Abandoned Baby: A rarely occuring reversal pattern composed of a gap followed by a *Doji*, followed by yet another gap in the other direction. In order for the pattern to be valid, the wicks of the Doji candle must gap between both the first and third candle.
Above the Market: Limit orders meant to buy/sell a stock for a specific price which is higher than the current price. If price action doesn’t reach the specific price, the order goes unfilled.
Absolute Breadth Index (ABI): Shows how much volatility and overall activity is happening on the NYSE while completely ignoring price action.
Absolute Price Oscillator (APO): An indicator that is based on the difference between two exponential moving averages, expressed in absolute terms. Also known as the *MACD*, the APO is calculated by finding the difference between the higher EMA and the lower EMA.
Accumulation: Also known as “loading the boat,” accumulation is essentially buying shares without causing significant increase in the price. After a downtrend has ended, price action may begin to form a base and trade sideways for some time. While this base forms, traders and investors that are well-informed may look to build or increase their existing long positions.
Accumulation Distribution Line: A momentum indicator that relates price action with volume, it relates the price at close to the overall price action range (L – H). The closer the closing price is to the high, the more volume is added to the total.
Advance Decline Line (AD Line): A widely used indicator that measures the breadth of an advance or decline. It is typically compared to a market average, where any divergence from that average would be an early signal of a possible trend reversal.
Advancing: The status of a stock that is defined by an uptrend with higher highs and higher lows.
Advancing Declining Issues: A momentum indicator that uses advancing issues and declining issues. It finds the difference between the declining issues and the advancing ones and is typically smoothed to work as a good overbought/oversold indicator.
Adverse Excursion: The loss attributable to price movement against the position in any single trade.
ADX: See Average Directional Index
After Hours (A/H): Trading done after the official close of the market. A typical A/H session is from 4 p.m. – 8 p.m. EST.
Against Actuals: A transaction typically used by 2 hedgers that would like to exchange cash or futures positions.
Agricultural Commodities Index ($GKX): An overall weighted average of the important agricultural commodity contracts as compiled by Goldman Sachs. Commodities used include Corn, Soybeans, Red Wheat, Wheat, Sugar, Cocoa, Cotton, Coffee, and Orange Juice.
All or None: A type of order used to fill the order completely or not at all. No partial transactions.
Alpha: An overall measurement of the risk taken by an investor for investing in a fund rather than a market index. Represents the total difference between a mutual fund’s actual performance and the performance that is be expected based on the level of risk taken by the fund’s manager. If a fund produces the expected return for the level of risk that is assumed, the fund would have an Alpha of zero. A positive Alpha signals that the manager produced a return greater than expected for the overall risk that was taken. A negative Alpha indicates the manager produced an inadequate return to investors for the risk taken.
American Depository Receipt (ADR): Stocks that are issued by commercial banks that represent the shares of an international company. ADRs trade like normal stocks on various US stock exchanges. Their performance is usually similar to that of the parent company on it’s domestic exchange.
AMEX: American Stock Exchange.
AMEX Composite Index ($XAX): A weighted index of the stocks listed on the American Stock Exchange. The overall market cap of each company is used to create the index.
Amortization: Paying off of debt in regular installments over a period of time.
Analysis of Variance: A technique that is used to improve the analysis over regression techniques. Can be utilized for finding relationships between predictor and criterion variables, whether the predictor variables are quantitative or qualitative in nature.
Analyst: A person holding expertise in evaluating financial instruments. He (or she) conducts research and makes recommendations to retail or institutional investors to hold, buy, or sell. Most analysts will specialize in a single sector or industry.
Andrew’s Pitchfork: Utilizes three parallel lines drawn from three points that a trader selects. These points are are usually three consecutive major highs or lows. The three parallel lines that extend out to the right are utilized as standard support and resistance points.
Announcement Date: The date that a company first publicly announces an upcoming stock split.
Annual Report: A popular term for the annual report made by a company to its shareholders. Federal law requires all registered corporations to make such reports. They typically will contain an income statement, balance sheet, how income of the corporation was used, and a list of changes in retained earnings.
Annualized: Translating periods of less than a year into an annual rate. To annualize quarterly figures, you multiply them by four.
Arbitrage: The simultaneous buying and selling of stocks to take advantage of descrepancies in price. Arbitrage opportunities are usually present after a takeover offer.
Area Pattern: A pattern consisting of sideways price action that follows a stalled uptrend or downtrend of a stock. Some of these patterns (triangles, diamonds, flags, wedges, etc.) have good predictive value.
Arms Index (TRIN): Also known as the “TRading INdex,” its an indicator that shows the ratio between the average volume of advancing stocks and the average volume of declining stocks. Rising TRIN is bearish and a falling TRIN is bullish.
Aroon: A system of indicators used to signal whether a stock is trending or not, and the overall strength of that trend.
Aroon Oscillator: The Aroon Oscillator indicates an uptrend when it goes above zero and a downtrend when it goes below zero. The further from the zero line, the stronger the trend.
Ascending Trend Channel: Price action that forms two parallel trend lines. One trend line connects the lows of the price action, while the other connects the highs.
Ascending Triangle: A pattern formed by sideways price between two converging trendlines. The lower line (support/demand) is rising while the upper line (resistance/supply) is typically flat. Generally considered to be a bullish pattern. See post on Ascending Triangle for more information.
Ask: Also referred to as the “offer”, its the price that market makers guarantee to fill your buy order. A market buy order will usually be filled at the current ask (offer) price. The ask price is typically higher than the bid.
Assets: Any possessions of value utilized in an exchange.
Average Directional Index (ADX): Part of the Directional Movement Indicator system the ADX line is based on the spread between the +DI and -DI lines from that same system. See ChartSchool article on Average Directional Index.
Average True Range (ATR): An indicator that measures overall volatility for any one ticker. High ATR values signal high volatility and could potentially be an indication of panic selling or panic buying. Low ATR readings signal sideways price action.