Last Updated: 05/20/2019

Terms Definitions
The Accumulation average is the average of all the data
Accumulation Average available for a security.
In relation to Double Tops & Bottoms. An Adam is a sharp
Adam pointed top or bottom.
The percentage amount that a security’s, or portfolio’s,
Alpha returns exceeds the returns of a Benchmark (Index).

Amplitude The height of a cycle from its horizontal midpoint (the x-axis)

Ascending Triangle Triangle with horizontal resistance line and rising support line.
Auctions See Fed Auctions
Like Correlation except looking back in the same datafile
instead of comparing to a different file. Used to identify cycles
Autocorrelation within the dataset.
Used in many Wells Wilder tools. Instead of recalculating an
indicator for the lookback period, the previous indicator value
Average Off Method is adjusted for the new data point.

Average True Range The average of the last X True Ranges where X is usually 14.
An Envelope that uses volatility to determine the envelope
size. Can use ATR or Standard Deviations. Most common is
Bands Bollinger Bands which uses Standard Deviation.
A chart where the first price (Open), the highest price, the
lowest price and the last price (Close) of the period are
charted as a vertical line with dashes for the first and last
Bar Chart prices.
One-hundredth of a percent. Ie 1% is 100 basis points. Yields
Basis Points are often quoted in basis points.
Bearish Confirmation When price and indicator values are both falling.
When price is rising but an indicator is falling in value.
Bearish Divergence Indicator is signalling weakness before it is evident in price.
Standard deviation of price relative to a market proxy (eg S&P
500). In Regression analysis, it is the slope of the Regression
Beta line.
Bills See Treasury Bills
Body The box part of a candle in a candlestick chart
A band around a central Moving Average that is based on
Bollinger Bands Standard Deviations around the average.
Refers to any oscillator that has strict limits on its upper and
Bounded Oscillator lower values. Eg RSI can only range from 0 to 100.
Breadth See Market Breadth
A Gap that occurs at the start of a new trend. Usually indicates
that a pattern is complete, or support/resistance has been
Breakaway Gap broken.
 When price passes through price levels/zones, or trend lines,
Breakout that previously were zones of support and resistance.
Bullish Confirmation When price and indicator values are both rising.
When price is falling but an indicator is rising in value.
Bullish Divergence Indicator is signalling strength before it is evident in price.
Business Cycle An 8.6 year cycle identified by Princeton Economic XXXX
Call options are contracts which give the call buyer the right
to BUY the underlying asset (stock) at a specific stock price. If
the call buyer does not exercise his right to buy the stock
before the predetermined time, the option contract will expire
and the opportunity to exercise the right to buy will cease to
Call Option exist.
A security with an embedded call provision that allows the
issuer to repurchase or redeem the security by a specified
Callable date.
A Simple Moving Average that is offset by half the period of
Centered Moving Average the moving average.
Before a Wedge pattern starts, there is one peak (or trough)
that ends the initial thrust of the move. That peak (or trough)
Climax (Wedge) is called the "Climax"
A pattern where price has a high probability of exiting the
pattern opposite the entry, with trend in the same direction as
Continuation Pattern the trend at the entry.
Convertible bonds provide investors with the option to swap
Convertible debt for equity.
A series of waves that moves counter to the primary trend.
Corrective Wave (Elliott Analysis) Labelled ABC.
Process of using regression on two data sets to see if their
moves are in sync. Ranges in value from -1 (negatively
Correlation correlated) to 0 (uncorrelated) to 1 (correlated)
Coupon Payments The interest payments made by the bond seller.
Risk associated with a government or company not being able
Credit Risk to meet their debt obligations.
Risk that changes in the currency will reduce/increase demand
Currency Risk for the securities.
A recurring process (price pattern) that oscillates around a
Cycle midpoint.

Dead Cat Bounce A short, unsustained rally that follows a drastic fall in prices.
A 10 year cycle where years of the decade move in similar
Decennial Cycle ways.

Descending Triangle Triangle with horizontal support line and falling resistance line.
An Elliott Motive wave which is contracting. It breaks the rule
Diagonal Wave that Wave 4 cannot enter the territory of Wave 1.
 A pattern that consists of a Broadening pattern followed by a
Diamond Top Symmetric Triangle. One of the most profitable patterns.
When price is rising (or falling) and an indicator derived from
that price is falling (or rising). The two plots are said to be
Divergence diverging.
A Trading Strategy that examines the highest high and lowest
low over the past four weeks. Buys on a break of the high and
Donchian Breakout Method sells on the break of the low.
Prices are trending lower. Identified by Lower Peaks and
Downtrend Lower Troughs on the chart.
When a traditional Moving Average drops the oldest value,
signals can be generated because of the values removed,
Drop-Off effect rather than the ones added.
Risk that the economy contracts which cuts government
Economic Risk revenue and company earnings
A moving average that has been translated up and down by a
fixed percentage. Most often used as a filter to mitigate
whipsaw in crossover strategies. Also called Moving Average
Envelopes Bands.
In relation to Double Tops & Bottoms. An Eve is a rounded top
Eve or bottom.

Exhaustion Gap Occurs at the end of a move. Usually filled within a few days.
A variation of an Elliott Flat corrective pattern where wave B
retraces beyond the start of wave A. Wave C ends beyond the
Expanded Flat end of wave A.
The date that an option and the right to exercise it will cease
to exist. Typically, the expiration date falls on the third Friday
Expiration Date (Option) of each month for monthly options.
A moving average that applies weights to the current price and
the previous EMA value. This helps avoid the drop-off effect
Exponential Moving Average that other averages are subject to.
An impulse wave that is longer than the other two impulse
Extension (Elliott. Also Extended waves) waves in the five wave structure.
Face Value The redeemable value of the security at maturity.
Fading (the price movement) A trading strategy that sells rallies and buys declines.

When price exits a pattern in the expected direction but fails

to move at least 10%, from the breakout of the pattern,
Failure (Patterns) before it reverses direction and reenters the pattern.
The primary market where the Fed raises funds from large
Fed Auctions banks by selling bills, notes and bonds.
 The percentage of deposits that banks must keep in reserves.
The rate is mandated by the central bank and is used to
increase/reduce money supply which affects economic
Federal Funds Rate expansion. Also used by banks to borrow from each other.

A short term counter-trend pattern that follows a sharp steep

Flag move. The upper and lower bounds of the pattern are parallel.
A corrective Elliott pattern made up of three waves. Sub-
Flat waves take a 3-3-5 pattern.
Floating-rate debt that pays interest the varies along with
Floating Libor or another market rate.
The number of cycles that repeat in a given amount of time. Is
Frequency the inverse of Wavelength.
Used in indexes. Is a simple moving average of the percentage
Geometric Moving Average changes.
Government Notes A Bond which matures in 2 to 10 years.
Government debt with maturity over 10 years. Pays interest
Government Bonds and is redeemable at maturity.
Solid commodities such as gold and silver. Traditionally
Hard Assets considered as an inflationary hedge.
A complex bearish reversal pattern made up of three peaks
Head and Shoulders where the 2nd peak is higher than the 1st and 3rd.
These bonds are below the ratings thresholds set by the
High Yield bonds ratings companies.
When the prices move in the direction of the primary trend.
Usually a forceful, rapid move. The term is most commonly
Impulse Move used in Elliott Analysis.
An Elliott Motive wave that has sub-waves that adhere to the
Impulse Wave standard 5 wave structure.
The call option is considered in-the-money (ITM) if the current
price for the stock is higher than the strike (exercise) price of
the option. The put option is in-the-money (ITM) if the current
price of the stock is below the strike (exercise) price of the
In the Money (Option) option

A manually drawn line that passes through the middle of the

prices on the chart. It is designed to represent the general
Internal Trend Line trend of the market without trying to capture a break in trend.
Intraday Trend A Trend measures in Minutes or Hours
Intrinsic value is the amount that the option is in-the-money
Intrinsic Value (Option) (ITM).

A complex bullish reversal pattern made up of three troughs

Inverted Head and Shoulders. where the 2nd trough is lower than the 1st and 3rd.
 When yields on near term bond maturities are higher than the
yields on longer-term maturities. Often preceeds an economic
Inverted Yields slowdown and recessions.
These bonds exceed the rating thresholds set by the ratings
Investment grade bonds agencies.
A lone bar at the end of a trend that has a gap before and after
Island Reversal it.
These bonds are below the ratings thresholds set by the
Junk Bonds ratings companies.
Kondratieff Wave A 54-year economic cycle.
The tendency for a cycle peak to the left of the expected
Left Translation centre of the cycle.
An order established with a broker that will automatically
Limit Order execute when price reaches requested level.
A simple chart where the closing price for each period is
plotted on a XY chart where X is time and Y is price. The
Line Chart periods are joined to form a line.
Risk that the asset will not be able to be sold for the desired
Liquidity Risk price. See Slippage
A purchase of a security. Profits are made when the security’s
Long Buy / Long Trade price rises.
An indicator that measures both positive and negative
sentiment in the market. Usually represented as an oscillator
Market Breadth or the values can be accumulated into an index.
An order to buy or sell at whatever price the market is
Market Order currently trading at.
Risk that prices will move so that the investment reduces in
Market Risk value.
The tendency for prices to return to their average when they
Mean Reversion move too far away from it.
How much the price has changed over a defined period of
Momentum time.
Money Market Where companies raise short-term cash.
A series of 5 waves that follow the primary trend. (Elliott
Motive Wave Analysis)
A trend line that joins the two troughs between the three
peaks of a Head and Shoulders pattern. Or the two peaks
between the three troughs of an Inverted Head and Shoulders
NeckLine pattern.
The return from an investment before considering inflation,
Nominal Return taxes and investment fees.
The process by which unbounded indicator values are
converted into a bounded range. Typically it returns a
percentage of the indicator value to the maximum indicator
Normalization value in the lookback period.
In futures and options markets, it is the total number of
Open Interest contracts that need to be traded before the expiry date.
 When the Open of a Day is outside the range of the previous
Opening Gap day.
An option is simply a contract between buyer and seller which
Option derives its value from an underlying asset.
The buyer (owner or holder) of the contract pays a premium
(payment) and holds the right to either buy or sell the asset
(stock) at a predetermined price and within a predetermined
time frame. It is important to note that the owner of an option
contract has a right to buy and not an obligation. Option
Option Buyer buyers are considered LONG the option
The seller (writer) of the contract receives a premium
(payment) in exchange for assuming an obligation to fulfill the
requirements of the contract to buy or sell the underlying
asset (stock) at a predetermined price for a predetermined
time. It is important to note here that sellers of options have
received a payment and have obligations to potentially fulfill
the terms of the contracts. Option sellers are
Option Seller considered SHORT the option.
Option Writer See Option Seller
The call option is out-of-the-money (OTM) if the stock is below
the strike (exercise) price of the option. The put option is out-
of-the-money (OTM) if the stock is above the strike (exercise)
Out of the Money (Options) price of the option.
Paper Assets See Soft Assets.

A short term counter-trend pattern that follows a sharp steep

Pennant move. The upper and lower bounds of the pattern converge.
The number of time units necessary to complete one cycle
Period (Cycles) (wavelength).
A measurement of the starting point or offset of the cycle
Phase relative to a benchmark cycle.
Phase Angle Locates the current position within the cycle.
A chart made up of X’s and O’s that ignores time. X’s are used
when prices are rising and O’s for when prices are falling. It is
Point and Figure Chart used to show price swings.
Central Bank policy adjuments change the amount of funds
available to the economy. Affects the prices of securities in
Policy Risk that market.
When legislation in enacted that prevents companies from
Political Risk reaching their goals.
Premium (Option) The price that an option buyer pays for the option.
Presidential Cycle A 4-year cycle that is observed in the markets.
Where governments and corporations offer securities to raise
funds. Not always accessible to the public. Securities are
Primary Market "Created" in the primary market.
Primary Trend A Trend measured in Months or Years
 When price breaks downward out of a pattern, a Pullback is
Pullback when the price retraces to the breakout levels.

Purchasing Power The study of purchasing the same item in different currencies.

The seller of a call option may be obligated to fulfill the terms

of the contract and SELL the underlying asset (stock) at a
specific price in exchange for the premium they have received.
The owner of the call option literally has the right to “CALL”
Put Option the stock from the seller of the call option at a specified price.
Rate Spread The gap between two securities with the same maturity.
Creating a ratio from the prices of two securities and then
Ratio Analysis comparing that ratio against other ratios.
Real Body The box part of a candle in a candlestick chart
An 18.6 year cycle in the property market that impacts equity
Real Estate Cycle and bond markets.
The return from an investment after it has been adjusted for
Real Returns inflation, taxes and investment fees.
Like the Accumulation Average, the Reset Accumulation
Average averages all the data but the start point is reset. Reset
Reset Accumulation Average events may be earnings reports etc.
A level where rising prices stop climbing. It is the point where
the number (or aggression) of sellers is balancing the number
Resistance (or aggression) of buyers.
A shorter counter-trend move against the direction of the
Retracement larger trend.
Reversal A change in the direction of Trend
A pattern where price has a high probability of exiting the
pattern on the same side as the entry, with trend in the
Reversal Pattern opposite direction as the trend at the entry.
The tendency for a cycle peak to the right of the expected
Right Translation centre of the cycle.
Occurs in the middle of a trend. Can be used like a flag for
Runaway or Measuring Gap projecting targets.
A variation of an Elliott Flat corrective pattern where wave B
retraces beyond the start of wave A. Wave C fails to extend
Running Flat beyond the end of Wave A.
Yearly cycles that affect commodities and equities affected by
Seasonality supply and demand.
Where investors trade already existing (pre-issued) securities
Secondary Market with each other. Eg Stock exchange
Secondary or Intermediate Trend A Trend measures in Weeks or Months
a term used for any period longer than the business cycle. Eg
Secular Secular Trend.
A secured financial product is one that has some form of asset
Secured guarantee in case of default. Also see unsecured.
Sentiment See Market Breadth
 The line extending above and beneath the Body of a candle.
Shadow Sometimes called a Whisker.
A transaction that allows the trader to profit from a falling
Short Selling / Short Trade security.

When price fails to retrace all the way to the expected bounds
of the pattern. If they occur late in a Rectangle, it is highly
Shortfall (Patterns) probable that the breakout will be in the opposite direction.
Short-Term Trend A Trend measured in Days
Prices are bound within a range. Sometimes called a Trading
Range. Prices move up and down but on average are staying in
Sideways Trend the same price range.
Simple Moving Average A simple average of the past X number of bars.
The difference between the quote price and the execution
price. When a market is not liquid, a market order can be filled
at a price lower (or higher if buying) than desired. This is a
Slippage function of Liquidity Risk.
To remove volatility from a data list, a short term moving
average is applied. The moving average acts to smooth out the
Smoothing data.
Financial assets, called paper assets, which primarily include
Soft Assets stocks and bonds.
An unusually long bar. Usually the result of an intra-day gap
Spike or Large Bar being presented in a daily bar.
A value that indicates how far individual values deviate from
Standard Deviation the group’s average.
A limit order to Sell (or Buy) when the price reaches a set
Stop value.
A combination of a Call option and a Put Option at the same
Straddle (Option) strike price that are purchased together.
Strap (Option) An option combination of two calls and one put.
The predetermined price at which the owner of an option can
purchase (call) or sell (put) the underlying stock. Sometimes
strike price is called the exercise price. Stock options have
multiple strike prices listed for trading to allow buyers and
sellers to choose which price levels in the stock they can buy
Strike Price (Option) or sell an option.
Strip (Option) An option combination of two puts and one call.
Separate Trading of Registered Interest and Principal
Securities. Separates the payments and the principal to give
STRIPS investors more options and increase liquidity.
A level where declining prices stop falling. It is the point where
the number (or aggression) of buyers is balancing the number
Support (or aggression) of sellers.
 A chart that posts a new vertical line for each change in trend.
There are a number of different styles of Swing Chart, the
difference is based on the rules of how to define a change in
Swing Chart trend.
Symmetric Triangle Triangle with falling resistance line and rising support line.
T-Bills See Treasury Bills
When price breaks upward out of a pattern, a Throwback is
Throwback when the price retraces to the breakout level.
Tick Volume The count of price changes in a given time period.
Time value or extra extrinsic value is the difference between
the total premium of the option and the intrinsic value (if any)
Time Value (Option) of the option.
Treasury Inflation Protected Securities. The principal in TIPS is
TIPS adjusted for inflation.
When the volume for all futures contracts for a market are
Total Volume added together.
A stop that follows the market. It can get closer to the market
but never move away. It is used to lock in profits when the
Trailing Stop market turns.
A form of Pattern Failure where price not only re-enters the
pattern, but it also breaks through the other side of the
Trap (Patterns) pattern.
Government debt with maturity less than (or equal to) 1 year.
Treasury Bills Pays no interest.
A manually drawn line. In up-trends, it is drawn by connecting
Trend Line troughs. In a downtrend, by connecting peaks.
Chart Patterns where the boundaries of the pattern are
Triangles getting closer as time goes on.
A corrective Elliott pattern made up of five waves. Sub-waves
Triangles take a 3-3-3-3-3 pattern.
Triangular Moving Average Refers to creating moving averages of moving averages.
A weighted moving average where the middle value has the
Triangular Weighted Moving Average greatest weight.
The greater of the bars High to Low, Previous Close to High,
True Range Previous Close to Low.
An Elliott wave 5 that fails to extend beyond the end of wave
Truncation 3.
Refers to any oscillator that does not have an upper and lower
limit. These often look like they are bounded. Eg MACD (the
moving average of the difference of two moving averages)
appears like a bounded oscillator even though there is no limit
Unbounded Oscillator to its extremes.
A financial product that is not backed (guaranteed) by any
assets in the event of a default. Companies pay a higher yield
when their money market products are unsecured. Also see
Unsecured Secured.
 Prices are trending higher. Identified by Higher Peaks and
Uptrend Higher Troughs on the chart.
Wavelength See Period
A triangle pattern where both the upper and lower trend lines
are heading in the same direction (either up for rising wedge,
Wedge or down for falling wedge).
A moving average where the most recent price, in the past X
number of bars, is multiplied by X. The next previous bar by X-
Weighted Moving Average 1 etc.
When trading rules signal consecutive buy and sell signals
Whipsaw within a short space of time.
The line extending above and beneath the Body of a candle.
Whisker More commonly called a Shadow.
A MA that multiplies previous value by (Periods - 1) and adds
Wilder Moving Average that to current price before dividing by Periods.
Link yields from increasing maturities. Should be upward
sloping. Can be inverted when near term maturities are higher
Yield Curve than longer-term maturities. See Inverted Yields.
Zero-Coupon Bonds Do not pay interest payments. More like a Bill.
A corrective Elliott pattern made up of three waves. Sub-
Zig-Zag waves take a 5-3-5 pattern.