The following is a list of terms used in association with Japanese Candlestick Analysis. Some terms are purely of Western origin; others are purely of Japanese origin. Many are used for description in both Western and Japanese techniques, becoming intermingled through the years. Read below to further your stock analysis education.
Ralph Nelson Elliot developed a system for forecasting price movements based upon oscillations in investor sentiment. The basis of the theory revolves around five waves in a general direction (five-wave upmove) followed by three corrective waves in the opposite direction (three-wave downmove).
Exponential moving average
A moving average calculated by exponentially weighted input.
The series of numbers that are derived by adding the two previous numbers to obtain the next number. That number added to the previous number results in the next number. The series of numbers produces ratios used extensively by Elliot wave advocates, 38 percent, 50 percent, and 62 percent.
Filling the Gap
A gap becomes filled when prices move back into the black area of trading. Candlestick Patterns and candlestick terminology describes this as “closing the window”.
A price void where the trading range between one time period does not overlap with a price trading of the next time period.
A bullish signal created by the short-term moving averages crossing above the long-term moving averages.
A group of candlesticks with long upper and/or lower shadows. This grouping of formations foretells a market turn.
A measure for the market to forecast future volatility.
This is a trading session where the high and the low of a trading period remains within the high and the low of the previous trading session.
Trading periods that begin and end within a one-day time frame.
A formation created at the end of a trend where prices gap away from the current trend, trade for two or more days at those levels, and then gap back in the opposite direction. This leaves an island of trading at the end of the trend. Commonly known as island reversals. Strong reversal indicator.
Floor traders that make their living by trading a particular entity.
The trading range below the body of a candle.
Stay tuned for next week’s Glossary with Terms K through…wait and see to find out!
To learn more from Stephen, be sure to sign-up for his free 12 Signals To Master Any Market pdf ebook.