry. An analyst may also be called a financial analyst or security analyst.

Ask (a.k.a. Offer)
The lowest price that any investor or dealer has declared that he/she will sell a given security or commodity for.

The highest price any buyer is willing to pay for a given security at a given time; also called bid price.

Binary options
A type of financial instrument that allows you to gamble on an underlying asset.   Most traders lose money and the instrument has a bad reputation.

A sudden rebound in the market (or an individual stock) typified by a strong upward move directly after a strong downward move.

To obtain ownership of a security or other asset in exchange for money or value.

This is a contract that gives the holder the right to buy a certain quantity (usually 100 shares) of an underlying security from the writer of the option, at a specified price (the strike price) up to a specified date (the expiration date).

The price at which a security closed for trading on a given day or moment.

To closeout a position is to buy or sell against it in order to end up with a neutral position.

Concurrent Volume Signals
This is when there are several large increased in the VMA over several days. The combination of these volume signals cause the market to change direction if the sum of these concurrent volume signals is greater than or equal to the last volume signal that cause the previous change in market trend.

To “cover” a position is to buy stock to closeout a short position.

Critical Volume
This when volume has met or exceeded the volume necessary to cause the market to change it’s directional trend. Critical volume could either be a large singe increase in the VMA or the combination of several concurrent volume signals.

Day Order
An order that remains live and executable until the end of the trading day, after which, it will be automatically canceled.

Day Trading
Buying or selling the same security within the same day. Day trading usually involves closing out all positions by the end of the day. You can learn more about day trading here.

Shares in a trust representing all 30 stocks in the Dow Jones Industrial Average. Traded on the American Stock Exchange. Symbol DIA.
Dow Jones Industrial Average (DJIA). Measure of the performance of the collection of 30 “blue-chip”, considered the leaders of the market.

European Option
An option that can only be exercised at the end of its life.

Expiration Date
The date on which an option, futures trading contract, rights or warrant expires, and becomes worthless if not exercised. It is also, the date on which an agreement is no longer in effect.

Being flat means that a trader has no open positions.

A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.

Fundamental Analysis
A method of valuating a stock that takes into account the sales, earnings, assets and other fundamental measures of the company’s performance.

Future Contract
A standardized, exchange-traded agreement to buy or sell a particular type and grade of commodity for delivery at an agreed-upon place and time in the future. futures trading contracts are transferable between parties.

Futures Market
A continuous auction market in which participants buy and sell contracts for delivery of specific commodities on a specified future date. Trading is carried on through open outcry and hand signals in a trading pit or ring.

A global after-hours electronic trading system.

The ‘high’ is the highest execution price of a trade that day.

Historical Data
Past information about a company, used to help forecast the future price of a stock or index futures trading contract; for example, historical price and historical volume.

Investment platforms designed to provide investors with a flexible, cost-effective way to diversify their investment in a particular industry through a single, exchange-listed security. Like symbol HHH, traded on AMEX, for 20 largest Internet stocks.

A benchmark against which financial or economic performance is measured, such as the Dow Jones Industrial, S&P 100, S&P 500, NASDAQ 100, NASDAQ Composite or the Consumer Price Index.

Index Shares
Index-based investment products that let you buy or sells shares of entire portfolios of stock in a single security. Such as Diamonds, Spyders, QQQQ, HHH.

Index Option
An option whose underlying security is an index. An example is the S&P 500 option, which is based on the S&P 500 index.

Data which provide information about or predict the overall health of the economy or the financial markets; examples are inflation, interest rates, employment, volume, and insider trading.

Inside Bid
The highest price at which someone is willing to buy a security.

Inside Offer
The lowest price at which someone is willing to sell a security.

Use money to make more money, usually with the understanding that risk is something to be avoided unless adequately compensated for.

Keynesian Economics
Named for economist John Maynard Keynes, Keynesian Economics is an economic theory that advocates government intervention, or demand-side management of the economy, to achieve full employment and stable prices. This is accomplished by controlling the money supply and interest rates.

Last Trade
The price at which the last trade was executed; after the market close, this is the closing price for the day.

The increment a stock moves in (this differs for each stock). Easily visible as the price difference between underlying bids or offers.

Limit Order
An order to buy or sell at a specific price or better. Limit buy orders are executed at or below the specified order price. Limit sell orders are executed at or above the specified order price.

The ability of an asset to be converted into cash quickly and without any price discount.

To be ‘long’ is to actually own a security, contract, or commodity. This is sometimes also called a long position and is the opposite of a short position.

Long Squeeze
A situation in which investors who hold long positions feel the need to sell into a falling market to cut their losses. This pressure to sell usually leads to a further decline in market prices. This situation is less common than the opposite, a short squeeze.

The ‘low’ is the lowest execution price of a trade that day.

Whenever MarketVolume™ refers to the “market”, we are generally referring to the S&P 500, S&P 100, Russell 1000, Russell 3000, and Dow Jones Industrials indexes. The NASDAQ Composite and NASDAQ 100 indexes also follow the trend of these indexes, but the support and resistance levels may differ slightly.

Market Capitalization
The market capitalization of a company is the total dollar value of all outstanding shares of that company at any given time. Computed as the number of outstanding shares times the current market price. This is a measure of the value that the stock market places on a company at any moment and is a measure of corporate size.

Market Indicators
Market indicators are various indexes that give a value and usually a net daily change for a specific market.

Market Maker
A stock exchange member who is responsible for insuring a liquid market for a particular security by buying and selling for his own account when the public is not buying and selling. In exchange for this responsibility, the market maker has the benefit of knowing the bid and asks positions of all the traders lined up to buy or sell that security.

Market Stage
When MarketVolume talks about an up-trend or a down-trend in it’s Market Commentary on the members home page, we are talking about the market’s trend over days to, sometimes, several months. We do not give the the trend for daytrading, i.e., we don’t tell you that the market will be up for an hour and then down for 2 hours. What we do give you is information on what the overall direction of the market will be over several days or months. So when we say ‘downtrend’, that means the market is moving generally down when you look at it on a 5-day, 15-day, 30-day, or 60-day view. The best view to see how our Market Commentary correlates with the market, we suggest using a 30 day chart with a 1-day VMA (Volume Moving Average). By knowing the general trend of the market, you can make greater profits then if you only knew where the market will go in the immediate short-term.

Market Trend
The general direction of the market at any period in time. See Market Stage and Market for more information.

Market Order
An order that is executed as quickly as possible at the best price available.

The strength behind an upward or downward movement in price. It is often heavily affected by trading volume.

Moving Average (MA)
Used in charts and technical analysis, the average of security, index or commodity prices constructed in a period as short as a few minutes or as long as several years and showing trends for the latest interval. As each new variable is included in calculating the average, the last variable of the series is deleted.

NASDAQ stands for the National Association of Securities Dealer Automated Quotations system for over-the-counter stock trading. Founded in 1971, the NASDAQ exchange is the world’s first electronic stock market. There are over 5000 companies listed on the NASDAQ exchange.

NASDAQ Composite Index
A market-value weighted index of all common stocks listed on NASDAQ.

NASDAQ-100 Index Tracking Stock
The NASDAQ-100 Index Share of largest 100 NASDAQ stocks. This index share can be traded on the American Stock Exchange. The symbol is QQQQ.

Net Change
The amount and direction of a security’s price change since its previous day’s closing price.

Offer (a.k.a. Ask)
This is the price at which someone is willing to sell a security.

This is the price at which a security opened for trading on a given day (or some other interval).

A contract bearing the right, but not the obligation, to buy (for a call option) or sell (for a put option) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified period of time. For stock options, the amount is usually 100 shares.

A call option whose strike price is higher than the market price of the underlying security, or a put option whose strike price is lower than the market price of the underlying security.

A sudden, widespread fear of economic or market collapse, leading to massive bank deposit withdrawals and/or falling stock prices

A position refers to security holdings in an account or an obligation to repay or return a security holding to a lender (as in a short position).

An option contract that gives the holder the right to sell a certain quantity of an underlying security to the writer of the option, at a specified price (strike price) up to a specified date (expiration date). This is also called a put option. Put also refers to the act of exercising a put option. A put is the opposite of a call.

Quantitative Analysis
The process of determining the value of a security by examining its numerical, measurable characteristics.

Resistance Level
A price at which a particular stock or index may tend to stop its momentum when moving upward.

Sell refers to the selling of a security.

Sell Short
The act of selling stock that you don’t own in the hope that the price will go down and you can replace it with stock purchased at a lower price. In essence, the stock is borrowed from a brokerage firm for delivery to the buyer and must be bought back at a future date. If it is purchased at a lower price, the short-seller will make money.

Short Position
When a trader has “sold short” a stock and still holds the position. A short position reflects an obligation to return the stock to the lender by buying it sometime in the future.

Short Squeeze
A situation in which the price of the stock rises and investors who sold short rush to buy it to cover their short position and cut their losses. As the price of the stock increases, more short sellers feel compelled to cover their positions. More common than the opposite, long squeeze.

Spider (SPDR)
These are shares of a security designed to track the value of the S&P 500. Spiders trade on the American Stock Exchange under the symbol SPY. One SPDR unit is valued at approximately one-tenth of the value of the S&P 500. Dividends are distributed quarterly, and are based on the accumulated stock dividends held in trust, less any expenses of the trust. These are also called SPDRs. Symbol SPY.

A large, quick, temporary rise or fall in price.

The act of taking risks, especially with respect to trying to predict the future. Speculation can also refer to gambling, in the hopes of making quick profit.

One who engages in speculation.

The incremental difference (in price) between the bid and the offer for a particular stock. Each stock has its own spread which may fluctuate during the course of the trading day.
Standard & Poor’s 500 (S&P 500)
The S&P500 is a market value weighted index of 500 blue-chip stocks, considered to be a benchmark of the overall stock market.

Standard & Poor’s Depositary Receipt (SPDR)
Securities representing ownership in a long-term unit investment trust designed to mirror the S&P 500’s performance. Traded on the AMEX. also called Spider.

Stock Index
An Index of market prices of a particular group of stocks, such as the S&P 500 and the NASDAQ Composite Index.

Support Level
A price at which a particular stock may tend to stop its momentum when moving downward. This type of technical indicator exists for varying reasons and is specific to each individual stock or index.

A dramatic reversal in either the market or a trader’s profit/loss. Swing also refers to mid-term trading as in swing trading.

A code (usually 1 to 5 letters), used to designate a security for trading on an exchange.

Technical Analysis
A method of evaluating securities by relying on the assumption that market data, such as charts of price, volume, and open interest, can help predict market trends.

Technical Analyst
Someone who invests based on technical analysis. also called technician.

The Market
Term used to identify the current inside (best/highest) bid and (best/lowest) offer. Example: 127.25 x 127.20.

The minimum price fluctuation available in a marketplace, expressed in terms of points or fractions of a point of the price or rate. Also called Minimum Price Fluctuation. A movement by a market maker is called also called a “tick.”

Ticks Down
The market maker moves away from current best market bid, thus lowering their desired buying price.

Ticks Up
The market maker has moved its bid closer the market bid, thus raising their desired buying price.

Triple Witching Day
The day on which triple witching hour occurs.

Triple Witching Hours
The final hour of the stock market trading session on the third Friday of March, June, September, and December, when option contracts and futures contracts expire on market indexes used by program traders. The simultaneous expirations often set off heavy trading of options, futures and the underlying stocks, which can cause large fluctuations in the value of their underlying stocks.

Underlying Bid
The bid or bids that are listed in the Level II NASDAQ market but are not the best (highest) bid price.

The number of shares, traded during a given period, for a security or an entire index or exchange. This is also called trading volume. The analysis of volume is essential in technical analysis. Volume provides evidence of intensity with a given price move. As volume often leads price, it is a valuable indicator, especially for price peaks.

Volume Moving Average (VMA)
The average of volume over a certain period determined by the user. This period can be anywhere from 5-minutes to several days. By using a VMA in your charts, you smooth out any non-relevant spikes in volume and are able to get a better picture of the volume as a whole. With this information you can determine with accuracy the support & resistance level of the market on both short-term and long-term levels.

A measurement of how much an underlying stock or index fluctuates over a period of time.

The seller of an option who collects the premium payment from the buyer.

X or XD
This is a symbol used by newspapers to signify that a stock is trading ex-dividend, or that a bond is trading without interest, or that a mutual fund recently paid a capital gain or dividend.

The annual rate of return on an investment, expressed as a percentage.

Yield Curve
Shows the relationship between yields at different maturity dates for a set of similar bonds, usually Treasuries, at a given point in time.

Zero-Sum Game
A situation or interaction in which one participant’s gains result only from another’s equivalent losses.