The Trading Code: Technical Analysis & Market Terminology

Flashcards covering technical analysis, fundamental analysis, trading terms, candlestick patterns, trend types, price action stages, and reversal signals based on Jason Cam's technical guide.

Technical Analysis (TA)

A study of mass psychology (Elder, 1993) that aims to recognize trends and crowd behavior, using the chart as its primary tool.

Fundamental Analysis (FA)

An analysis method that gives an idea of what price 'should' be based on company earnings, future prospects, financial statements, and related data.

PSEi

The Philippine Stock Exchange Composite Index, which is a collection of 30 major companies in the Philippines and serves as the local equivalent of the Dow Jones Industrial Average (DJIA) in the U.S.

Oversold

A stock which has been relentlessly sold down and is considered a good candidate for recovery.

Overbought

A stock which has been continuously bought up and may be pulled by gravity soon.

Divergence

A term used to describe the relationship between two variables, usually price and a technical indicator, wherein one doesn't agree with the other.

Crossover

A general term when the line of one indicator crosses with another.

Bull / Bullish

A term used to describe a stock, a pattern, or a market in general that is characterized by upward movement; a happy green market.

Bear / Bearish

The reverse of bull/bullish, characterized by downward movement; a sad, red market.

Support

An area where price is expected to stop declining after a selloff, where buyers are waiting to buy.

Resistance

An area where it becomes difficult for price to continue moving up due to heavy selling.

Breakout

Describing a movement that got out of resistance after a long consolidation.

Pullback

A term used to describe price movement that got out of resistance after a long consolidation.

Going Long

Slang for buying with the goal of selling at a higher price, where a long position is winning when price goes up.

Short-Selling

The reverse of 'going long', involving selling shares first then buying them back at a lower price to profit from the price difference.

Paper Profit

The unrealized profit in a portfolio when the price of a bought stock goes up before selling.

Paper Loss

The unrealized loss in a portfolio when the price of a bought stock goes down, becoming a monetary loss only after selling.

Rally

A continued, uninterrupted rise in price.

Position Trading

A trading strategy where one positions at the start of a trend and exits only if the trend has been completely consumed, usually holding positions from weeks to a few months.

Swing Trading

A strategy involving getting in a trade as long as momentum is present and getting out when momentum fades, usually holding positions from a few days to a few weeks.

Day Trading

A strategy involving getting in and out of trades in seconds to minutes without holding positions overnight, also referred to as scalping.

Candlestick Body

The solid colored portion of a candlestick representing the range between the open price and the close price.

Candlestick Tail

Thin lines on the ends of a candlestick (also called wick) representing the high or low prices of the trading day.

Momentum Candles

Two or more long candles usually seen during trending moves that propel the price into a certain direction.

Non-momentum Candles

Two or more short candles (weak candles) seen during trend pauses that indicate weakness or loss of momentum and signify a possible change in trend.

Uptrend

A directional trend characterized by higher highs (HH) and higher lows (HL) price movements.

Downtrend

A directional trend characterized by lower lows (LL) and lower highs (LH) price movements.

Sideways Trend

A non-directional up and down movement creating a range of highs acting as resistance and lows acting as support.

Countertrend Trading

The practice of buying in a downtrend to trade short upward rallies within a falling trend.

The Waves

Price movement pattern in trends typically composed of 5 counts: three momentum moves (waves 1, 3, 5) and two pullbacks (waves 2, 4).

Stages of Price Action

The four distinct phases of market movement: Stage 1 (Accumulation), Stage 2 (Markup), Stage 3 (Distribution), and Stage 4 (Markdown).

Sign of Reversal (SOR)

A candlestick or combination of candlesticks that gives a signal or cue that the prevailing trend is about to end and change direction.