Technical Analysis Glossary

A complete reference covering every trading metric, indicator, chart pattern, and risk management concept on this site. Each entry includes a brief definition and links to the full guide.

Trading Metrics

Performance Metrics

• Total Return — The total gain or loss of a portfolio over a specific period.
• Annualized Return — The geometric average amount of money earned by an investment each year over a given time period.
• Monthly Return — The percentage change in portfolio value over one month.
• Daily Return — The percentage change in portfolio value over one day.
• CAGR (Compound Annual Growth Rate) — The rate of return required for an investment to grow from its beginning balance to its ending balance, assuming profits are reinvested each year.

Risk Metrics

• Volatility (Standard Deviation) — Measures the degree of variation in prices over a specific period.
• Beta — Assesses an asset’s volatility in relation to the overall market.
• Alpha — Indicates the performance of an asset relative to a benchmark index.
• Max Drawdown — The maximum observed loss from a peak to a trough in portfolio value.
• Value at Risk (VaR) — Estimates the maximum potential loss over a given time frame with a specific confidence level.
• Expected Shortfall (ES) — Calculates the average loss exceeding the VaR threshold, providing insight into tail risk.

Efficiency Metrics

• Sharpe Ratio — Measures risk-adjusted return by comparing excess return over the risk-free rate to volatility.
• Sortino Ratio — Similar to the Sharpe Ratio but focuses only on downside volatility.
• Information Ratio — Evaluates portfolio performance relative to a benchmark, adjusted for risk taken.
• Treynor Ratio — Calculates risk-adjusted return by comparing excess return to the investment’s beta.

Trade-Specific Metrics

• Win Rate — The percentage of trades that result in a profit out of the total number of trades.
• Average Win — The average amount of profit made from winning trades.
• Average Loss — The average amount of loss incurred from losing trades.
• Profit Factor — The ratio of total profits to total losses, indicating overall profitability.
• Trade Frequency — The number of trades executed within a specific period.
• Risk-Reward Ratio — The ratio comparing the potential profit of a trade to its potential loss.
• R-Multiple — A comparison of the actual outcome of a trade to the expected risk-reward ratio.
• Max Adverse Excursion (MAE) — The maximum unrealized loss experienced by a trade before it is closed.
• Max Favorable Excursion (MFE) — The maximum unrealized profit achieved by a trade before it is closed.

Portfolio Metrics

• Diversification Ratio — Measures the degree to which a portfolio’s risk is reduced through diversification.
• Correlation Matrix — Displays the correlation coefficients between different assets in a portfolio.
• Sector Allocation — The distribution of investments across various sectors within a portfolio.
• Asset Allocation — The distribution of investments among different asset classes such as stocks, bonds, and cash.
• Turnover Rate — The rate at which assets in a portfolio are bought and sold over a specific period.

Execution Metrics

• Slippage — The difference between the expected price of a trade and the actual execution price.
• Commission Costs — The fees paid to brokers for executing trades.
• Spread Costs — The difference between the bid price and the ask price of an asset.
• Fill Rate — The percentage of orders that are executed successfully.
• Order Execution Time — The time it takes to complete a trade from initiation to completion.

Sentiment Metrics

• Put-Call Ratio — The ratio of the trading volume of put options to call options.
• Short Interest Ratio — The number of shares sold short divided by the average daily trading volume.
• Bullish Percent Index — The percentage of stocks in an index that are currently in a bullish pattern.
• Fear and Greed Index — A measure of market sentiment that combines various indicators to gauge the level of fear or greed.

Trading Indicators

Trend Indicators

• Simple Moving Average (SMA) — Calculates the average price over a specific period, smoothing out fluctuations to show the overall trend.
• Exponential Moving Average (EMA) — A weighted moving average that gives more emphasis to recent prices, reacting faster to trend changes.
• Moving Average Convergence Divergence (MACD) — Measures the relationship between two EMAs to identify trend direction and momentum shifts.
• Parabolic SAR — Plots points above or below price to indicate potential trend reversals and provide trailing stop levels.
• Average Directional Index (ADX) — Quantifies the strength of a trend, regardless of direction, often used with directional movement indicators.

Momentum Indicators

• Relative Strength Index (RSI) — Measures the magnitude of recent price changes to determine overbought or oversold conditions.
• Stochastic Oscillator — Compares a closing price to its price range over a period, indicating momentum and potential reversals.
• Stochastic Relative Strength Index (StochRSI) — Combines RSI and Stochastic principles to provide a more sensitive measure of momentum.
• Rate of Change (ROC) — Calculates the percentage change in price over a specified period, highlighting the speed of momentum.
• Commodity Channel Index (CCI) — Assesses price deviation from its average, identifying cyclical trends and overbought/oversold levels.

Volatility Indicators

• Bollinger Bands — Consist of a moving average and two standard deviation bands, indicating price volatility and potential breakout levels.
• Average True Range (ATR) — Measures the average range of price movement over a specified period, reflecting market volatility.

Volume Indicators

• On-Balance Volume (OBV) — Tracks cumulative volume by adding or subtracting volume based on price direction, indicating buying or selling pressure.
• Chaikin Money Flow (CMF) — Measures the flow of money into or out of an asset over a period, combining price and volume to assess accumulation or distribution.
• Volume Weighted Moving Average (VWMA) — A moving average weighted by trading volume, giving greater emphasis to periods with higher volume.

Support and Resistance Indicators

• Trendlines — Drawn lines connecting price highs or lows to highlight support or resistance zones and trend direction.
• Pivot Points — Calculated levels based on previous price action, identifying potential support and resistance for the current period.
• Fibonacci Retracement — Uses Fibonacci ratios to mark potential support and resistance levels after a price move.
• Trend Based Fib Extension — Extends Fibonacci levels beyond the initial move to project future support or resistance in a trending market.

Cycle Indicators

• Elliott Wave Theory — A principle that categorizes market movements into structured wave patterns to predict market direction.
• Gann Fan — A geometric tool that uses angles to identify potential support and resistance levels based on price and time relationships.
• Gann Box — A time and price analysis tool that forecasts potential turning points by plotting key intervals and ratios.

Divergence

• Divergence Concepts — Compares price movement with indicator behavior to reveal momentum shifts and anticipate trend reversals or continuations.

Trading Patterns

Reversal Patterns

Bullish Reversal Patterns

• Inverse Head and Shoulders — A three-trough formation signaling the end of a downtrend and a potential shift to bullish momentum.
• Double Bottom — Two consecutive troughs at roughly the same level, indicating a reversal from bearish to bullish.
• Triple Bottom — Three consecutive troughs at similar levels, providing strong confirmation of a bullish reversal.
• Rounding Bottom — A gradual U-shaped formation signaling a slow shift from selling pressure to buying momentum.
• Diamond Bottom — A broadening then narrowing price pattern at the bottom of a downtrend, signaling a reversal.
• Falling Wedge — Converging downward trendlines that signal weakening bearish pressure and a potential upward breakout.
• Descending Broadening Wedge — Expanding downward price range that signals increasing volatility before a bullish reversal.

Bearish Reversal Patterns

• Head and Shoulders — A three-peak formation signaling the end of an uptrend and a potential shift to bearish momentum.
• Double Top — Two consecutive peaks at roughly the same level, indicating a reversal from bullish to bearish.
• Triple Top — Three consecutive peaks at similar levels, providing strong confirmation of a bearish reversal.
• Rounding Top — A gradual inverted U-shaped formation signaling a slow shift from buying to selling pressure.
• Diamond Top — A broadening then narrowing price pattern at the top of an uptrend, signaling a reversal.
• Rising Wedge — Converging upward trendlines that signal weakening bullish pressure and a potential downward breakout.
• Ascending Broadening Wedge — Expanding upward price range that signals increasing volatility before a bearish reversal.

Continuation Patterns

Flags and Pennants

• Bullish Flag — A rectangular consolidation sloping against an uptrend, signaling a brief pause before the trend resumes.
• Bearish Flag — A rectangular consolidation sloping against a downtrend, signaling continuation of the decline.
• Bullish Pennant — A small symmetrical triangle forming after a strong upward move, indicating the uptrend will continue.
• Bearish Pennant — A small symmetrical triangle forming after a strong downward move, indicating the downtrend will continue.

Rectangles and Triangles

• Ascending Triangle — A pattern with flat resistance and rising support, carrying a bullish bias toward an upside breakout.
• Descending Triangle — A pattern with flat support and falling resistance, carrying a bearish bias toward a downside breakout.
• Symmetrical Triangle — Converging trendlines representing neutral consolidation that resolves in the direction of the prevailing trend.
• Rectangle — A horizontal consolidation between parallel support and resistance, breaking in the direction of the prior trend.

Special Continuation Patterns

• Measured Move Up — Two equal upward price legs separated by a consolidation, projecting a symmetrical continuation target.
• Measured Move Down — Two equal downward price legs separated by a consolidation, projecting a symmetrical decline target.
• Cup and Handle — A rounded bottom followed by a small pullback, signaling a bullish continuation breakout.
• Rising Three Methods — A long bullish candle followed by small bearish candles and another strong bullish candle, confirming uptrend continuation.
• Falling Three Methods — A long bearish candle followed by small bullish candles and another strong bearish candle, confirming downtrend continuation.

Candlestick Patterns

Bullish Candlestick Patterns

• Hammer — A single candle with a small body and long lower shadow, signaling potential bullish reversal at the bottom of a downtrend.
• Inverted Hammer — A single candle with a small body and long upper shadow at the bottom of a downtrend, hinting at buying interest.
• Dragonfly Doji — A doji with a long lower shadow and no upper shadow, indicating strong rejection of lower prices.
• Bullish Engulfing — A large bullish candle completely engulfing the prior bearish candle, signaling a shift to buying pressure.
• Tweezer Bottoms — Two candles with matching lows, indicating strong support and a potential bullish reversal.
• Piercing Line — A bullish candle opening below the prior bearish candle’s low and closing above its midpoint.
• Bullish Harami — A small bullish candle contained within the prior bearish candle’s body, suggesting diminishing selling pressure.
• Bullish Harami Cross — A doji contained within the prior bearish candle’s body, signaling strong indecision and potential reversal.
• Matching Low — Two consecutive candles with equal closing prices at the bottom of a downtrend, indicating support.
• Morning Star — A three-candle pattern with a bearish candle, small-bodied candle, and bullish candle, signaling a reversal.
• Three White Soldiers — Three consecutive long bullish candles, each closing higher, confirming strong upward momentum.
• Three Inside Up — A harami pattern confirmed by a third bullish candle closing above the first candle’s high.
• Three Outside Up — An engulfing pattern confirmed by a third bullish candle closing higher, validating the reversal.
• Ladder Bottom — A multi-candle pattern showing gradual exhaustion of selling pressure followed by a bullish reversal.

Bearish Candlestick Patterns

• Hanging Man — A single candle with a small body and long lower shadow at the top of an uptrend, warning of potential reversal.
• Shooting Star — A single candle with a small body and long upper shadow, signaling rejection of higher prices.
• Gravestone Doji — A doji with a long upper shadow and no lower shadow, indicating strong rejection of higher prices.
• Bearish Engulfing — A large bearish candle completely engulfing the prior bullish candle, signaling a shift to selling pressure.
• Tweezer Tops — Two candles with matching highs, indicating strong resistance and a potential bearish reversal.
• Dark Cloud Cover — A bearish candle opening above the prior bullish candle’s high and closing below its midpoint.
• Bearish Harami — A small bearish candle contained within the prior bullish candle’s body, suggesting diminishing buying pressure.
• Bearish Harami Cross — A doji contained within the prior bullish candle’s body, signaling strong indecision and potential reversal.
• Matching High — Two consecutive candles with equal closing prices at the top of an uptrend, indicating resistance.
• Evening Star — A three-candle pattern with a bullish candle, small-bodied candle, and bearish candle, signaling a reversal.
• Three Black Crows — Three consecutive long bearish candles, each closing lower, confirming strong downward momentum.
• Three Inside Down — A harami pattern confirmed by a third bearish candle closing below the first candle’s low.
• Three Outside Down — An engulfing pattern confirmed by a third bearish candle closing lower, validating the reversal.
• Advance Block — Three bullish candles with progressively smaller bodies, signaling weakening momentum and potential reversal.

Special Candlestick Patterns

• Common Doji — A candle with nearly equal open and close prices, reflecting market indecision.
• Long-Legged Doji — A doji with long upper and lower shadows, indicating significant indecision with wide price exploration.
• Spinning Top — A candle with a small body and long shadows on both sides, reflecting equilibrium between buyers and sellers.
• Marubozu — A candle with no shadows, reflecting pure buying or selling pressure and strong directional momentum.

Harmonic Patterns

• Bullish Gartley — A four-leg pattern using precise Fibonacci ratios to identify a bullish reversal after a measured pullback.
• Bearish Gartley — A four-leg pattern signaling a bearish reversal after an extended rise, shaped by Fibonacci ratios.
• Bullish Bat — Signals a bullish reversal after a deep but measured retracement, guided by strict Fibonacci ratios.
• Bearish Bat — Points to a bearish reversal after an extended climb, defined by precise Fibonacci measurements.
• Bullish Butterfly — Suggests a powerful bullish rally after an extended decline, formed through Fibonacci extensions.
• Bearish Butterfly — Signals a steep bearish drop after a prolonged rise, formed through precise Fibonacci extensions.
• Bullish Crab — Signals a sharp bullish reversal at an extreme Fibonacci extension level.
• Bearish Crab — Warns of a strong bearish turn after an overextended rally, defined by harmonic measurements.
• Bullish Shark — Indicates a swift bullish reversal from an overextended drop, shaped by unique Fibonacci projections.
• Bearish Shark — Signals a rapid bearish turn after an excessive rise, defined by Fibonacci projections.
• Bullish Cypher — Points to a bullish reversal after a sharp corrective move, structured by distinct Fibonacci patterns.
• Bearish Cypher — Signals a bearish turn following a steep rally, structured by distinct Fibonacci patterns.
• Bullish AB=CD — Marks a likely bullish reversal as two equal price legs complete in symmetrical harmony.
• Bearish AB=CD — Signals a potential bearish turn under the same symmetrical two-leg structure.

Gap Patterns

• Common Gap — The most basic type of gap, often appearing in ranges and usually filled quickly.
• Breakaway Gap — Marks the start of a significant new trend, typically not filled, making it a strong trading signal.
• Runaway Continuation Gap — Appears mid-trend and confirms strong momentum acceleration in the prevailing direction.
• Exhaustion Gap — Occurs near the end of a trend, signaling the final push before a reversal.
• Island Reversal — An isolated price cluster separated by gaps on both sides, signaling a sharp sentiment reversal.
• Abandoned Baby (Bullish) — A doji isolated by gaps at the bottom of a downtrend, signaling a strong bullish reversal.
• Abandoned Baby (Bearish) — A doji isolated by gaps at the top of an uptrend, signaling a strong bearish reversal.
• Upside Tasuki Gap — A bullish continuation pattern where a counter candle confirms the upward move without closing the gap.
• Downside Tasuki Gap — A bearish continuation pattern where a counter candle confirms the downward move without closing the gap.

Risk Management

• Trading Psychology — The foundation of all risk management, developing the mindset, discipline, and risk acceptance required to execute consistently.
• Position Sizing — Controls how much is risked per trade based on account size and trade setup.
• Stop-Loss — Defines where to exit a trade when it moves against you, limiting potential losses.
• Risk-Reward — Ensures each trade has a favorable risk-reward ratio, maintaining long-term profitability.
• Leverage — Amplifies both gains and losses and must be used strategically, not emotionally.
• Volatility Awareness — Adapts your risk strategy based on changing market volatility conditions.
• Drawdown — Tracks peak-to-trough losses and helps manage emotional and capital risk.
• Journaling — Tracks trades, behavior, and results to improve decision-making and discipline.