Glossary

Technical analysis

Candles, trend, oscillators, volume and management: the vocabulary the other three take for granted.

65 terms

Aggressive / passive: Whoever crosses at market chose the moment; whoever posted a limit chose the price.
Ask / Offer: The lowest price someone will sell to you. It is what you buy at.
Bid: The highest price someone will buy from you now. It is what you sell at.
Leverage: Trading more notional than deposited. It does not improve accuracy: it multiplies consequence.
Liquidity: Capacity to absorb a trade without moving. Not fixed: it changes with the hour and the news.
Order bookDOM: The two lists of intentions. It shows orders, not trades.
Slippage: Filling worse than the price you saw, by eating several levels of the book.
Spread: The difference between the two. The toll for getting in and out.

Gap: A band of price where nothing traded.
Log scale: The same vertical distance is the same percentage, not the same points.
Timeframe: Not a level of detail: a filter that throws away the order inside the candle.

Body · wick: The rectangle between open and close; the lines out to the extremes.
Candle pattern: A candle or a group meeting a numeric condition. It is not an object sitting on the chart: it is a threshold you set, and moving it changes how many there are.
Rejection: A long wick on one side: price went there and nobody followed.
Relative close: Where in the range it closed, 0 to 1. Summarises a candle better than any other number.

Break of structureBOS: Price exceeds the last swing in the direction it was already going.
Change of characterCHoCH: It breaks against. First hint of a turn.
False break / fakeout: Leaves the level and comes back inside. It is how an important level does its job.
Polarity change: Broken support becoming resistance. Explained by whoever got trapped, not by the level.
Reclaim: Regaining the level after losing it. Used in English in Spanish too.
Swing high / low: An extreme exceeding the n candles on each side. That n is the parameter almost nobody declares.

Channel: Two parallels around price. It inherits the whole arbitrariness of the line that generates it and adds that of the width.
Trendline: A straight line joining two or more extremes. Over the same stretch the engine found twenty-eight meeting the same criterion: the chart does not bring the line, you choose it.

Moving average: The recent average price. All of them pick a point between lag and noise.
Moving-average cross: Two averages of different periods cross. It is late by construction: the cross needs the move to have already entered both windows.

Divergence: Price and oscillator disagree between two pivots. It only means something between recognisable extremes.
Oscillator: A bounded or centred indicator summarising recent speed. The redundancy matrix measures which one each repeats: several pairs reach 0.99, which is the same indicator with two recipes.
Overbought · oversold: It has moved a lot and fast. It does not mean sell or buy.

Average True RangeATR: Average travel including gaps. The most useful tool for sizing.
BandWidth: How wide the bands are versus their average. Turns «they look narrow» into a number.
Squeeze: Bollinger fits inside Keltner. It anticipates expansion, not direction.
Walking the band: Price hugging the band through a trend. Selling every touch is the classic mistake.

Anchor: The two extremes a retracement is measured between. With every defensible anchor at once, 81 % of candles close within reach of some level.
Extension: A projection beyond the impulse. It needs three anchors instead of two.
Retracement / pullback: A leg against the trend inside it.

Double top · double bottom: Two similar extremes in a row. «Similar» is a tolerance, and the tolerance decides how many exist.
Head and shoulders: Three highs with the middle one higher. How much higher, and how far apart the shoulders may sit, the pattern does not say: you set it.
Measured move: Projecting the height of the pattern from the break. It is an ATR by another name: it measures recent volatility, not intent.

Low volume nodeLVN: A zone price crossed quickly. It usually crosses it quickly again.
Point of ControlPOC: The price where most trading happened.
Value area · VAH / VAL: The 70 % of volume around the POC.
Volume profile: The same price axis counted by how much traded at each level.
VWAPVolume weighted average price: The average price things traded at. Weights by participation, not by time.

Displacement: A fast move with large bodies. It is volatility expansion.
Fair Value GapFVG: Three candles where the first and third do not overlap. One appears every two or three candles.
Liquidity pool: Equal extremes where stops pile up. A range phenomenon, nearly absent in trends.
Order block: Last opposite candle before the displacement. Depends on what you call «opposite».
Sweep / raid: An extreme breaks to reach the stops and price comes back.

Absorption: A lot of aggression with price not moving. Somebody is on the other side.
Delta: Aggressive buying volume minus selling. It needs tick data.
Effort without result: Wyckoff's version of the same thing, without tick data.
Iceberg: A large order shown in slices. Only visible in the real book.
Spoofing: Posting orders in order to pull them. Used in English in both languages.

Drawdown: Worst fall from a peak. The one you lived is a draw, not the distribution.
Expectancy: Average R per trade. If it is negative, nothing else matters.
In-sample · out-of-sample: The data you chose the parameters on, and the data it never saw while being chosen.
Look-ahead bias: Using information in a backtest that did not exist live yet.
Maximum Adverse ExcursionMAE: The furthest against a trade went before closing.
Overfitting / curve fitting: Picking parameters that explain the past and not the future. The central error of Part XIV.
Profit factor: Gross won divided by gross lost.
R multiple: The risk of one trade. The unit that lets you compare systems.
Risk of ruin: Probability of going broke even with an edge, through position size.
Robustness: That the neighbouring parameters also work. If only the peak works, it is a coincidence.

Invalidation: The price at which the hypothesis stops being true, written before entering. If there is no invalidation written down, there is no trade.
Regime: Trend with force, range or transition. Those are the only three, and it is the method's second question because it changes the meaning of every question after it.