The Vocabulary of Technical Analysis Technical analysis is a field that uses charts and indicators to predict future price movements of financial assets such as stocks or cryptocurrencies. This method is based on the idea that recent trends and patterns can predict future price movements. He […]
All the vocabulary of technical analysis
Technical analysis is a field that uses charts and indicators to predict future price movements of financial assets like stocks or cryptocurrencies.
This method is based on the idea that recent trends and patterns can predict future price movements. There are many key terms associated with technical analysiseach with a specific meaning for traders and investors.
This glossary will provide you with a concise understanding of these key terms, helping you better understand technical analysis and how it can be used to make investment decisions.
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Technical analysis
This method of analysis aims to predict future price movements of financial assets using historical price and volume data.
👉 Find all our technical analyzes on Bitcoin and other cryptocurrencies
Bollinger Bands
Technical indicator used to measure market volatility. They consist of three lines: a central moving average which represents the market trend, and two bands which are at a fixed distance from the moving average and which represent the levels of uncertainty. When prices are near the upper bands, it may indicate overbought, while when they are near the lower bands, it may indicate overselling.
Bearish
Refers to a downtrend in the market.
Bear Market
A bear market, or “bear market”, is a period when the prices of financial assets (stocks, cryptocurrencies, etc.) decline significantly and for a prolonged period. A bear market is often associated with a period of economic recession or financial crisis.
Bear Trap
A situation in which investors believe the market is going down, but then suddenly turns up, trapping investors who bet on lower prices.
Bevels (or wedge)
Bevels are graphical triangle shapes. Wedges can be ascending (narrow triangle widening upwards, left below) or descending (narrow triangle widening downwards, right below) and can indicate a bullish or bearish trend in depending on the direction they take.
Bottom
The lowest point of a bearish movement on a chart.
Candle (or candlestick)
The candle, also called candlestick, is the most famous graphic tool in technical analysis to represent the evolution of the price of a financial asset over a given period. The candle has a body, which indicates the difference between the opening and closing price of the asset during the period under review, as well as upper and lower wicks, which indicate the highest and lowest reached during this same period. . Candles can be colored green or red to indicate rising or falling prices.
Bullish
Refers to an upward market trend.
Bull Market
A bull market, or “bull market”, is a period when the prices of financial assets (stocks, cryptocurrencies, etc.) increase significantly and for a prolonged period. A bear market is often associated with a period of economic growth or increased investor confidence in financial markets.
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Bull Trap
A situation in which investors believe the market is going up, but then suddenly turns down, trapping investors who have been betting on higher prices.
Channel
A chart pattern that is drawn when prices move between two parallel trend lines.
Break
A movement in the price of an asset that breaks through a support or resistance level.
Dead Cat Bounce
Temporary price rebound of a falling asset, usually followed by a continuation of the downtrend
Divergence
Difference between the evolution of an asset and that of a technical indicator. It can be used to detect trend reversal signals.
Doji
A Doji forms when the opening and closing price of a trading day are the same or nearly the same, resulting in a candle represented by a thin vertical line. This situation indicates uncertainty or a balance between supply and demand for an asset, which may suggest a possible trend reversal.
Double Bottom
Chart pattern that forms when prices reach a low point, then rise again before falling again to the same price level, but without being able to exceed it. This shape is generally seen as a buy signal, as it indicates that the downtrend is running out of steam and sellers are finding it increasingly difficult to keep prices down.
double-top
A chart pattern that forms when prices reach a peak, then fall back before rising again to the same price level, but without being able to exceed it. This shape is generally seen as a sell signal, as it indicates that the uptrend is running out of steam and buyers are finding it increasingly difficult to keep prices high.
Drawdown
Term used in technical analysis to describe the largest loss suffered by an investment at any given time, measured from a high point to the lowest point reached before the rally. It is an indicator used to measure the performance and risk management of a portfolio.
Shoulder Head Shoulder
A trend reversal pattern that forms when the price of an asset moves in such a way that it forms a shape that resembles a head over one shoulder, with another symmetrical shoulder on the other side. This pattern is seen as a signal of a potential reversal from an uptrend to a downtrend, and vice versa for a downtrend (Shoulder Head Shoulder Reversed).
👉 What is the shoulder-head-shoulder pattern in trading?
Fibonacci
This technical indicator is based on a sequence of numbers discovered by Leonardo Fibonacci in the 1200s that describes proportions often found in nature and mathematics. Fibonacci levels are used to determine potential support and resistance levels by drawing retracements of price movements on charts. Traders use these levels to determine potential entry and exit points in the market.
👉 All about Fibonacci retracements
Chartist figure
Price and volume pattern that can indicate future price movement.
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Turnaround figure
Graphical form that indicates a likely change in trend in the prices of an asset. There are different types of reversal patterns, such as double tops and double bottoms, which can be used to predict a reversal from an uptrend to a downtrend or vice versa.
👉 Learn more about the different reversal figures
golden cross
Chart pattern that occurs when the short-term (usually 50-day) moving average crosses above the long-term (usually 200-day) moving average. This is seen as a buy signal for investors, indicating potential for price upside ahead.
High
Highest price reached by a financial asset over a given period.
Ichimoku
Technical indicator used to measure the trend, strength and momentum of an asset. It is made up of several elements, such as the moving average, the cloud, and the trend lines.
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Technical indicator
Statistical tool used to aid in the analysis of price and volume movements.
intraday
Term used to describe the price movements of a financial asset over a single trading day.
Neck line (neckline)
A line of support or resistance that forms between the two lows (or highs) of a chart pattern, such as the double top or the head and shoulders. A break below (or above) the neck line may suggest a change in trend.
Low
Lowest price reached by a financial asset over a given period.
MACD
Technical indicator used to measure trend strength and detect trading signals. It is made up of two lines: the signal line and the divergence line.
Spot market
Market where assets are bought and sold immediately, unlike futures markets where transactions are made at a future date.
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Futures market
A market where futures contracts are bought and sold, allowing investors to bet on the future price movement of the underlying assets.
momentum
Technical indicator that measures the speed of price change of a financial asset. Momentum is usually calculated using the difference between current prices and prices from a number of time periods ago (for example, the difference between current prices and prices from 14 days ago). If momentum is positive, it means prices are rising at a faster rate than they are falling, indicating an uptrend. If the momentum is negative, it means prices are falling at a faster rate than they are rising, indicating a downtrend.
Moving average
Technical indicator that calculates the average of prices over a given period of time.
open-interest
Number of open contracts or open positions on a given market.
👉 Understanding open interest and its interpretation
pull-back
Temporary price return to a support or resistance level before resuming the previous trend
Tidy
Range of price change of an asset over a given period of time. This can be used to determine if an asset is overbought or oversold.
👉 Understand this fundamental aspect of technical analysis
Relative Strength Index (RSI)
Technical indicator used to measure the outperformance or underperformance of an asset relative to its price. It is used to detect overbought and oversold signals.
Resistance
Price level where sellers are expected to intervene to curb the rise in price of an asset.
Retracement
Temporary change in the upward or downward price trend.
Support
Price level where demand is likely to increase, which either halts or slows down the price of an asset.
Overbought / Oversold
A situation where an asset is considered overbought or oversold based on certain technical indicators, such as the RSI oscillator. When an asset is considered overbought, it could experience a short-term downside correction. Otherwise, if it is considered oversold, it could bounce in the short term.
top
Highest point of a bullish movement on a chart
trend
General price trend, which can be up, down or stable.
Ascending triangle
Chart pattern that occurs when the price of an asset moves between horizontal resistance and an ascending trend line. The ascending triangle is generally considered a buy signal because it indicates that the uptrend is strong and investors are ready to buy at higher prices.
descending triangle
Chart pattern that occurs when the price of an asset moves between horizontal resistance and a descending trend line. The descending triangle is generally considered a sell signal because it indicates that the downtrend is strong and investors are ready to sell at lower prices.
Volume
Measure the amount of stocks, contracts or cryptocurrencies traded in a given financial market (e.g. BTC/USDT pair) over a specific period of time. Volume is often used to gauge the strength of an existing trend.
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Editor-in-chief of cryptonewsherald, I discovered Bitcoin and blockchain technology in 2017. Since then, I have been striving to share quality content so that the sector becomes more democratic for everyone.
Clement Wardzala
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