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.
Related to the velocity of a price move. The most recent close is compared to a specific number of closes in a specific time frame.
A Japanese definition for a large buy or sell order on the opening that is designed to significantly move the market.
Moving Average Convergence-Divergence oscillator (MACD)
A combination of three exponentially smoothed moving averages.
The level that indicates the lows of the head in the head and shoulders formation or the high points in an inverse head and shoulders formation.
A large order placed at the close to move the market.
The term for closing trades. Longs are said to liquidate. Shorts are said to cover.
On-Balance Volume (OBV)
A cumulative volume figure. If prices close higher than the prior trading session, the volume for the higher day is added to the OBV. Conversely, volume is subtracted from the OBV on days when prices close lower than the previous day.
Pertains to future contracts. It is the number of contracts that are still outstanding. It will be equal to the total number of long and short positions, not the combination of the two.
An indicator based upon a momentum formula that moves above or below a zero line or on a chart grid between 0 and 100 percent. They depict overbought and oversold conditions and positive or negative divergences; r measures the velocity in a price movement.
A term associated with specific oscillators to denote when a price has moved too far, too fast in an upward direction.
The same as the overbought definition except for it being in the downward direction.
A popular method using real-life trade circumstances and trading with imaginary trading funds.
Another name for the Harami cross.
An order placed to limit losses on an existing position. If prices move to that level, a trade is initiated to liquidate the position avoiding further loss potential.
Another name for the star formation.
Usually a strong upward price movement.
A price movement that moves opposite the current trend.
Real body (or body)
The boxed area from the open to the close is what forms the body of the candle (see candlestick patterns). When the close is lower than the open, a black body is produced. A close above the open causes a white body to be formed.
Relative Strength Index (RSI)
An oscillator developed by Welles Wilder. It compares the ratio of positive closes to negative closes over a specific time period.
A trading level where obvious selling keeps the prices from advancing any further.
The price movement in the opposite direction of the recent trend.
After a move experiences a new high (or low), the next close is below (or above) the previous day’s close.
A long-legged Doji where the body, although small, is in the center of the formation.
Stay tuned for stock market trading glossary terms S-Z to assist with your stock analysis.
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