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Stock trading > Technical Analysis > Flashcards

Technical Analysis Flashcards

1
Q

Comeback King Pattern

A

Stock that swings from overbought to oversold repeatedly (at least 3 times)

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2
Q

Comeback Queen Pattern

A

Stock that goes from under fair value (under the 50 RSI) to overbought repeatedly (at least 3 times)

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3
Q

Price momentum loss

A

Smaller and smaller candles as they approach a level of support.

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4
Q

Possible trend change

A

Candles changing colors at support or resistance

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5
Q

Bollinger Bands

A

2 Bands above and below a moving average 2 standard devitations away.

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6
Q

How many % of the price data is between the bollinger bands?

A

95% of the price data.

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7
Q

If the price is on the upper end of the bollinger bands…

A

…the market is maybe overextended and we expect a selloff (and a move to the lower end) (overbought) (sell)

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8
Q

If the price is on the lower end of the bollinger bands…

A

…people may be looking for the market to roll back up and test the other end. (Oversold) (buy)

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9
Q

If volatility drops, the bollinger bands will…

A

…get tighter

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10
Q

If volatility increases, the bollinger bands will…

A

…widen

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11
Q

The default time period of bollinger bands is…

A

…20 days

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12
Q

Good entry point to buy or sell with bollinger bands is…

A

…when the bands start to widen and volatility increases.

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13
Q

Bearish divergence

A

Price reaches new high

Indicator makes a lower high.

Price likely to go down.

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14
Q

Bullish divergence

A

Price reaches a new low.

Indicator makes a higher low.

Price likely to go up.

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15
Q

Fibonnaci Retracements

A

Lines on the price chart on the 23.6%, the 38.2%, 50%, and 61.8% mark to give you levels when to buy or sell.

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16
Q

VWAP

A

Volume Weighted Average Price. It gives the average price a security has traded at throughout the day.

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17
Q

Price above the VWAP

A

Bullish sentiment

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18
Q

Price below the VWAP

A

Bearish sentiment

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19
Q

VWAP calculation

A

Sum of prices x Volume / Total volume

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20
Q

Buy call option

A

Gives us the right to buy 100 stocks at a certain price (the strike price) (betting on long position, price rising)

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21
Q

Break even point (call option)

A

The Strike price + the premium cost. Everything above the strike price is profit.

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22
Q

IV Crush

A

Implied Volatility is high, and options are expensive (often before earnings reports)

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23
Q

When to buy call options

A

Before earnings

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24
Q

Uptrend

A

Market makes successive higher highs and higher lows.

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25
Q

Downtrend

A

Market makes successive lower highs and lower lows.

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26
Q

Trendline for an Uptrend

A

Connect major throughs (the lows) (At least 2 throughs and a 3rd one for confirmation)

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27
Q

Trendline for a Downtrend

A

Connect major peaks (the highs) (At least 2 peaks and a 3rd one for confirmation)

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28
Q

Trendlines can act as…

A

…support or resistance. If the price breaks through the trendline the trend might be over.

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29
Q

MACD

A

Moving Average Convergence Divergence

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30
Q

When the stock begins to rise, the faster MA is…

A

…above the slower one. That is because the more recent prices are getting stronger than prices in the past. Possible uptrend.

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31
Q

When the stock price begins to become weaker, the faster MA is…

A

…below the slower one. That means that the more recent prices are getting weaker than the prices in the past. Possible downtrend.

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32
Q

The 2 lines in the MACD indicator are…

A

…the MACD line itself, and the signal line.

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33
Q

The MACD line is…

A

…the difference between the fast and the slow moving average (both are EMAs)

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34
Q

When the faster MA is below the slower one, the MACD is…

A

…negative.

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35
Q

When the faster MA is above the slower one, the MACD is…

A

…positive.

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36
Q

The signal line is…

A

…a moving average of the MACD line (usually a nine period EMA of the MACD line).

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37
Q

When the MACD goes above its average price (the signal line)…

A

…it could mean that prices are getting stronger with a possible uptrend. (Early entry on a buy signal)

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38
Q

When the MACD line goes from below zero to above zero…

A

…there is a possible uptrend. (Buy signal)

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39
Q

When the MACD line goes from above zero to below zero…

A

…there is a possible downtrend. (Sell signal, or going short).

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40
Q

Negative Divergence

A

MACD moves inversely to a rising stock, and could signal a potential reversal.

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41
Q

Positive Divergence

A

MACD moves inversely to a falling stock, and could signal a potential reversal.

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42
Q

Pip

A

Smallest amount of movement in a currency pair (relevant to us). 4th place away from the decimal

Example: EUR/USD drops from 1.0787 to 1.0786, it dropped 1 Pip.

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43
Q

Pip for Yen currency pairs

A

It´s the 2nd decimal place. For example: 110.90, the 0 after the 9 is a Pip.

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44
Q

Equilibrium Point

A

The central line of the Pivot Points. This is where the next day´s trading is expected to occur.

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45
Q

Pivot Points

A

Equilibrium Point (center), 3 resistance levels (R1, R2, R3 above the EP), and 3 support levels (S1, S2, S3, below the EP).

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46
Q

A break UP through any pivot level could signal…

A

…a possible buying opportunity.

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47
Q

A fall THROUGH any pivot level could signal…

A

…an opportunity to short the stock.

48
Q

You can also use pivot points as…

A

…targets for when to enter or exit a trade.

49
Q

Pivot Points can help you manage your risk by…

A

…indicating where to set appropriate stop losses.

50
Q

Volume

A

The quantity of a security that trades between buyers and sellers. It is measured on a trade by trade basis and totaled over a given time period.

51
Q

Share

A

Partial ownership of a company.

52
Q

Average Daily Volume

A

The average daily volume for a given time period (usually 20-30 days).

53
Q

Some investors believe that moves in price on higher than average volume…

A

…are more valid than moves on lower than average volume. Possible price move upwards.

54
Q

Increased volume on the rally suggests…

A

…that institutions are buying the stock.

55
Q

Increased volume on a downward chart suggests…

A

…that institutions are selling the stock.

56
Q

Downtrends are…

A

…commonly faster than uptrends. (Stocks taking the stairs going up, and the window going down).

57
Q

OBV indicator

A

On-balance volume. It helps spot volume strenght with the trend. It measures the volume on up and down days to see where the strenght is.

58
Q

When volume is confirming an uptrend, the OBV line…

A

…will uptrend at a greater rate than the stock price.

59
Q

When volume is confirming a downtrend, the obv line will…

A

… downtrend at a greater rate than the price.

60
Q

Stochastic Oscillator

A

Momentum oscillator (like the RSI). Gives indications of overbought and oversold. Compares current prices to prices in the past (factures in highest high and lowest low).

61
Q

2 lines of the stochastic oscillator

A

%k and %D (the signal line)

62
Q

%D

A

Average %k over d (3) periods (smoother than %k)

63
Q

usages of the Stochastic Oscillator

A
  1. Overbought and oversold (like RSI)
  2. Crossovers of %k and %D
  3. Divergences between price and oscillator
64
Q

If you have %k crossing BELOW %D…

A

…then you sell.

65
Q

If you have %k crossing ABOVE %D

A

…then you buy.

66
Q

Divergence: Price goes up and stochastic oscillator dips

A

potential price reversal.

67
Q

Fast stochastic is…

A

…more sensitive than slow.

68
Q

Slow stochastic…

A

…smooths out the %k line by averaging over d periods.

69
Q

SWAPS

A

Switching between two parties. For example switching a floating variable loan rate for a fixed loan rate.

70
Q

Hedging

A

A kind of insurance for your holdings. This is done by adding investments into our portfolio, that move in the opposite direction of what we´re trying to manage.

71
Q

Hedging will ensure that if our holdings lose value…

A

…the new asset will appreciate thus offsetting the decline and providing some protection. (for example shorting the position of a stock he holds, or by derivatives.)

72
Q

Derivatives

A

A contract whereby you enter a bet or an agreement with another investor. It derives its value from the underlying asset, like stocks, commodities, or currencies)

73
Q

Derivative examples

A

Options, Futures

74
Q

You can use a buy put option…

A

…as a hedging instrument, so you can sell your stocks for a specified price, even if the stock crashes.

75
Q

Heikin Ashi

A

Japanese technique based on the candlestick theory, mainly used for trend determination. (The average pace of prices). It acts like an indicator.

76
Q

Heikin

77
Q

Ashi

78
Q

Heikin Ashi Candlesticks

A

Each candlestick is calculated and plotted using some information from the previous candlestick.

79
Q

Heikin Ashi Open Price

A

The average of the open and close price of the previous canldestick.

80
Q

Heikin Ashi Close Price

A

The average of the open, close, high and low prices of the previous candlestick.

81
Q

Heikin Ashi High Price

A

One of the high, open and close price of the previous candlestick (which has the highest value)

82
Q

Heikin Ashi Low Price

A

One of the low, open and close price of the previous candlestic (which has the lowest value).

83
Q

Up Heikin Ashi Candlestick

A

The closing price must be ABOVE the midpoint of prior candle.

84
Q

Down Heikin Ashi Candlestick

A

The closing price must be BELOW the midpoint of prior candle.

85
Q

Heikin Ashi candlestick charts work like a…

A

…moving average.

86
Q

When the market is bullish, Heikin Ashi candlesticks have…

A

…big (green) bodies, long upper shadows, and no lower shadow.

87
Q

When the market is bearish, Heikin Ashi candlesticks have…

A

…big (red) bodies, long lower shadows, and no upper shadow

88
Q

Reversal candlesticks in the Heikin Ashi charts look like…

A

…regular Doji candlesticks. (no, or small bodies, and long upper and lower shadows.) Price action is stalling.

89
Q

Heikin Ashi charts work well with the…

A

4 hour or daily charts.

90
Q

SMA

A

Simple Moving Average. It shows price trends by smoothing out price fluctuations.

91
Q

Simple Moving Average assigns…

A

…equal weight to all previous data.

92
Q

EMA

A

Exponential Moving Average

93
Q

Exponential Moving Average assigns…

A

…more importance to the most recent data values.

94
Q

MACD histogram…

A

…is comprised of the differences between the signal and MACD line.

95
Q

The MACD line helps…

A

…determine upward or downward momentum.

96
Q

Convergent

A

when the (MACD) lines convert to one another.

97
Q

DIvergent

A

when the (MACD) lines move apart.

98
Q

To calculate today´s 20 day SMA number…

A

…you add each of the past 20 day´s prices together, then divide them by 20.

99
Q

When price goes above an upwardly sloping MA…

A

…it is a buy signal.

100
Q

Support bounce

A

When the security´s MA line acts as a support level for the price, which bounces off the MA.

101
Q

When the price rises up to the MA line and bounces…

A

…it is a sell signal.

102
Q

Whipsaws

A

When the stock crosses upwards over a MA, giving one signal, and then reverses quickly downwards over the MA, giving the opposite signal.

103
Q

EMA is helpful for…

A

…active traders, who want to place short term trades. They reacty quickly to the security´s price changes.

104
Q

Doji candle (Common Doji)

A

A candle where the open and close price are the same, or nearly the same.

105
Q

Doji meaning…

A

…market indecision. Lack of control by the bulls and the bears.

106
Q

Another Doji meaning…

A

…possible reversal (change of direction).

107
Q

Doji candles can offer decent entry points…

A

…when they form at support or resistance levels, pivot points or Fibonnaci Retracements.

108
Q

Gravestone Doji…

A

…open and close are at the low, with a long, upward wig. (Bearish Pattern) Only trade this pattern near strong support and resistance levels.

109
Q

Dragonfly Doji…

A

…Open and close price are at the high, and it has a long, lower wig. (Bullish pattern). Trade it near strong support and resistance levels.

110
Q

Long legged Doji…

A

…long upper and lower wigs. (Market indecision). Should only be traded on higher timeframes.

111
Q

Rare Doji…

A

…when the open, close, high and low are all the same. (When the market is very illiquid, complete uncertainty of the market direction)

112
Q

Trade Dojis around…

A

…resistance and support levels.

113
Q

The next 3 candles after a doji forms must…

A

…close above the high of that doji.

114
Q

Conditional change after the 3 candles after a doji…

A

…a higher closing high above the doji´s high, but it must occur near a pivot point level. (For a long entry)

115
Q

Doji Stop Loss

A

Use a stop loss below the low of the Doji.

Stock trading (4 decks)

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