Technical Analysis: Basic terminology

A method for predicting future market movements by analysing historical market data, typically utilizing charts, volume metrics, and statistical indicators.

A bounding line drawn across swing highs or swing lows on a chart to visually represent the prevailing directional trajectory of a market or asset.

Two parallel trendlines comprising an upper resistance boundary and a lower support boundary, within which price action oscillates.

Contract for Difference. A leveraged derivative that enables traders to speculate on price movements without taking physical ownership of the underlying asset. You can learn more about how CFDs work here.

A price level where buying interest is sufficiently concentrated to overcome selling pressure, typically halting or reversing a downward move.

A price level where selling interest is sufficiently strong to overcome buying momentum, typically preventing prices from advancing further.

The total quantity of shares, contracts, or units transacted during a specific measurement interval, used to confirm the strength of price movements.

The horizontal axis representing chronological intervals across the chart.

Commonly applied timeframes include intraday (1m, 5m, 1h), daily (D1), weekly (W1), monthly (M1), and annual horizons.

The vertical axis on the right-hand side of a chart depicting valuation. Price scales can be plotted as arithmetic/linear (equal dollar steps) or logarithmic (equal percentage changes).

Visual methodologies for structuring pricing data. Standard formats include line charts, open-high-low-close (OHLC) bar charts, Japanese candlestick charts, and Point & Figure (P&F) charts.

Identifiable structural geometric shapes that signal continuation or reversal of the underlying trend.

Primary patterns:

• Head & Shoulders / Inverse H&S: Trend reversal structure
• Double & Triple Tops / Bottoms: Major reversal patterns at extreme levels
• Rounding / Saucer Bottom: Long-term shift from bearish accumulation to bullish expansion
• Cup & Handle: Bullish continuation pattern
• Flags & Pennants: Short-term trend continuation consolidations
• Wedges (Rising / Falling): Reversal or continuation patterns depending on angle and prior trend

Mathematical calculations applied to historical price, volume, or open interest to assess momentum, trend strength, volatility, and order flow.

Standard examples:

• Relative Strength Index (RSI)
• Moving Average Convergence Divergence (MACD)
• Average Directional Index (ADX)
• Accumulation/Distribution Line & On-Balance Volume (OBV)
• Aroon Indicator & Stochastic Oscillator

A predictive indicator designed to signal potential price shifts before they materialize on the chart (e.g., RSI divergences, Stochastic oscillator extremes).

A trend-following metric that provides confirmation only after a price movement has already begun (e.g., Simple/Exponential Moving Averages, Bollinger Bands).

A technical indicator that smooths out price data by filtering out short-term fluctuations and market noise. Common variants include the Simple Moving Average (SMA) and the Exponential Moving Average (EMA), which assigns greater weight to recent price action.

A condition where price makes a new high (or low) while an oscillator (such as RSI or MACD) fails to confirm it by making a corresponding high (or low). Divergences frequently precede trend decelerations and corrective reversals.

Occurs when price forcibly breaches an established support level, resistance line, or chart consolidation boundary, typically accompanied by an expansion in volume.

Horizontal lines indicating where support and resistance are likely to occur based on key mathematical ratios (23.6%, 38.2%, 50.0%, 61.8%, 78.6%) measured between the trough and peak of a market move.

A statistical measure of the dispersion of returns for a given security or index, measuring the magnitude and speed of price fluctuations (commonly gauged via the Average True Range, or ATR).