Charting terms and indicators
[edit]Concepts
- Resistance — a price level that may prompt a net increase of selling activity
- Support — a price level that may prompt a net increase of buying activity
- Breakout — the concept whereby prices forcefully penetrate an area of prior support or resistance, usually, but not always, accompanied by an increase in volume.
- Trending — the phenomenon by which price movement tends to persist in one direction for an extended period of time
- Average true range — averaged daily trading range, adjusted for price gaps
- Chart pattern — distinctive pattern created by the movement of security prices on a chart
- Dead cat bounce — the phenomenon whereby a spectacular decline in the price of a stock is immediately followed by a moderate and temporary rise before resuming its downward movement
- Elliott wave principle and the golden ratio to calculate successive price movements and retracements
- Fibonacci ratios — used as a guide to determine support and resistance
- Momentum — the rate of price change
- Point and figure analysis — A priced-based analytical approach employing numerical filters which may incorporate time references, though ignores time entirely in its construction.
- Cycles - time targets for potential change in price action (price only moves up, down, or sideways)
[edit]Types of charts
- Open-high-low-close chart — OHLC charts, also known as bar charts, plot the span between the high and low prices of a trading period as a vertical line segment at the trading time, and the open and close prices with horizontal tick marks on the range line, usually a tick to the left for the open price and a tick to the right for the closing price.
- Candlestick chart — Of Japanese origin and similar to OHLC, candlesticks widen and fill the interval between the open and close prices to emphasize the open/close relationship. In the West, often black or red candle bodies represent a close lower than the open, while white, green or blue candles represent a close higher than the open price.
- Line chart — Connects the closing price values with line segments.
- Point and figure chart — a chart type employing numerical filters with only passing references to time, and which ignores time entirely in its construction.
[edit]Overlays
Overlays are generally superimposed over the main price chart.
- Resistance — a price level that may act as a ceiling above price
- Support — a price level that may act as a floor below price
- Trend line — a sloping line described by at least two peaks or two troughs
- Channel — a pair of parallel trend lines
- Moving average — the last n-bars of price divided by "n" -- where "n" is the number of bars specified by the length of the average. A moving average can be thought of as a kind of dynamic trend-line.
- Bollinger bands — a range of price volatility
- Parabolic SAR — Wilder's trailing stop based on prices tending to stay within a parabolic curve during a strong trend
- Pivot point — derived by calculating the numerical average of a particular currency's or stock's high, low and closing prices
- Ichimoku kinko hyo — a moving average-based system that factors in time and the average point between a candle's high and low
[edit]Price-based indicators
These indicators are generally shown below or above the main price chart.
- Advance decline line — a popular indicator of market breadth
- Average Directional Index — a widely used indicator of trend strength
- Commodity Channel Index — identifies cyclical trends
- MACD — moving average convergence/divergence
- Relative Strength Index (RSI) — oscillator showing price strength
- Stochastic oscillator — close position within recent trading range
- Trix — an oscillator showing the slope of a triple-smoothed exponential moving average
- Momentum — the rate of price change
[edit]Volume-based indicators
- Accumulation/distribution index — based on the close within the day's range
- Money Flow — the amount of stock traded on days the price went up
- On-balance volume — the momentum of buying and selling stocks
