Glossary – M
MACD (Moving Average Convergence/Divergence): An indicator calculated by subtracting the 26-period exponential moving average of a stock from its 12-period exponential moving average. By comparing moving averages, MACD displays trend following characteristics, and by plotting the difference of the moving averages as an oscillator, the MACD displays momentum characteristics. Read more about the MACD.
MACD Histogram: A visual representation of the difference between the MACD line and the MACD signal line. The plot of this difference is presented as a histogram, making the centerline crossovers and divergences easily identifiable.
Market Capitalization: Also referred to as “market cap,” it is the total market value of a company (number of shares outstanding multiplied by the price of the stock). As an example, a company with 1 million shares outstanding and a stock price of $20 would have a market capitalization of $20 million.
Market Order: An order to buy or sell a stock at the market price. These orders are usually filled immediately by the market maker. A sell order placed at the market will likely be filled at the bid price, while a buy order will be filled at the ask price.
Margin Call: A notification received from your broker if one or more of the stocks you had bought (with borrowed money) dropped in value beyond a certain point. You would then be forced either to deposit more money in the account or to sell off some of your shares.
Marubozu: A candle with no shadow extending from the body at either the open, the close or at both. Japanese for “close-cropped” or “close-cut.” Read more about the Marubozu.
McClellan Oscillator: A breadth indicator compiled from each day’s net advances. Similar to MACD, the McClellan Oscillator is a momentum indicator that is applied to the advance/decline statistics. As a momentum indicator, the McClellan Oscillator attempts to anticipate positive and negative changes in the AD statistics for market timing. Buy and sell signals are generated as well as overbought and oversold readings. Positive or negative divergences can also be spotted to time trades.
McClellan Summation Index: A popular market breadth indicator that is ultimately derived from the number of advancing and declining stocks in a given market. Many people regard it as an excellent indicator of the overall “health” of the market and the market’s current trend.
Momentum: A momentum indicator measuring a stock’s rate-of-change. The ongoing plot forms an oscillator that moves above and below 100. Bullish and bearish interpretations are found by looking for divergences, centerline crossovers and extreme readings.
Money Flow Index (MFI): A volume-weighted momentum indicator that measures the strength of money flowing in and out of a security. It compares “positive money flow” to “negative money flow” to create an indicator that can be compared to price in order to identify the strength or weakness of a trend. The MFI is measured on a 0 – 100 scale and is often calculated using a 14 day period.
Morning Doji Star: A three candle bullish reversal pattern that is very similar to the Morning Star. The first candle is in a downtrend with a long black body. The next candle opens lower with a Doji that has a small trading range. The last candle closes above the midpoint of the first candle.
Morning Star: A three candle bullish reversal pattern consisting of a long-bodied black candle extending the current downtrend, a short middle candle that gapped down on the open, and a long-bodied white candle that gapped up on the open and closed above the midpoint of the body of the first candle.
Moving Average (MA): An average of data for a certain number of time periods. It “moves” because for each calculation, we use the latest x number of time periods’ data. By definition, a moving average lags the market. An exponentially smoothed moving average (EMA) gives greater weight to the more recent data, in an attempt to reduce the lag. Read more about Moving Averages.
Multicollinearity: Multicollinearity is a statistical term for a problem that is common in technical analysis, when one unknowingly uses the same type of information more than once. Be careful to not utilize technical indicators that reveal duplicate information.