Why does price matter?Price is the current summation of multiple factors including volume, momentum, participation, and sentiment. [Read More]
What is sentiment? Market sentiment refers to the overall attitude of investors toward a particular stock or financial market. [Read More]
Why does sentiment matter?We like to say, in the short run the markets are a popularity contest, and in the long run the markets are a weighing mechanism for value. [Read More]
How does sentiment affect buyer/seller behavior?Sentiment is very important when it comes to measuring where a stock is currently at in the lifecycle of buyer and seller perception. [Read More]
What is a Candlestick Chart? A variant of the box and whisker chart, candlestick charts take a lot of security price information and condense it into an easily digestible format that can be utilized by analysts and traders to monitor price fluctuations on a daily basis as well as to research the performance of a security when conducting technical analysis. [Read More]
What is a Bar Chart? A bar chart in the financial world highlights the same five pieces of information that candlestick charts do, but in a different way. By visually depicting the opening and closing prices, the high and low prices, and whether there was a gain or loss, bar charts are a quick and easy reference to identify performance and more importantly, trends within a security or market’s price. [Read More]
What is a Heiken-Ashi Chart?A Heiken-Ashi chart is a type of candlestick chart that makes it easier for analysts and investors to spot trends due to its more user-friendly interface. Besides the appearance difference between a candlestick chart and a Heiken-Ashi chart, the formulas utilized to create both charts are different, with the candlestick using a method of open, high, low, and close and the Heiken-Ashi using a method of close, open, high, and low. [Read More]
What is a Line Chart? A line chart is simplest chart utilized by analysts and traders in the financial world. It gets its name from the lines that connect the data points it displays, which are usually the closing price of the security in question for a given trading session. [Read More]
What is a Point-and-Figure Chart? Created by Charles Dow, point-and-figure charts show the movement of the price of a security irrespective of time. The charts are used by technical analysts and investors to identify trends and patterns within the market that can be difficult to detect utilizing other charting methods. [Read More]
What is a Renko Chart? Renko charts are very similar to point-and-figure charts in that they track the movement of a security’s price irrespective of time. Whereas a point-and-figure chart stacks box sizes in a column, box sizes are spaced next to each other at 45-degree angle offsets. [Read More]
What is a Daily Chart? A daily chart is a chart that displays specific data regarding a security, usually price, by day. There are many types of daily chart types, including bar charts, candlestick charts, and line charts. Analysts and traders utilize daily charts to identify patterns and trends in a technical analysis of a security, usually over long periods of time. [Read More]
What is a Intraday Chart?An intraday chart tracks data (usually price) for a particular security for a single trading session. Just as with daily charts, intraday charts can have many formats, including bar charts, candlestick charts, and line charts. The main difference between an intraday chart and a daily chart is that the intraday chart displays data for only a single trading session, usually in a specific interval (30 minutes or 60 minutes). [Read More]
What are price channels? Price channels are trendlines that become visible on a chart (usually a candlestick chart) when the price of a security is contained within two parallel lines. Utilized by analysts and investors in the process of technical analysis, price channels serve as indicators of both the momentum and direction of a security’s price movements. [Read More]
What is a breakout? Breakout is a term used to describe when a security’s price breaks through either that security’s support or resistance levels. Breakouts are part of technical analysis, and usually indicate that there is at least the potential for the security’s price to begin to trend in the direction that the breakout occurred. [Read More]
What is a breakdown? Breakdown is a specific type of breakout move in a security’s price, specifically moving in a downward trend below its support level. As with other types of breakouts, it is a critical component in the initial technical analysis of a security and is usually accompanied by heavy trading volume for the security in question. [Read More]
What are moving averages? Moving average is a statistical tool that has been adapted to the financial world as a technical indicator used to view the moving average of a security over a specific period of time. By calculating a security price’s moving average, analysts and investors are able to smooth out the data and more easily identify trends for use in investment decisions. [Read More]
What is a trendline? Trendlines are key components of technical analysis that analysts and investors place on charts in order to easily see patterns in the data. Trendlines can be created in several different ways but are usually created by connecting to price points on the chart or by creating a best fit line using charting software. Multiple trendlines can be used to create price channels. [Read More]
What is Fibonacci? Fibonacci numbers in finance are taken from the Fibonacci sequence that was developed by the Italian mathematician of the same name in the 1200s. As it relates to finance, Fibonacci numbers are utilized in technical analysis to identify both price retracements and extensions, giving analysts and investors an idea how long a pullback or surge may last. [Read More]
What are bid-ask spreads? The bid-ask spread is the difference between the highest bid price (price someone is willing to pay for a security) and the lowest ask price (price someone is willing to sell a security for) of a particular security. This measure is often taken as a gauge of the supply and demand for the security in question. [Read More]
What is price discovery? Price discovery is the term that is given to the process by which the price of a security is set. While the main components are supply and demand, there are a multitude of factors that play into each of those components, which price discovery seeks to include for review. It is one of the core functions of a market of any kind, and as such, is studied by both analysts and investors as part of trading strategy development. [Read More]
What is a price by volume chart? A price by volume (PBV) chart is a chart that shows the volume of shares of a security that are traded at a given price point. PBV charts are often combined with other charts like candlestick charts so that analysts and investors can see both volume and price on the same chart and find levels of support and resistance in a more efficient manner. [Read More]
What is a liquid asset? An asset that is considered to be “liquid” is one that can be converted into cash or cash equivalent in a short amount of time with minimal loss in value. In the financial world, money market and securities holdings are considered liquid assets in addition to cash. [Read More]
What is an auction market? An auction market is a specific type of market where both buyers and sellers submit their respective bids at the same time. Bids that match are paired together and then executed as a completed market order. A great example of an auction market today is the New York Stock Exchange. [Read More]
What is the role of a market maker? Market maker is the term used to describe the individuals or entities that function a lot like car dealerships. They purchase assets (various types of securities) at one price, and then try and sell those same assets at a higher price. The difference in their purchase price and sale price is known as the bid-ask spread, and is one method for market makers to generate income. [Read More]
What is the ask? Ask is the term used in the financial world to describe the price that a seller of a security is ASKING for in order to sell that security. Often times, the ask also includes the size of the security purchase as well as the price at which it will be sold. For example, a broker might ask for $10/share for a block of 100 shares, which would total $1000. [Read More]
What is the bid? Bid is the term used in the financial world to describe the price that a buyer of a security will BID for a security in order to purchase it. Just as with the ask, the bid includes not only a price component but also a size component in terms of the number of securities that will be bought at that price. For example, a buyer might bid $10/share for a block of 100 shares, which would total $1000. [Read More]
Who is a seller? In the financial world, a seller is an individual or corporation who has possession of a security that they would like to sell to either another individual or corporation. [Read More]
Who is a buyer? In the financial world, a buyer is an individual or corporation who is seeking to buy a security from sellers at the lowest possible price. [Read More]
What is MACD? The moving average convergence divergence, or MACD, is a specific type of technical indicator called a trend-following momentum indicator. It highlights the relationship between any two of a security’s moving average figures, most often subtracting the 26-period and 12-period exponential moving averages to get the MACD. [Read More]
What is an Ichimoku Cloud? The Ichimoku Cloud is a synthesis of multiple technical indicators that indicate support and resistance levels, momentum, and trend direction. Developed by Goichi Hosoda in the 1960s, it provides experienced analysts and investors with an easy-to-read visual representation of these indicators. [Read More]
What is the Relative Strenght Index? The relative strength index (RSI) is a type of indicator used in technical analysis to identify momentum, specifically if a security is overbought or oversold. The RSI is an oscillator-style indicator, so its values will swing from 0 to 100. Standard usage of the RSI says that any value of 70 or more indicates an overbought security, and any value of 30 or less indicates an oversold security. [Read More]
What are Bollinger Bands? A Bollinger Band is a copyrighted technical analysis tool that was created by John Bollinger with the goal of highlighting when a security is oversold or overbought. The construction of the tool is simple: It contains an upper and lower band that are two standard deviations away from the 20-day simple moving average for the security in question. Those securities who are closer to the upper band tend to be overbought while those closer to the lower band tend to be oversold. [Read More]
What is the McClellan Oscillator? The McClellan Oscillator is a specific type of technical analysis indicator the looks at entire markets to highlight strong changes in sentiment in either positive or negative directions. The center line of the indicator is zero, with readings above zero equating to a rise in the market and readings below zero indicating a decrease in the market. [Read More]
What is On-Balance Volume? On-balance volume (OBV) is a specific type of technical analysis indicator that utilizes volume flow as a proxy for changes in security pricing. Developed by Joseph Granville in the 1960s, when combined with price bars, OBV provides more reliable indicators than the volume-only indicators found at the bottom of most price charts. [Read More]