Master the language of technical analysis
A breakout occurs when a stock price moves decisively above a resistance level or below a support level, typically accompanied by increased volume. Breakouts signal potential trend changes and new trading opportunities.
Support is a price level where buying pressure typically emerges, preventing further price decline. Resistance is a price level where selling pressure typically emerges, preventing further price advance.
A bullish signal that occurs when a short-term moving average (typically 50-day) crosses above a long-term moving average (typically 200-day). It suggests a potential shift to an upward trend.
A continuation pattern that forms after a strong price advance (the pole), followed by a consolidation period (the flag) that slopes slightly downward. Suggests continuation of the uptrend.
A bullish continuation pattern that resembles a cup with a handle. The cup forms a rounded bottom, followed by a small consolidation (handle) before the breakout.
A fundamental event or news that triggers significant price movement in a stock. Catalysts provide the "why" behind technical breakouts.
A momentum oscillator that measures the speed and magnitude of price changes on a scale of 0-100. Used to identify overbought/oversold conditions.
A trend-following momentum indicator showing the relationship between two moving averages (typically 12-day and 26-day EMAs).
Average price over a specific number of periods, smoothing out price action to identify trends. Common types include Simple (SMA) and Exponential (EMA).
The number of shares traded during a specific period. Volume confirms price movements and indicates the strength of trends.
The average number of shares traded over a specific period (typically 20 or 50 days). Used as a baseline to identify unusual trading activity.
A predetermined price level at which a trader will exit a losing position to limit losses. Essential for capital preservation.
The comparison between potential profit and potential loss on a trade. A 3:1 ratio means potential profit is 3x the potential loss.
Determining how many shares to buy based on account size and risk tolerance. Prevents catastrophic losses from any single trade.