ADX

Average Directional movement index, a version of the directional movement index to be used on periods of high volatility. Traditionally used to measure the strength of price movement to decide whether it is in trending mode.

Bar Chart

A type of chart consisting of four significant points: the high (1) and the low (2) prices, which form the vertical bar; the opening (3) price, which is marked with a little horizontal line to the left of the bar; and the closing (4) price, which is marked with a little horizontal line to the right of the bar.

Candlestick Chart

A type of chart that consists of four major prices: high, low, open and close. The body of the candlestick bar is formed by the opening and closing prices. To indicate that the opening is higher than closing, the body of the bar is left blank. If the currency closes below its opening, the body is filled. In ForexSAM charts, an up day is marked by a green candle and a down day is marked by a red candle.

Channel Line

A line that is parallel to a trend line, connecting the significant peaks in an up trend and the significant bottoms in a down trend. It is frequently used as a reference tool to project the level and time of the further prices, which are assumed to bounce between the two parallel “channel” lines.

Contrary Opinion

A technical theory that market psychology is such that it often goes against the wish or anticipation of majority views.

Corrections

Counter-trend price movements that are largely the result of profit-taking.  These are very technical moves that must occur, and their correction distance can often be measured prior to occurrence by Fibonacci correction ratios.

Cycles

Variation where a point of observation returns to its origin. Certain price movement patterns are believed and observed to have recurrence according to Fibonacci sequential numbers, and thus can be predicted accordingly. It is most often used to provide an estimate of timing of a suspected turn of market movements, or a trend reversal.

Divergence

When two or more indicators fail to pattern after price trends, they are often observed to be an omen of major market corrections or trend reversals. It shows up nearly without a fail on all formations of double- tops/bottoms, much more so in case of triple-tops/bottoms.

Double Bottoms

A bullish reversal pattern that consists of two bottoms of approximately equal lows, with the latter bottom typically lower than the first. A parallel line is drawn from the support line that connects the two bottoms, and it is placed on the peak between the two bottoms to form a resistance line. The break of this resistance line generates a bullish move often equal in size as the previous bearish move, forming a "W"-shaped price pattern on chart.

Double Tops

A bearish reversal pattern that consists of two tops of similar heights, with the latter one being slightly higher than the first. A parallel line is drawn from the resistance line that connects the two tops, forming a support line when placed at the bottom between the double-tops. The break of the support line generates a move usually equal in size as the previous bullish move, forming an "M"-shaped price pattern on chart.

Elliot Waves

A technical theory asserting that a full market cycle completes itself in a series of 8 waves, with the initial five waves (known as W1, W2, W3, W4, and W5) being parts of a giant trending wave, and the remaining three waves (known as A, B, and C) being parts of a counter-trend correction.

Fibonacci Ratio

0.382, 0.618, 1.382 and 1.618, a natural phenomenon that is found to have frequent recurrence during market corrections, known as 38% and 62% retracements, or corrections.

Flag Formation

A price consolidation pattern at the end of a thrusting and stiff wave, indicating the repeat of the same wave for the second time from the higher or lower level.

Fundamental Analysis

A cause-and-effect study of market behavior based on factors of news, events, economy, and politics. It is prone to victimhood of insider-trading and market’s “buy rumor sell fact” behavior.

Gann Projection

An interesting method to forecast price targets, derived from Gann's trading techniques, by combining theories of market cycles, ratios, and other unexplainable natural phenomena.

Head and Shoulders

A bearish reversal pattern that consists of a series of three consecutive rallies after a prolonged bull run, where the first and third rallies (the shoulders) reach similar heights and the middle one (the head) protrudes above the two. The rallies usually take off from the same support line, known as the “neckline.” When the neckline is broken, the price target is approximately equal in amplitude and distance to the wave from the top of the head to the neckline. Also known as the "Triple-top" formation, Head and Shoulders is referred to as the "Triple-bottom" formation or “inverted Head and Shoulders” pattern to describe a bullish scenario.

Key Reversal

The daily or weekly close that settles far away from and opposite of ongoing trends. A bearish key reversal closes below open and away from the market highs; a bullish key reversal closes above its open and away from the market lows. Weekly key reversals are more indicative of a trend reversal, whereas daily key reversals may signal more of a pending correction.

Money Management

A risk-control policy that safeguards trading positions from the unexpected risk with iron rules of stop loss.  See Risk Reward Ratio.

Moving Average

An average of prices (high, low, open, close) over a period of time (minutes, hours, days, weeks, etc.). It is used primarily to project a trend curve on chart to aide technicians with readings on market trend. When prices trade above the MA curve, the market is said to be bullish, and vise versa.

Point and Figure Chart

A third type of chart, in addition to the more popular Bar Chart and Candlestick Chart, that consists of only price highs and lows, which are symbolized by columns of "X’s" (up) and "O’s" (down) to track price movements.

Resistance Level

The peaks representing the price level where buying decreases and selling increases. Upward price movements are expected to slow down when coming close to resistance levels. A strong resistance can turn the market tide either into downside correction or downward trend reversal.

Risk Reward Ratio

Or short-termed as RRR, a money management rule that serves to minimize loss according to predetermined level of risk tolerance. Also see Money Management.

RSI

Relative Strength Index, an oscillator that measures the relative changes between the higher and lower closing prices. The RSI is plotted on a 0 to 100 scale. The 30 and 70 values are used as warning thresholds, beyond which the market is considered “oversold” or “overbought,” a condition that calls for buy or sell entry/exit.

Support Level

The bottoms representing the price level where selling decreases and buying increases. Downward price movements are expected to slow down when coming close to support levels. A strong support can turn the market tide either into upside correction or upward trend reversal.

Technical Analysis

The chart study of past price movement patterns for the purpose of forecasting their future behaviors, based on the assumption and affirmation that these patterns are likely natural recurrence.

Trend

The general direction of a moving market, as shown by acceding or descending peaks and bottoms of price movements.

Trend Line

A straight line that can be drawn on chart to connect the significant highs (peaks) in a down trend, and the significant lows (bottoms) in an up trend.

Triangle Breakout

A sideway market fluctuation with reduced volatility that winds itself down into a breaking point. This price pattern has a string of falling tops and rising bottoms, thus resembling the shape of a triangle. It is the bigger version of "flag formation" to warn a breakout move ahead, which is usually the repeat of the previous wave prior to the start of triangle consolidation.

Triple Bottoms

Also known as inverted Head and Shoulders formation. See Head and Shoulders.

Triple Tops

See Head and Shoulders.

%R

An oscillator that trails the difference between the price highs/lows and their closing prices. This oscillator is plotted on a 0 to 100 scale. The interpretations are similar to those of RSI, only the 80% reading indicates “overbought” market condition, and the 20% indication suggests an “oversold” market.