Technical analysis glossary

Average Directional Index: a 0 to 100 measure of trend strength, regardless of its direction.

The average of the true range over a window, usually 14. It measures volatility in price units, not direction. Read the guide

Testing a rule on historical data. Past results do not guarantee future results.

A prolonged period of falling prices, often defined as a decline of 20% or more from a peak.

A moving average with bands placed two standard deviations above and below. They widen when volatility rises. Read the guide

A move of the price beyond a support, resistance or range boundary. It can fail and return inside. Read the guide

A prolonged period of rising prices and optimism. The term has no strict threshold.

A chart symbol showing the open, high, low and close of a period with a body and two shadows. Read the guide

A shorter moving average crossing below a longer one. It is a lagging observation, not a forecast. Read the guide

A disagreement between the price and an indicator, such as a new price high with a lower indicator high. Read the guide

Spreading exposure across assets that do not move in lockstep to reduce dependence on one of them. Read the guide

A candle whose open and close are almost equal, showing indecision. Read the guide

The fall from a peak in account value to a subsequent low, usually expressed as a percentage. Read the guide

A moving average that gives more weight to recent prices, so it reacts faster than the SMA. Read the guide

A two-candle pattern in which a body fully covers the previous body of the opposite colour. Read the guide

Horizontal levels (23.6%, 38.2%, 50%, 61.8%, 78.6%) drawn between a swing low and high to frame how deep a pullback is. Read the guide

An empty space between the close of one period and the open of the next, common after news.

A shorter moving average (often 50) crossing above a longer one (often 200). It confirms a past move. Read the guide

A candle with a small body and a long lower shadow, seen after a decline. Sellers pushed lower but buyers recovered. Read the guide

A Japanese system combining five lines and a shaded cloud to show trend, momentum and dynamic support and resistance. Read the guide

Using borrowed exposure to control a larger position than the capital. It magnifies gains and losses. Read the guide

How easily an asset can be traded without moving its price much.

Moving Average Convergence Divergence: the gap between a fast and a slow exponential moving average, plotted with a signal line and a histogram. Read the guide

A volume-weighted oscillator, often described as a volume version of the RSI. Read the guide

The speed and strength of a price move, measured by indicators such as the RSI or the MACD. Read the guide

A running total that adds volume on up-closes and subtracts it on down-closes. Read the guide

A reading, such as an RSI above 70, that describes a strong recent rise. It is not an automatic reversal signal. Read the guide

A reading, such as an RSI below 30, that describes a strong recent fall. It is not an automatic reversal signal. Read the guide

Deciding the quantity of an asset from the amount risked and the distance to the stop. Read the guide

The study of price movement itself, such as trend, structure, levels and candles, without indicators. Read the guide

A temporary move against the prevailing trend before it resumes, or not. Read the guide

A price area where advances have repeatedly stalled or reversed. Read the guide

The potential gain divided by the potential loss of an idea. Read the guide

Relative Strength Index: a 0 to 100 momentum oscillator comparing the average size of gains and losses over a window, usually 14 periods. Read the guide

The arithmetic mean of the last n closing prices. It smooths price but lags it. Read the guide

The difference between the best buying price (ask) and the best selling price (bid).

A 0 to 100 oscillator showing where the close sits within the recent high-low range. Read the guide

A predefined level at which a position is closed because the idea is invalidated, to cap the loss. Read the guide

A trend-following line based on the ATR that flips side when the price closes beyond it.

A price area where declines have repeatedly slowed or reversed. Read the guide

The duration of each candle on a chart, such as one hour, one day or one week.

The general direction of a market: a series of higher highs and lows (uptrend) or lower highs and lows (downtrend). Read the guide

The amplitude of price changes over time. High volatility means large moves in either direction. Read the guide

The quantity traded during a period. It shows how much participation stands behind a move. Read the guide