Technical Glossary

A chart representation showing the open, high, low, and close prices for a given period as a bar-shaped figure. Originated in Japan and consists of a body and wicks (shadows).

The price of the first trade executed in a given period. Corresponds to the top or bottom of the candlestick body.

The highest price traded during a given period. Corresponds to the tip of the upper wick (shadow) of a candlestick.

The lowest price traded during a given period. Corresponds to the tip of the lower wick (shadow) of a candlestick.

The price of the last trade executed in a given period. The most important price in technical analysis.

The number of shares or contracts traded during a given period. A key indicator for measuring the reliability of price movements; increased volume during breakouts enhances credibility.

A candlestick where the close is higher than the open. Typically displayed as hollow or green, indicating strong buying pressure.

A candlestick where the close is lower than the open. Typically displayed as filled or red, indicating strong selling pressure.

The tendency for prices to move in a consistent direction. There are three types: uptrend, downtrend, and sideways (range).

A state where both highs and lows are progressively rising. Indicates that buyers are dominant.

A state where both highs and lows are progressively falling. Indicates that sellers are dominant.

A horizontal state where prices oscillate within a fixed range. Price moves between support and resistance levels.

A line connecting levels where prices tend to bounce when falling. Indicates a price zone where buy orders tend to accumulate.

A line connecting levels where prices tend to reverse when rising. Indicates a price zone where sell orders tend to accumulate.

A bearish reversal pattern formed after two similar highs, followed by a neckline break to the downside. Also known as an 'M-shape' pattern.

A bullish reversal pattern formed after two similar lows, followed by a neckline break to the upside. Also known as a 'W-shape' pattern.

A bearish reversal pattern forming three peaks: left shoulder, head, and right shoulder. A break below the neckline often accelerates the decline. One of the most reliable patterns.

A line connecting the troughs between peaks in patterns such as double top/bottom and head and shoulders. A break of this line signals a breakout.

A clear breach of important levels such as support lines, resistance lines, or necklines. Reliability increases when accompanied by higher volume.

A move that appears to break out but quickly returns to the previous range. Caution is needed when volume is lacking or only wicks penetrate the level.

A general term for chart patterns that suggest a change in the direction of the prevailing trend. Double tops and head and shoulders are representative examples.

A pattern that forms temporarily during a trend, suggesting the trend will continue in the same direction. Flags and pennants are representative examples.

A pattern during a downtrend where a bullish candle following a large bearish candle opens lower and closes only slightly above the previous low. Indicates a weak bounce and suggests continued decline.

A pattern during a downtrend where a bullish candle following a large bearish candle opens lower and closes at or below the previous close. Indicates an even weaker bounce than the in neck line.

A candlestick pattern where the candle closes beyond the previous day's body in the opposite direction. May suggest a trend reversal.

A pattern where a bearish candle appears after a gap-up bullish candle during an uptrend, closing within the gap without filling it. Indicates continuation of the uptrend.

A pattern where a bullish candle appears after a gap-down bearish candle during a downtrend, closing within the gap without filling it. Indicates continuation of the downtrend.

Two candlesticks extending in opposite directions from the same opening price by similar amounts. Considered a signal confirming trend continuation.

A candlestick with a small body and upper and lower wicks. Similar to a doji but with a slightly larger body. Indicates indecision between buyers and sellers.

A pattern similar to three white soldiers but with a long upper wick on the third candle. Indicates weakening upward momentum and serves as a warning signal of a potential false three white soldiers.

A pattern similar to three white soldiers but with the third candle being a spinning top (small body). Indicates buyer indecision and warns of a stalling uptrend.

A powerful sell signal consisting of three bearish candles all without lower wicks (marubozu). An enhanced version of three black crows, showing overwhelming seller dominance.

A pattern where the second large candle contains both the first and third smaller candles. Indicates deep market indecision.

A pattern where two same-sized bullish candles appear side by side after a gap. An upside gap suggests continued rise; a downside gap suggests decline.

A line connecting the average closing prices over a set period. A fundamental indicator for identifying trend direction. Common periods are 5, 25, 75, and 200 days.

An oscillator indicator ranging from 0 to 100, calculated from gains and losses over a set period. Readings above 70 suggest overbought conditions; below 30 suggest oversold.

An indicator based on the difference between short-term and long-term exponential moving averages. Trend reversals are identified by crossovers of the MACD line and signal line.

An indicator displaying bands at standard deviations above and below a moving average. Approximately 95% of prices fall within the +/-2 sigma range; band width indicates volatility.

When a short-term moving average crosses above a long-term moving average from below. Considered a buy signal indicating a shift to an uptrend.

When a short-term moving average crosses below a long-term moving average from above. Considered a sell signal indicating a shift to a downtrend.

Opening a new position (buy or sell). In chart pattern trading, the standard approach is to enter after confirming a breakout.

Closing a position with unrealized gains to lock in profit. In chart pattern trading, the target is often set at the pattern's measured move.

Closing a position at a loss to limit the damage. In chart pattern trading, it is typically set at the level where the pattern is invalidated.

The ratio of potential loss (risk) to potential gain (reward) in a single trade. A ratio of at least 1:2 is generally considered desirable.

The percentage of profitable trades out of all trades. It is important to evaluate win rate alongside the risk/reward ratio rather than in isolation.

The ratio of gross profit to gross loss. A value above 1.0 indicates profitability, with 1.5 or higher generally considered a benchmark. Used for overall evaluation of trading strategies.

A market analysis theory proposed by Ralph Nelson Elliott in the 1930s. Markets form cycles of 8 waves: 5 motive waves and 3 corrective waves, with this pattern repeating fractally.

A wave pattern consisting of 5 waves (Waves 1-5) that moves in the direction of the trend. There are two types: impulse waves and diagonals.

A wave pattern consisting of 3 waves (A-B-C) that moves against the trend. Includes patterns such as zigzags, flats, and triangles.

The basic form of a motive wave. Has an internal structure of 5-3-5-3-5, where Waves 1, 3, and 5 are motive and Waves 2 and 4 are corrective. Must follow the three cardinal rules.

The wave that marks the beginning of a new trend. Often still influenced by the previous trend, with few participants and limited volume. Frequently not recognized as a trend reversal.

The corrective wave of Wave 1. Never retraces beyond the start of Wave 1 (inviolable rule). Typically retraces 50%-78.6% of Wave 1. Often corrected as a zigzag.

Usually the strongest and longest motive wave. Cannot be the shortest among motive waves 1, 3, and 5 (inviolable rule). Often extends to 1.618 times or more of Wave 1. Volume is typically the highest.

The corrective wave of Wave 3. Must not enter the price territory of Wave 1 (inviolable rule). Often corrected as flats or triangles, tending to differ from Wave 2's pattern (law of alternation).

The final motive wave. Volume often decreases compared to Wave 3 (divergence), suggesting the end of the trend. May take the form of an ending diagonal.

The first wave of a corrective sequence. Appears as a motive wave (5-wave structure) or as the start of a zigzag. Often mistaken for a temporary pullback within the trend.

The middle wave of a corrective sequence. Forms as a rebound against Wave A. In flat corrections, it may retrace near the start of Wave A. Considered the most difficult wave to identify.

The final wave of a corrective sequence. A 5-wave motive wave that is often equal to or longer than Wave A. Signals the completion of the correction and the starting point of the next trend.

The self-similar structure where each wave in Elliott Wave Theory is composed of smaller waves. A single wave on the monthly chart can be observed as a complete 5+3 wave cycle on the daily chart.

A classification indicating the time scale of waves. Ranges across 9 levels from Grand Supercycle (centuries) to Subminuette (minutes). Higher degree waves are composed of lower degree waves.

The absolute rules of Elliott Wave Theory: (1) Wave 2 cannot retrace beyond the start of Wave 1, (2) Wave 3 cannot be the shortest motive wave, (3) Wave 4 cannot enter the price territory of Wave 1. Any count violating these is invalid.

A type of motive wave that appears in the Wave 1 or Wave A position. Formed with converging trendlines, where Wave 4 is allowed to enter Wave 1's price territory. Signals a strong start to a new trend.

A type of motive wave that appears in the Wave 5 or Wave C position. Has a 3-3-3-3-3 internal structure, indicating trend exhaustion. A sharp reversal often follows its completion.

One of the basic corrective wave patterns. Has a 5-3-5 internal structure forming a sharp correction. Wave A is an impulse wave, Wave B retraces 38.2%-78.6% of Wave A, and Wave C is often similar in length to Wave A.

One of the basic corrective wave patterns. Has a 3-3-5 internal structure forming a sideways correction. Wave B retraces near the start of Wave A, and Wave C reaches near the end of Wave A. Three varieties: regular flat, expanded flat, and running flat.

The most common variation of flat correction. Wave B exceeds the start of Wave A (100%+ retracement), and Wave C exceeds the end of Wave A. Can mislead traders as it appears to move in the trend direction.

One of the basic corrective wave patterns. Consists of 5 waves (A-B-C-D-E), each with 3-wave structure, forming converging trendlines. Appears in the Wave 4 or Wave B position; after breakout, moves in the direction of the larger trend.

A complex corrective wave where two simple correction patterns (zigzag, flat, triangle) are connected by an X wave. Labeled W-X-Y. Common in sideways, time-consuming corrections.

A complex corrective wave where three simple correction patterns are connected by two X waves. Labeled W-X-Y-X-Z. A longer sideways correction than a double three.

A phenomenon where one wave within a motive wave extends significantly beyond normal. Most common is a Wave 3 extension (1.618-2.618 times Wave 1). Wave 1 and Wave 5 extensions also occur, but Wave 3 extensions are most frequent.

A phenomenon where Wave 5 fails to exceed the end of Wave 3. Indicates extreme weakness in the trend. Tends to occur after a very strong Wave 3 and is an important signal for trend reversal.

A guideline that Waves 2 and 4 tend to correct in different patterns. For example, if Wave 2 is a zigzag (sharp correction), Wave 4 tends to be a flat or triangle (sideways correction).

A technique for predicting motive wave progression using channel lines (parallel lines). By connecting the endpoints of Waves 1 and 3 and drawing a parallel line through the end of Wave 2, targets for Waves 4 and 5 can be estimated.

The typical characteristics of each wave: Wave 1 = initial move, hard to recognize; Wave 2 = deep retracement, induces fear; Wave 3 = strongest move, highest volume; Wave 4 = time-based correction; Wave 5 = optimistic mood but declining momentum.

A corrective pattern where two zigzags are connected by an X wave. Labeled W-X-Y, where both W and Y have zigzag structures. Appears when a deeper correction than a simple zigzag is needed.

A rare variation of flat correction. Wave B significantly exceeds the start of Wave A, and Wave C does not reach the end of Wave A. Occurs in very strong trends, indicating a shallow correction.

Fibonacci ratios used to predict the extent of wave retracements. Key ratios are 23.6%, 38.2%, 50%, 61.8%, and 78.6%. Wave 2 typically retraces 50%-78.6%, while Wave 4 typically retraces 23.6%-50%.

Fibonacci ratios used to predict wave progression targets. Key ratios are 100%, 127.2%, 161.8%, 200%, and 261.8%. The most common target for Wave 3 is the 161.8% extension of Wave 1.

An intermediate wave connecting two correction patterns in complex corrections (double three, triple three). Typically composed of simple corrective waves (zigzag or flat).

A special form of motive wave that forms converging trendlines (wedge shape). Two types: leading diagonal (Wave 1/A position) and ending diagonal (Wave 5/C position).

The analytical process of assigning Elliott Wave labels (1-2-3-4-5, A-B-C, etc.) to price movements on a chart. Correct counts require adherence to the three cardinal rules and consideration of guidelines. Multiple valid counts may exist.