If you are reading one of my stock market articles, you may have come across an investment term or phrase that you are unfamiliar with.
I've assembled a list of the more pertinent investment phrases and terms, along with their definitions, that I frequently reference in my stock market articles.
Click the investing phrase or term below to expand and view its definition. Some of the investing terms or phrases may have links to additional resources. I am continually adding new investment terms and phrases, so be certain to check back frequently for updates! Now, on to the definitions....
Stock Market Terms & Definitions
If you are not prepared for the possibility of a bear trap, it usually ends up with you selling your shares at exactly the wrong time as prices are declining and getting ready to rebound.
How can you tell if it is a bear trap, indicating you should be purchasing shares, or the start of a longer decline which indicates that you should be selling some shares? By using technical analysis of course!
Break-away gaps to the upside are also called Rising Window candlestick patterns.
Break-away gaps to the downside are called Falling Window candlestick patterns.
Read more about candlesticks, candlestick charts and candlestick patterns here:
- A stock's share price increases 25 - 50% or more in 1-3 weeks after already having an extended run in its share price
- When a high percentage of the recent activity has been trending upwards, like 7 out of the last 8 days or 8 out of the last 10 days, this could be an early indicator of a climax top when there is heavy volume associated with the upwards move
- The largest daily gain in a stock's share price
- A gap-up after an extended run in the stock's share price; this is also referred to as an "exhaustion gap" (see below).
When the 50 Day moving average line crosses below the 200 Day moving average line, it usually signals a change from a bullish trend to the probable start of a new bearish trend. A Death Cross pattern is considered a lagging indicator.
Review additional details and real-life examples of Death Cross patterns here:
Distribution days should be traced separately between the NASDAQ Composite, the NYSE composite and the S&P 500. Tracking the accumulated number of distribution days is crucial to gauging a market's health. Why? Because distribution days almost always are signs that large institutions are exiting the market.
Some examples of "large institutions" include pension funds, money managers and investment bankers. And since these large institutions control the bulk of the daily trading volume due to their overall size, they also tend to have an influence on the market's overall direction.
You can't expect stocks to rise without those big guns on your side. How many accumulated distribution days is too many? Investors Business Daily states that the market could probably withstand approximately six or seven distribution days before rolling over and falling into a deep correction.
Review additional details and real-life examples of Falling Window candlestick patterns here:
The next two sessions, Days 2 and 3, don't need to show much in the way of gains. As long as they don't undercut Day 1's low, the rally remains intact. For a follow-through to occur, you want it to land between Day 4 and Day 7 of the attempted rally. On any one of those days, you're looking for one or more of the major indexes -- the NASDAQ, S&P 500 or Dow -- to rise 1.7% or more in higher volume than the previous day.
Though a follow-through in that span gives the strongest signal for a new rally, one that hits anywhere between Day 4 and Day 10 can work. Follow-through days that occur after Day 10 yield lower success rates.
In most cases of FOMO, rather than getting higher prices, the investor/trader ends up getting lower prices by holding onto those shares for too long before selling. It is usually better to "stick to the plan". If you think you are developing a case of FOMO, send me a message.
The quantitative information that contributes to the financial valuation of a company, security or currency. Analysts and investors analyze fundamentals to develop an estimate as to whether the underlying asset or security is considered a worthwhile investment.
For companies, information such as revenue, earnings, assets, liabilities and growth are used to determine the quality of the fundamentals. Investors analyze a company's fundamentals to help determine the health of the company, security or currency, as well as its growth prospects. For example, a company with little debt and a lot of cash is considered to have strong fundamentals.
From a Japanese candlestick terminology perspective, gap-downs are referred to as Falling Window candlestick patterns.
Gap-downs can be created by factors such as regular selling pressure that continues to gain momentum, bad earnings announcements & outlooks, negative changes in analyst outlooks and other types of significant news releases.
These gap-ups are referred to as Rising Window candlestick patterns in Japanese candlestick terminology.
Gap-ups can be created by factors such as regular buying pressure that continues to gain momentum, good earnings announcements & outlooks, positive changes in analyst outlooks and other types of significant news releases.
From a candlestick perspective, gap-ups are referred to as Rising Window Candlestick Patterns.
When the 50 Day moving average line crossed above the 200 Day moving average line, it usually signals a change from a bearish trend to the possible start of a new bullish trend. A Golden Cross pattern is considered a lagging indicator.
Review additional details and real-life examples of Golden Cross patterns here:
The NASDAQ Exchange consists of over 500 member firms that act as NASDAQ market makers, keeping the financial markets running efficiently because they are willing to quote both bid and offer prices for securities.
Become a Trendy Stock Charts member today and learn about different ways to effectively measure a stock's momentum.
Some investors and traders use moving averages to trade and invest. For example, a 200 Day Moving Average is typically used to help determine long-term trends and also calculate buying and selling targets. Also see Simple Moving Averages.
Point & Figure Charts are used to try to gauge supply and demand for a stock. Follow this link to learn more about Point & Figure Charting.
Review additional details and real-life examples of Rising Window candlestick patterns here:
Technical analysis is also used to calculate buying and selling targets for individual stocks.
For example, a moving average is considered a technical indicator. So is a MACD Histogram charting tool.
The earlier that a trend can be established, the more money that can be made, especially when the momentum of the trend is calculated.
Determining the strength of a trend is critical to investing success. Become a Trendy Stock Charts member and determine how I use different Technical Indicators to identify a trend for either stocks or indices.
Volume "spikes" can also help determine a stock’s trend, depending upon where it develops in the larger trend at hand. Some volume spikes stop trends, some start new trends while others continue trends at hand. Therefore, volume spikes can be used to confirm breakouts, continuations or climaxes.
I discuss volume in more detail on its webpage along with price. "Price & Volume" go hand in hand.
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If you aren't a member already, what are you waiting for? As a Trendy Stock Charts member, all of the above stock market terms & definitions will become second-hand nature in no time.
In my stock market articles, I review Cup with Handle chart patterns, Elliott Wave patterns and heavy volume moves. I'll analyze charts using Fibonacci analysis and trading tools such as the Fibonacci Retracement Tool, Extension Tool and Fan Tool. Trendlines can always be seen on almost all of my charts. Moving averages help to confirm many other forms of analysis. And let's not forget candlestick patterns, a literal one-hit wonder.
At the end of each article, I put it all together and come up with either a buy, sell or hold recommendation. Sometimes a combination of two using a scale-in or scale-out strategy.
Learn the ropes of technical analysis at Trendy Stock Charts. I've put together a winning combination of technical analysis methods that will help you and your portfolio outperform the market. Learn how to decide which stocks to buy and which to avoid using a few simple tools.
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