Glossary

Quick definitions for every term used in technical analysis. Bookmark this page. You'll come back to it.

175Terms Defined

🔍

Accumulation

A phase where large investors gradually buy an asset, often at low prices, without driving the price up significantly.

Accumulation Zone

A price range where institutional buyers are building positions before a markup phase.

All-Time High

The highest price ever recorded for an asset. Often abbreviated ATH.

Altcoin

Any cryptocurrency other than Bitcoin.

Analysis Paralysis

Overthinking a setup to the point of inaction. Using too many indicators or waiting for perfect conditions.

Ask

The lowest price a seller is willing to accept for an asset.

ATR

Average True Range. A volatility indicator measuring the average range between high and low prices.

Backtest

Testing a trading strategy on historical data to evaluate its past performance before risking real capital.

Bag Holder

A trader stuck holding a losing position, often hoping for a recovery that may not come.

Bear Flag

A bearish continuation pattern where price consolidates upward briefly before continuing the downtrend.

Bear Trap

A false breakdown below support that lures in short sellers before price reverses sharply higher.

Bearish

Expecting prices to fall. A bearish trader anticipates downward movement.

Bid

The highest price a buyer is willing to pay for an asset.

Bitcoin Dominance

Bitcoin's market cap as a percentage of total crypto market cap. Rising dominance means money flowing to BTC from alts.

Blow-Off Top

A sharp, steep rise in price on heavy volume followed by an equally sharp decline, marking a major top.

Body

The filled or hollow area of a candlestick between the open and close prices.

Bollinger Bands

Volatility bands placed above and below a moving average, using standard deviation to define bandwidth.

Breakaway Gap

A gap that occurs at the start of a new trend, breaking out of a consolidation pattern.

Breakeven

The price at which a trade has zero profit or loss, including fees.

Breakout

When price moves beyond a defined support or resistance level with increased volume.

Bulkowski

Thomas Bulkowski, known for statistically testing chart patterns and publishing performance rankings.

Bull Flag

A bullish continuation pattern where price consolidates downward briefly before continuing the uptrend.

Bull Trap

A false breakout above resistance that lures in buyers before price reverses sharply lower.

Bullish

Expecting prices to rise. A bullish trader anticipates upward movement.

Candlestick

A chart element showing open, high, low, and close prices for a specific time period.

Capitulation

Mass panic selling where traders abandon positions at any price. Often marks bottoms.

Chart Pattern

A recognizable formation on a price chart that signals a potential continuation or reversal of the trend.

Chop

Directionless, erratic price action with no clear trend. Difficult to trade profitably.

Climax

An extreme price move on very high volume, often marking the end of a trend. Buying climax or selling climax.

Climax Volume

Extremely high volume at a price extreme, often marking a capitulation point and potential reversal.

The last traded price of a candlestick period. The most important price point in most analysis.

Composite Operator

Wyckoff's concept of viewing all institutional activity as if controlled by a single large entity.

Confirmation Bias

The tendency to seek information that confirms existing beliefs and ignore contradicting evidence.

Confluence

When multiple technical factors align at the same price level, increasing the significance of that level.

Consolidation

A period of sideways price movement, typically after a strong move, indicating market indecision.

Continuation Pattern

A chart pattern that suggests the prior trend will continue after the pattern completes.

Correction

A temporary price decline within an uptrend, or temporary rally within a downtrend. The pause between impulse moves.

Crossover

When one line crosses above or below another, generating a signal. Common in moving average and MACD analysis.

DCA

Dollar Cost Averaging. Investing a fixed amount at regular intervals regardless of price, reducing timing risk.

Dead Cat Bounce

A temporary recovery in a declining asset before the downtrend resumes.

Death Cross

When the 50-period moving average crosses below the 200-period moving average, signaling a long-term bearish trend shift.

Distribution

A phase where large investors sell holdings without causing a sharp price drop.

Distribution Zone

A price range where institutional sellers are offloading positions before a markdown phase.

Divergence

When price and an indicator move in opposite directions, often signaling a potential reversal.

Doji

A candlestick where open and close are virtually equal, indicating market indecision.

Double Bottom

A bullish reversal pattern where price tests the same support level twice and bounces, forming a W shape.

Double Top

A bearish reversal pattern where price tests the same resistance level twice and rejects, forming an M shape.

Dow Theory

One of the oldest frameworks of technical analysis. Establishes that markets move in primary, secondary, and minor trends.

Drawdown

The decline from a peak to a trough in portfolio value, measuring the largest loss from top to bottom.

Dry Up

A period of abnormally low volume, often preceding a significant price move.

Edge

A statistical advantage that makes a strategy profitable over time. Without an edge, trading is gambling.

Edwards & Magee

Authors of 'Technical Analysis of Stock Trends,' considered the bible of chart pattern analysis.

EMA

Exponential Moving Average. A weighted average giving more importance to recent prices.

Engulfing

A two-candle pattern where the second candle's body completely engulfs the first.

Equity

The total value of a trading account including unrealized gains and losses on open positions.

Exhaustion Gap

A gap that occurs near the end of a trend, signaling the final push before reversal.

Expectancy

The average amount a trader expects to win or lose per trade over time. Positive expectancy means profitable.

Fakeout

A false breakout where price temporarily moves beyond a level but quickly reverses.

Fibonacci

Mathematical ratios (23.6%, 38.2%, 50%, 61.8%, 78.6%) used to identify potential support and resistance levels.

Fill

The execution of an order. A 'filled' order has been completed.

Flag

A continuation pattern forming a small rectangular consolidation against the trend.

Flat

Having no open positions. Being out of the market entirely.

Forward Test

Testing a strategy in real-time with live data but without real money. Also called paper trading.

FUD

Fear, Uncertainty, and Doubt. Negative sentiment or misinformation that drives selling pressure.

Funding Rate

In perpetual futures, the periodic payment between longs and shorts to keep the contract price near spot.

Gap

A price region where no trading occurs, visible as a space between candles on a chart.

Golden Cross

When the 50-period moving average crosses above the 200-period moving average, signaling a long-term bullish trend shift.

Hammer

A single bullish reversal candlestick with a small body and long lower wick, appearing at the bottom of a downtrend.

Head and Shoulders

A bearish reversal pattern with three peaks: two shoulders of similar height flanking a higher head.

High

The highest price reached during a candlestick period.

Higher High

A swing high that exceeds the previous swing high, indicating an uptrend.

Higher Low

A swing low that is above the previous swing low, confirming an uptrend.

HODLing

Holding a cryptocurrency long-term regardless of price fluctuations. Originally a misspelling of 'hold'.

Ichimoku

A comprehensive indicator system showing support, resistance, trend, and momentum in one view.

Impulse Move

A strong, directional price movement with momentum. The trending legs between corrections.

Island Reversal

A reversal pattern where price gaps away from the trend, trades briefly, then gaps back, leaving an isolated cluster.

Key Level

A significant price level where major buying or selling has historically occurred.

Lagging Indicator

An indicator that follows price action, confirming trends after they begin. Moving averages are lagging.

Leading Indicator

An indicator that attempts to predict future price movement. RSI and Stochastic are leading indicators.

Leverage

Using borrowed capital to increase position size. Amplifies both profits and losses.

Limit Order

An order to buy or sell at a specific price or better. Guarantees price but not execution.

Liquidation

Forced closure of a leveraged position when losses approach the margin amount. The exchange closes the trade.

Liquidation Cascade

A chain reaction where liquidations trigger further price movement, causing more liquidations.

Liquidity

The ease with which an asset can be bought or sold without significantly affecting its price.

Long

A trade that profits when price rises. Buying an asset with the expectation it will increase in value.

Lot Size

The standardized quantity of an asset in a single contract or trade unit.

Low

The lowest price reached during a candlestick period.

Lower High

A swing high below the previous swing high, indicating a downtrend.

Lower Low

A swing low below the previous swing low, confirming a downtrend.

MACD

Moving Average Convergence Divergence. Measures the relationship between two moving averages.

Margin

The collateral required to open a leveraged position.

Markdown Phase

The downtrend phase of the Wyckoff cycle where price falls after distribution is complete.

Market Cap

Total value of a cryptocurrency calculated by multiplying price by circulating supply.

Market Order

An order to buy or sell immediately at the best available price. Guarantees execution but not price.

Market Structure

The pattern of higher highs/lows (uptrend) or lower highs/lows (downtrend) that defines trend direction.

Markup Phase

The uptrend phase of the Wyckoff cycle where price rises after accumulation is complete.

Maximum Adverse Excursion

The largest unrealized loss experienced during a trade before it closes profitably.

Mean Reversion

The theory that prices tend to return to their average over time. The basis for many range-trading strategies.

Measured Move

A price target calculated by projecting the height of a pattern from the breakout point.

Momentum

The rate and speed of price change. Strong momentum suggests trend continuation.

Moving Average

A smoothed line calculated from the average closing price over a set number of periods. Used to identify trend direction.

Neckline

The support or resistance line connecting lows/highs in head and shoulders or double top/bottom patterns.

Nison

Steve Nison, credited with introducing Japanese candlestick charting to the Western world.

OBV

On-Balance Volume. Cumulative volume indicator that adds volume on up days and subtracts on down days.

Open

The first traded price of a candlestick period.

Order Book

A real-time list of all open buy and sell orders at different price levels for an asset.

Order Flow

The analysis of buying and selling activity at specific price levels to understand institutional participation.

Oscillator

An indicator that moves between fixed boundaries, used to identify overbought and oversold conditions.

Overbought

A condition where an asset has risen too far too fast and may be due for a pullback.

Oversold

A condition where an asset has fallen too far too fast and may be due for a bounce.

Overtrading

Taking too many trades, often from boredom or the need for action. Erodes edge through fees and poor setups.

Paper Hands

A trader who exits positions at the first sign of loss or volatility. Opposite of diamond hands.

Paper Trading

Simulated trading without real money to practice strategy execution and build confidence.

Pennant

A continuation pattern forming converging trendlines after a sharp move.

Period

The number of data points used in an indicator calculation. A 14-period RSI uses the last 14 candles.

Perpetual Futures

Cryptocurrency futures contracts with no expiration date, using funding rates to stay pegged to spot price.

Polarity

The principle that broken support becomes resistance and broken resistance becomes support.

Position

An active trade. A long position profits from rising prices; a short position profits from falling prices.

Price Action

Analysis of raw price movement on charts without indicators, the purest form of technical analysis.

Profit Factor

Total gross profits divided by total gross losses. Above 1.0 is profitable; above 2.0 is strong.

Pullback

A temporary reversal within a larger trend, often providing entry opportunities.

Pullback Entry

Entering a trade during a temporary move against the trend, buying a dip in an uptrend or selling a rally in a downtrend.

Pyramiding

Adding to a winning position as it moves in your favor. A trend-following technique.

R-Multiple

A trade's profit or loss expressed as a multiple of the initial risk. A 3R trade earned three times what was risked.

Range

A period where price moves sideways between defined support and resistance levels.

Recency Bias

Giving more weight to recent events when making decisions, ignoring longer-term data.

Relative Strength

Comparing the performance of one asset against another or against a benchmark to identify leaders and laggards.

Resistance

A price level where selling pressure has historically prevented further upward movement.

Retest

When price returns to a broken support or resistance level to confirm the breakout before continuing.

Revenge Trading

Emotionally-driven trading after a loss, attempting to recover quickly. Almost always leads to larger losses.

Reversal Pattern

A chart formation that signals the current trend is likely to change direction.

Risk Per Trade

The maximum amount of capital risked on a single trade, typically expressed as a percentage of account equity.

Risk/Reward Ratio

The ratio between potential loss (risk) and potential gain (reward) on a trade. A 1:3 ratio risks $1 to make $3.

Rounding Turn

A gradual, curved reversal in price rather than a sharp V-shaped turn.

RSI

Relative Strength Index. A momentum oscillator measuring speed and change of price movements on a 0-100 scale.

Runaway Gap

A gap in the middle of a strong trend, confirming the trend's momentum. Also called a measuring gap.

Scale In

Entering a position in multiple parts rather than all at once, averaging into the trade.

Scale Out

Exiting a position in parts, taking partial profits at different levels.

Sector Rotation

The movement of capital between different market sectors as economic conditions change.

Sharpe Ratio

A measure of risk-adjusted return. Higher Sharpe ratios indicate better return per unit of risk.

Short

A trade that profits when price falls. Selling an asset with the expectation of buying it back lower.

Signal Line

A secondary line on an indicator used to generate buy/sell signals when the primary line crosses it.

Slippage

The difference between expected and actual execution price of a trade.

SMA

Simple Moving Average. The arithmetic mean of prices over a specific number of periods.

Spot

The current market price for immediate delivery. Buying on spot means owning the actual asset.

Spread

The difference between bid and ask prices.

Spring

A Wyckoff term for a false breakdown below support that traps sellers before a rally.

Standard Deviation

A statistical measure of price dispersion. Used in Bollinger Bands to define volatility.

Stochastic Oscillator

A momentum indicator comparing closing price to the price range over a set period. Identifies overbought/oversold conditions.

Stop Loss

A predetermined price level where a trade is closed to limit losses.

Stop Order

An order that becomes a market order when a specified price is reached. Used for entries and exits.

Support

A price level where buying pressure has historically prevented further downward movement.

Swing High

A price peak flanked by lower highs on both sides.

Swing Low

A price trough flanked by higher lows on both sides.

Take Profit

A predetermined price level where a profitable trade is closed.

Throwback

A return to a broken resistance level from above after an upside breakout.

Tilt

An emotional state where frustration or anger impairs trading decisions. Borrowed from poker terminology.

Timeframe

The time period each candle represents on a chart (e.g., 1H, 4H, 1D, 1W).

Trailing Stop

A stop loss that automatically adjusts as price moves in your favor, locking in profits.

Trend

The general direction of price movement: uptrend (higher highs/lows), downtrend (lower highs/lows), or sideways.

Trendline

A diagonal line connecting swing highs or lows to visualize trend direction.

Triangle

A chart pattern formed by converging trendlines. Ascending, descending, and symmetrical triangles signal different biases.

Unrealized P&L

Profit or loss on open positions that hasn't been locked in yet. Only becomes real when the position is closed.

Upthrust

A Wyckoff term for a false breakout above resistance that traps buyers before a decline.

Volume

The number of shares or contracts traded in a given period. Confirms price movements.

Volume Spike

An abnormally large volume bar indicating significant institutional activity or news-driven participation.

VWAP

Volume Weighted Average Price. The average price weighted by volume, used as an institutional benchmark.

Wedge

A pattern where price converges between two slanting trendlines. Rising wedges are bearish; falling wedges are bullish.

Whale

A trader or entity holding a very large amount of a cryptocurrency, capable of influencing price.

Whipsaw

Rapid price movement in both directions causing stop losses to trigger on both sides.

Wick

The thin lines above and below the candlestick body, showing the high and low of the period. Also called shadows.

Win Rate

The percentage of trades that are profitable. Only meaningful when combined with risk/reward ratio.

Wyckoff Cycle

The four-phase market cycle: accumulation, markup, distribution, and markdown. Repeats across all timeframes.

Wyckoff Method

A framework for understanding market cycles through accumulation, markup, distribution, and markdown phases.

Zero Line

The center line on oscillators like MACD. Crossing above is bullish; crossing below is bearish.

← Back to Encyclopedia