By Alan Farley
 

Abandoned Baby -- A 3-bar candlestick reversal pattern. A single bar gaps up or down but then immediately gaps back in the opposite direction on the next bar. The shadow of the lone candle never crosses the shadow of the bar before the first gap or after the second gap.

Accumulation-Distribution (Acc-Dis) -- The underlying buying or selling pressure within a particular stock.

Adam and Eve (A&E) -- Top or bottom reversal pattern noted by its sharp, volatile first high (low) and slower, rounded second high (low).

Ascending Triangle -- A common continuation pattern that forms from a rising lower trendline and a horizontal top resistance line.

AvgLOSS -- A performance measurement that shows the total losses divided by the number of losing trades.

AvgWIN -- A performance measurement that shows the total profits divided by the number of winning trades.

Bear Hug -- A trading strategy that finds short sale opportunities in weak markets that rally into resistance or narrow range bars on the verge of breakdown.

Bollinger Bands (BB) -- Elastic support and resistance channels above and below price bars that respond to the tendency of price to draw back to center after strong movement in either direction. The Bollinger Band center band sets up at the moving average chosen for the indicator.

Breakaway Gap -- A classic gap popularized in Technical Analysis of Stock Trends that signals the start of a new trend after a prolonged basing period.

Bucket Shops -- Early 20th-century stock gambling parlors that catered to short-term speculation.

Fictional trader Jesse Livermore discusses his experiences in them in the classic Reminiscences of a Stock Operator.

Charting Landscape -- A three-dimensional view that evaluates complex price action through multiple layers of information on a single price chart.

Coiled Spring -- A trading strategy that executes a position at the interface between a rangebound market and a trending market.

Continuation Gap -- A classic gap popularized in Technical Analysis of Stock Trends that signals the dynamic midpoint of an ongoing trend.

Convergence-Divergence (C-D) -- The tendency of two or more charting landscape features to confirm or refute an expected price outcome.

Clear Air (CA) -- Pockets of thin participation and ownership that often lead to wide range price bars.

Climbing the Ladder -- Bollinger Band pattern that indicates a strong and sustained rally.

Cross-Verification (CV) -- The convergence of unrelated directional information at a single price level.

Cross-Verification x 4 (CVx4) -- A high probability trade in which a single price and time emerges from analysis through at least four unrelated methods.

Cup and Handle (C&H) -- A popular pattern that triggers a breakout through a triple top. The formation draws a long and deep base after an intermediate high. The market rallies into a double top failure that creates the "cup". It pulls back in a small rounded correction that forms the
"handle" and then surges to a new high.

Cup and Two Handles (C&2H) -- A Cup and Handle variation that draws two congestion zones on the right side of the pattern before price ejects into a strong breakout.

Dark Cloud Cover -- A 2-bar candlestick reversal pattern. The first bar draws a tall rally candle. The next candle gaps up but closes well within the range of the prior bar.

Descending Triangle -- A common reversal pattern that forms from a descending upper trendline and a horizontal bottom support line.

Dip Trip -- A trading strategy that buys pullbacks in an active bull market.

Doji -- A 1-bar candlestick reversal pattern in which the open and close are the same (or almost the same) price and the high-low range is above average for that market.

Double Bottom (DB) -- A common reversal pattern in which price prints a new low, reverses into a rally and returns once to test it before moving higher.

Double Top (DT) -- A common reversal pattern in which price prints a new high, reverses into a selloff and returns once to test it before moving lower.
Dow Theory -- Observations on the nature of trend by Charles Dow in the early 20th century. It also notes that broad market trends verify when the three major market averages all move to a new high or low.

Electronic Communications Networks (ECNs) -- Computer stock exchanges that rapidly match, fill and report customer limit orders.

Elliott Wave Theory (EWT) -- A pattern-recognition technique published by Ralph Nelson Elliott in 1939 that believes all markets move in five distinct waves when traveling in the direction of a primary trend and three distinct waves when moving in a correction against a primary trend.

Empty Zone (EZ) -- The interface between the end of a quiet range-bound market and the start of a new dynamic trending market.

Execution Trigger (ET) -- The predetermined point in price, time and risk that a trade entry should be considered.

Execution Zone (EZ) -- The time and price surrounding an Execution Target that requires undivided attention in order to decide if a trade entry is appropriate. undivided attention in order to decide if a trade entry is appropriate.

Exhaustion Gap -- A classic gap popularized in Technical Analysis of Stock Trends that signals the end of an active trend with one last burst of enthusiasm or fear.

Fade -- A swing strategy that sells at resistance and buys at support.
Failure Target -- The projected price that a losing trade will be terminated. The price at which a trade will be proven wrong.

Farley's Accumulation-Distribution Accelerator (ADA) -- A technical indicator that measures the trend of accumulation-distribution.

Fibonacci (Fibs) -- The mathematical tendency of trends to find support at the 38%, 50% or 62% retracement of the last dynamic move.

First Rise/First Failure (FR/FF) -- The first 100% retracement of the last dynamic price move after an extended trending market.

Finger Finder -- A trading strategy that initiates a variety of tactics based upon single bar candlestick reversals.

5-8-13 -- Intraday Bollinger Bands and moving average settings that align with short-term Fibonacci cycles. Set the Bollinger Bands to 13-bar and two standard deviations. Set the moving averages to 5-bar and 8-bar SMAs.

5 Wave Decline -- A classic selloff pattern that exhibits three sharp downtrends and two weak bear rallies.

Flags -- Small continuation pattern that prints against the direction of the primary trend.

Foot in Floor -- Bollinger Band pattern that indicates short term support and reversal.

Fractals -- Small-scale predictive patterns that repeat themselves at larger and larger intervals on the price chart.

Gap Echo -- A gap that breaks through the same level as a recent one in the opposite direction.

Hammer -- A 1-bar candlestick reversal pattern in which the open-close range is much smaller than a high-low range that prints well above average for that market. The real body must sit at one extreme of the high-low range to form a hammer.

Harami -- A 1-bar candlestick reversal pattern in which the open-close range is much smaller than the high-low range and sits within the real body of a tall prior bar.

Hard Right Edge -- The location where the next bar will print on the price chart. This also points to the spot where the swing trader must predict the future.

Head and Shoulders -- This classic reversal pattern forms from an extended high that sits between two lower highs. Three relative lows beneath the three highs connect at a trendline known as the neckline. Popular opinion expects a major selloff when the neckline breaks.

Head in Ceiling -- Bollinger Band pattern that indicates short-term resistance and reversal.

Historical Volatility -- The range of price movement over an extended period of time as compared to current activity.

Hole in the Wall -- A sharp down gap that immediately follows a major rally.

Inside Day -- A price bar that prints a lower high and higher low than the bar that precedes it.

Inverse Head and Shoulders -- This classic reversal pattern forms from an extended low that sits between two higher lows. Three relative highs above the three lows connect at a trendline known as the neckline. Popular opinion expects a major rally when the neckline breaks.

January Effect -- The tendency for stocks to recover in January after end-of-year, tax-related selling has completed.

Market Numbers – Price levels based on multiples or fractions of 10 that act as support or resistance. Common market numbers include 5, 10, 20, 25, 30, 50, 100.

Moving Average Convergence-Divergence (MACD) -- A trend-following indicator that tracks two exponentially smoothed moving averages above and below a zero line.

Mesa Top -- A double top reversal pattern that declines at the same angle as the initial rally.

Moving Average Crossover -- The point where a moving average intersects with another moving average or with price.

Moving Average Rainbows (MARs) -- Wide bands of mathematically related and color-coded moving averages.

Narrow Range Bar (NR) -- A price bar with a smaller high-low range as compared to the prior bar's high-low range.

Narrowest Range of the Last 7 Bars (NR7) -- A low volatility time-price convergence that often precedes a major price expansion. A price bar with a smaller high-low range as compared to the prior six bars high-low ranges.

NR7-2 -- The 2nd NR7 in a row. A low volatility time-price convergence that often precedes a major price expansion.

Neckline -- A trendline drawn under the support of a Head and Shoulders pattern over the resistance of an Inverse Head and Shoulders pattern.
Negative Feedback -- Directionless price action in which bars move back and forth between well-defined boundaries.

Noise -- Price and volume fluctuations that confuse interpretation of market direction.

On Balance Volume (OBV) -- A volume indicator that measures the progress of accumulationdistribution.

Oscillator -- A subset of technical indicators that accurately measures flat market conditions by assigning overbought and oversold price levels.
assigning overbought and oversold price levels.

Overbought -- The evolution of price action to a state in which it runs out of buying pressure.

Oversold -- The evolution of price action to a state in which it runs out of selling pressure.

Pattern Analysis -- Price prediction through interpretation of the crowd behavior seen in repeating chart formations.

Pattern Cycles -- The tendency of markets to repeat identical price formations through different stages of development in all time frames. The master market blueprint that generates all chart patterns.

Pennants -- Small continuation pattern that prints against the direction of the primary trend.

%WIN -- A performance measurement that shows the total winners divided by the total number of trades.

Positive Feedback -- Directional price action in which bars gather momentum and move from one level to the next.

Power Spike -- A trading strategy that seeks high volume events and executes positions to capitalize on their special characteristics.

Profit Target -- The projected price that a successful trade will be terminated. The price at which a trade faces first resistance.

Random Walk -- Classic theory that chaos drives all market activity and that price movement cannot be predicted.

Rainbow Crosspoint -- A horizontal support and resistance zone created by a moving average crossover.

Rectangle -- Small continuation pattern that prints sideways to the primary trend.

Reflection -- A 2-4 bar candlestick pattern that first print a significant reversal, then thrusts away from that formation and immediately draws an identical reversal in the opposite direction.

Relative Strength Index -- A technical indicator that measures a stock's ability to close up rather than down for a specific period of time. An oscillator invented by J. Welles Wilder that measures overbought, oversold and divergent market situations.

Rising Wedge -- Reversal pattern that slowly rises in an uptrend until price suddenly ejects into a selloff.

Seasonality -- The predictable appearance of certain market characteristics that reflect specific and repeating calendar events.

Setup -- A sequence of bars, patterns or other charting landscape features that predict the direction and timing of future price movement.

Shooting Star -- A 1-bar to 3-bar candlestick reversal pattern with a small real body and tall shadow that pushes into an intermediate high or low before a sudden change in direction. shadow that pushes into an intermediate high or low before a sudden change in direction.

Slippage -- The difference between expected transaction costs and actual transaction costs.

Slippery Slope -- Bollinger Band pattern that indicates a sustained decline.
Signpost - Point on the charting landscape that identifies an imminent trading opportunity.

Silent Alarm -- A rare high volume signal that prints a narrow range bar and flags an impending breakout.

6-18 Swing -- A moving average crossover system used to track intraday buying and selling pressure.

Standard Deviation (std dev) -- The positive square root of the expected value of the square of the difference between a random variable and its mean.

Stochastics -- An overbought-oversold oscillator that compares the current bar to a preset selection of high and low prices. The indicator plots the results on a graph between 0 and 100.

Support/Resistance (S/R) -- Horizontal and non-horizontal barriers that current price should not pass without the application of sufficient directional force.

Swing Trading -- A complex execution strategy that relies on identification of market opportunity through the charting landscape.

Symmetrical Triangle -- A common pattern formed from a descending and rising trendline. The formation has an equal bias of breaking out in either direction.

Technical analysis -- Market prediction that studies crowd behavior through evolving price and volume activity.

3rd of a 3rd -- The middle wave and most dynamic price movement within a complete Elliott 5- Wave rally or decline.

3rd Watch -- A trading strategy that executes a long position on a triple top breakout.

Transit Zone -- The horizontal price level of the last segment of a dying trend that also becomes the first retracement of the new range.

Trend Mirrors (TM) -- Past chart activity that influences the direction and development of current trend and range.

Trend Relativity Error -- A common mistake committed when a trader prepares an analysis in one-time frame but executes in another.
Trendlet -- Small pocket of chart activity that appears and disappears over time.

Trendline -- A line that connects a series of highs or lows. The trendline can represent support in an uptrend or resistance in a downtrend. Horizontal trendlines mark support-resistance and range-bound conditions.

Triangles -- A related set of common 3-sided congestion patterns.
Wave -- Sustained price movement in one direction marked by clear high and low reversal boundaries.

Whipsaw -- Erratic price behavior that triggers false signals and incurs trading losses.

Window Dressing -- Institutional buying or selling near the end of a quarter that makes reported results appear better than actual results.

Stock Trading References:

Market Club Trading Service
Day Trading Advice
fundamental analysis
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Trading Philosophies
How to price options
Rockwell Trading Review
Swing Trading Defined
Options University Trading Tutorials
Options Trading Tutorials