Terms Flashcards
Always In
If you have to be in the market at all times, either long or short, this is whatever your current position is (always in long or alway in short). If at any time you are forced to decide between initiating a long or a short trade and are confident in your choice, then the market is always-in mode at that that moment. Almost all of these trades require a spike in the direction of the trend before traders will have confidence.
Barbwire
A trading range of three or more bars that largely overlap and one or more is a dojo. It is a type of tight trading range with prominent tails and often relatively large bars.
Bar Pullback
In an upswing, a bar pullback is a bar with a low below the low of the prior bar. In a downswing, it’s a bar with a high above that of the prior bar.
Bear Reversal
A change in trend from up to down (a bear trend).
Blown Account
An account that your losses have reduced below the minimum margin requirements set by your broker, and you will not be allowed to place a trade unless you deposit more money.
Breakout
The high or low of the current bar extends beyond some prior price of significance such as a swing high or low, the high or low of any prior bar, a trend line, or a trend channel.
Breakout Bar (or Bar Breakout)
A bar that creates a breakout. It is usually a strong trend bar.
Breakout Mode
A setup where a breakout in either direction should have follow through.
Breakout Pullback
A small pullback of one to about five bars that occurs within a few bars after a breakout. Since you see it as a pullback, you are expecting the breakout to resume and the pullback is a setup for that resumption. If instead you thought that the breakout would fail, you would not use the term pullback and instead would see the pullback as a failed breakout. For example, if there was a five-bar breakout above a bear trend line but you believed that the bear trend would continue, you would be considering shorting this bear flag and not looking to buy a pullback immediately after it broke out to the downside.
Breakout Test
A breakout pullback that comes close to the original entry price to test a break even stop. It may overshoot it or undershoot it by a few ticks. It can occur within a bar or two of the entry or after an extended move or even 20 or more bars later.
Bill Reversal
A change in trend from a downtrend o an uptrend (a bull trend).
Buying Pressure
Strong bulls are asserting themselves and their buying is creating bull trend bars, bars with trails at the bottom, and two-bar bull reversals. The effect is cumulative and usually is eventually followed by higher prices.
Candle
A chart representation of price action in which the body is the area between the open and close. If the close is above the open, it is a bull candle and is shown as white. If it is below, it is a bear candle and is black. The lines above and below are called tails (some technicians call them wicks or shadows).
Chart Type
A line, bar, candle, volume, tick or other type type of chart.
Climax
A move that has gone too far too fast and has now reversed direction to either a trading range or an opposite trend. Most climaxes end with trend channels overshoots and reversals, but most of those reversals result in trading ranges and not an opposite trend.
Countertrend
A trade or setup that is in the opposite direction direction from the current trend (the current always-in direction). This is a losing strategy for most traders since the risk is usually at least as large as the reward and the probability is rarely high enough to make the trader’s equation favorable.
Countertrend Scalp
A trade taken in the belief that there is more to go in the trend but that a small pullback is due; you enter countertrend to capture a small profit as that small pullback is forming. This is usually a mistake and should be avoided.
Day Trade
A trade where the intent is to exit on the day of the entry.
Directional Probability
The probability that the market will move either up or down any number of ticks before it reaches a certain number of ticks in the opposite direction. If you are looking at an equidistant move up and down, it hovers around 50 percent most of the time, which means that there is a 50-50 chance that the market will move up by X ticks before it moves down X ticks, and a 50-50 chance that it will move down X ticks before it moves up X ticks.
Doji
A candle with a small body or no body at all. On a 5 minute chart, the body would be only one or two ticks; but on a daily chart, the body might be 10 or more ticks and still appear almost nonexistent. Neither the bulls nor the bears control the bar. All bars are either trend bans or nontrend bars, and those nontrend bars are called dojis.
Double Bottom
A chart formation in which the low of the current bar is about the same as the low of a prior swing low. That prior low can be just one bar earlier or 20 or more bars earlier. It doesn’t have to be at the low of the day and it commonly forms in bull flags (a double bottom bull flag).
Double Bottom Bill Flag
A pause or bill flag in a bill trend that has two spikes down to around the same price and then reverses back to a bill trend.
Double Bottom Pullback
A buy setup composed of a double bottom followed by a deep pullback that forms a higher low.
Double Top
A chart formation in which the high of the current bar is about the same as the high of the prior swing high. That prior high can be just one bar earlier or 20 or more bars earlier. It doesn’t have to be at the high of the day and it commonly forms in bear flags (a double top bear flag).