Margin calls happen when you are trading “on margin” and your account value drops to a value below that allowed by a broker – and they force you to sell stocks or add more cash
Technical Analysis is the use of technical indicator to predict which direction the stock price will move in the future. Technical indicators use past stock prices to calculate their value.
In the world of stock analysis, fundamental and technical analysis are on completely opposite sides of the spectrum. Fundamental analysis focuses on financial statements, while technical analysis looks at stock charts
Falling Knife is a phrase used for a stock where the price has dropped significantly in a short period of time. A falling knife security can rebound, or it can lose all of its value where the shares become worthless. Trying to catch a “falling knife” right as it rebounds is dangerous!
You do not need anything else on a stock chart but the candles themselves to be a successful swing trader! And, there is nothing that can improve your trading more than learning the art of reading candlestick charts.
In technical analysis, “Support” is a price trend line that a stock usually won’t fall below (at least in the short term), while “Resistance” is a price trend line that it has trouble rising above
If you perform four or more day trades in a 5 day period you may get flagged by the SEC as a “Pattern Day Trader.” This can cause you to lose your margin account status until you deposit enough cash to have $25,000 or more in your account. Many beginning traders have been bitten by this rule!
An inverted dead cat bounce will occur when a company discloses news that will send the stock soaring by 5% to 20% or perhaps even higher.
A trading term called a dead cat bounce is used to when a stock is in a severe decline and has a sharp bounce off the lows. It occurs due to the huge amount of short interest in the market. This bounce will be short lived and followed up by heavy selling which will break the prior price low.
A gap in a chart is basically an empty space between one trading period and the one prior to that trading period. They normally form on account of an important and material event that will affect security, like an earnings surprise or a merger agreement. Read this article to learn more!
Flags and Pennants are categorized as a continuous pattern. They normally represent only brief pauses in a dynamic stock. They’re typically seen immediately after a quick move. The stock will then take off again in the same direction. Click on this post for more information about Flags and Pennants.
The V top is a reverse V-shaped top, where the top is quite sharp. It’s due to the irrationality of actors leading to a steep increase that will be corrected shortly afterwards. Read this article to learn more!
The V Bottom is a sharp dip pattern due to irrationality of actors, which is corrected shortly after. Click on this article to learn more about what constitutes a V Bottom pattern.
A horizontal channel is a pattern that underlines investor’s indecisiveness. This horizontal channel is assembled by two horizontal and parallel lines that build the progress of the price. To confirm a line, there should be at least two points of contact with the price. The more contact points it will has, the more these will be durable and their breakout will give an substantial buy/sell signal.
The descending triangle is a bearish continuation pattern. This pattern forms two converging lines. The initial is a downward slant which resistance and the other is a horizontal support. To validate the descending triangle, there must be oscillation between the two lines. The lines must be touched at least twice for validation.
The symmetrical triangle top is a bullish continuation pattern. This pattern forms two trend lines which are symmetrical to the horizontal and convergent. Click on this post to learn more!
A symmetrical triangle bottom is a bearish continuation pattern. This pattern forms two trend lines that are symmetrical to the horizontal and convergent. Click on this post for more details.
The ascending triangle is a bullish continuation pattern. This pattern is made by two converging lines. The first line is an upward slant which is the support and the other is a horizontal resistance line.
The Cup and Saucer is a chart with a continuous pattern, formed by two rounded bottoms, the first is deeper and wider than the second. The height of the cup and the handle will be aligned along a straight horizontal resistance. This is the neckline of the pattern. Read this article to find out more!
A Rounding Top pattern is a reverse U-shape, also called a “reverse saucer. ” The top is rounded with a flat top. Read this post for further details and a visual representation of the pattern!
A Rounding Bottom, also known as a saucer, is a U-shaped bottom reversal pattern. The dip is rounded with a flat bottom. Click on this post for more information and a visual representation!
The pennant resembles the symmetrical triangle, but it’s characteristics are not the same. The pennants is shaped like a wedge of consolidation and normally appears after a sudden upward or downward movement.
The descending flag shows as a continuation pattern. The flag is built by two straight downward parallel lines which is shaped like a rectangle. It is oriented in the direction of that trend which it consolidates. Contrary to a bearish channel, this pattern is quite short term and shows the fact that buyers will need a break. Click on this post to learn more!
An ascending flag is a continuation pattern formed by two straight upward parallel lines which are shaped like a rectangle. It is adjusted in the direction of the trend that it consolidates.
A bullish channel is called a continuation trend pattern. The bullish channel is assembled by two parallel lines that frame the upward price trend. Click on this article to learn more!
A bearish channel is a continuation trend pattern arranged by two parallel lines that frame the downward price trend. Read this article to learn more!
Click on this post to read about the Triple Top, which is a bearish pattern with an MN shape.
Reverse head and shoulders is a trend reversal pattern that marks a desire to make a bullish reversal. The theory is the same as a triple bottom other than the second bottom will be lower than the others, which are technically at the same height. Click on this post for more information.
The double top is a bearish pattern shaped like an M. Two tops must succeed, imaging an important resistance. This marks a reversal. Read this article for more information.
A reversal pattern is called a diamond bottoms. This pattern is formulated by two juxtaposed symmetrical triangles and it is shaped like a diamond.
A falling wedge is a bullish reversal pattern made by two converging downward slants. To prove a falling wedge, there has to be oscillation between the two lines. Each of the lines must be touched at least twice for validation.
A Rising Wedge is a bearish reversal pattern formed by two assembled upward slants. Read this post to learn more.
The Adam & Eve top is a type of double top that consists of a spiking first top, followed by a rounded second one. Read this article to learn more!
The formation, ascending broadening wedge is called this because of its similarity to a rising wedge formation and then has a broadening price pattern. The ascending broadening wedge differs from a rising wedge as the axis rises. Read this article to learn more!
The right-angled and ascending broadening chart pattern is not one you might choose to trade. Other chart patterns perform much better. Downward breakouts have a big break even failure rate which may disqualify them from your trading tools. Upward breakouts have only a middling average rise, and that is if you trade them perfectly.
The broadening bottom is one of those chart patterns that appears often, but you might want to avoid trading. The performance rank approaches the bottom of the list with a comparatively high break even failure rank and low average rise in a bull market. Its only redeeming value is the partial decline which does an excellent job of predicting an upward breakout.
Asset Turnover Ratio is the amount of sales generated for every dollar’s worth of assets.
The Cash Flow Statement is one of the four financial statements required by the SEC based on the U.S. GAAP (Generally Accepted Accounting Principles). This statement presents where the cash and its equivalents are coming from and where they are being allocated.
Fundamental analysis is the process of looking at the basic or fundamental financial level of a business, especially sales, earnings, growth potential, assets, debt, management, products, and competition.
The Sharpe Ratio looks at a portfolio’s return over time, then gives it a rating based on how volatile the returns are. Portfolios with steady returns have a better Sharpe Ratio than portfolios with high returns but big swings
Capital Asset Pricing Model (CAPM) is a method used by investors to prioritize what stocks to invest in, given their limited cash.
Form 10-Q, is also known as a 10-Q or 10Q, is a quarterly report mandated by the United States federal Securities and Exchange Commission, to be filed by publicly traded corporations.
A Dividend Yield is a financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. The formula is Annual Dividends Per Share divided by Price Per Share.
Beta measures a stock’s volatility versus the market’s volatility. Read this article to learn more and see an example of Beta.
Technical Analysis is the use of technical indicators comprising of statistics using past market information to predict which direction the security price will move. Read this post to learn about the 6 principles that formed the foundation of technical analysis, and some of its purposes and uses.
Current Ratio is the ratio of current assets divided by current liabilities. It provides A liquidity ratio that measures a company’s ability to pay short-term obligations. Also known as “liquidity ratio”, “cash asset ratio” and “cash ratio”.
The Asset/Equity Ratio – the ratio of total assets divided by stockholders’ equity. Higher ratio means each stock has a higher intrinsic worth – regardless of future earnings
In simple terms, the moving average is an average that compares the previous period over time. There are two types of moving averages: the Simple Moving Average (SMA) and the Exponential Moving Average (EMA) which puts more weight on the latest date.
Quick Ratio is the ratio that measures the ability of a firm to cover its current liabilities with their most liquid current assets. Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Delta is also called the hedge ratio, which is the ratio of the change in price of an option to the change in price of the underlying stock.