Trading Glossary - Part I (A-F)

ADX: Trend strength oscillator originally developed J. Welles Wilder Jr. that fluctuates between 0 and 100.

BEAR FLAG: Classic bar chart pattern that occurs in a trending market, a bearish continuation pattern.

BEAR TRAP: A bear trap occurs when the market breaks below chart support, bringing traders in on the short side, then quickly reverses, trapping traders with losses.
BREADTH: The difference between the number of advancing issues and the number of declining issues on the NYSE.

BREAKOUT TRADE: A trade that occurs when the market breaks above or below some pre-define range, usually a nearby support or resistance levels such as the previous day's high or low, or the last 60 minutes high/low. Breakouts are often associated with low volatility readings.

BULL FLAG: Classic bar chart pattern that occurs in a trending market, a bullish continuation pattern.

BULL TRAP: A bull trap occurs when the market breaks above chart resistance, bringing traders in on the long side, then quickly reverses, trapping traders with losses.


CREEPER MARKET: A market that slowly creeps higher without a significant retracement. One of the strongest types of trending action that does not catch people's attention.

DIVERGENCE: A divergence is indicated when momentum fails to confirm a new low or new high in the price. Divergences usually show up best with oscillators such as the 3/10 and 5/35 MACD.

EDGE: Term used to describe when a trader has the advantage or a favorable margin. It is even better when this margin can be quantified statistically.

EMA: Exponential Moving Average. We generally use a 13 or 21-period setting.

EQUILIBRIUM LEVEL: The point at which buyers and sellers are in balance. Coincides with a neutral chart point that is often at the end of a consolidation period.

EVENT RISK: The risk that some unexpected event will cause a substantial change in the market value of a security. For example, missed earnings, lawsuits, crop failures, war, etc.

FADE: A countertrend trade.

FAIR VALUE: Fair value reflects the relationship between stock index futures and the index's current levels. It is a theoretical estimate of where the futures should be trading based on their underlying cash index with short-term interest rates and dividends factored into the calculation. Determining the fair value relationship between the Nifty futures contract and the underlying Nifty index requires adding the cost of borrowing the money to buy the Nifty stocks, while subtracting the gain these stocks pay in dividends.

FILL OR KILL: This means do it now if the stock is available in the crowd or from the specialist, otherwise kill the order altogethe