An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period. An individual deemed a pattern day trader must hold a minimum of US$25,000 in equity in his or her account before being allowed to day trade. This $25,000 equity amount must be maintained in the account at all times because it addresses the additional risks inherent in leveraged day-trading activities and ensures that customers, before continuing to day trade, cover any losses incurred in their accounts from the previous day.
A technical indicator developed by Tushar Chande to numerically identify trends in candlestick charting. It is calculated by taking an 'n' period moving average of the difference between the open and closing prices. A Qstick value greater than zero means that the majority of the last 'n' days have been up, indicating that buying pressure has been increasing. Transaction signals come from when the Qstick indicator crosses through the zero line. Crossing above zero is used as the entry signal because it is indicating that buying pressure is increasing, while sell signals come from the indicator crossing down through zero. In addition, an 'n' period moving average of the Qstick values can be drawn to act as a signal line. Transaction signals are then generated when the Qstick value crosses through the trigger line.
The price at which a stock or market can trade, but not exceed, for a certain period of time. Often referred to as "resistance level". The stock or market stops rising because sellers start to outnumber buyers.
A type of chart, developed by the Japanese, that is only concerned with price movement; time and volume are not included. It is thought to be named for the Japanese word for bricks, "renga". A renko chart is constructed by placing a brick in the next column once the price surpasses the top or bottom of the previous brick by a predefined amount. White bricks are used when the direction of the trend is up, while black bricks are used when the trend is down. This type of chart is very effective for traders to identify key support/resistance levels. Transaction signals are generated when the direction of the trend changes and the bricks alternate colors. For example, a trader will sell an underlying asset when a black brick is placed at the end of series of climbing white bricks. Since this type of chart was designed as a way to follow the general price trend of an asset, there can often be false signals where the color of the bricks changes too early, producing a whip-saw effect.
The component of a candlestick chart that represents a downward movement in the underlying price. A red candlestick is composed of the period's high, low, opening and closing prices. If the closing price is lower than the day's opening price, then the body of the candle is red or black. Also known as a "black candlestick" or a "closed candlestick". Charts are primarily used in technical analysis. A red candle quickly conveys a downward movement as well as the range of the price for the day. The longer the candle, the greater the price movement. Most charting software will allow you to change the colors of these candles. Even though red and black are common colors for this type of candlestick, any color can be used.
In candlestick charting this is the wide part of a candle that represents the range between the opening and the closing prices over a specific time period. When the real body of a candle is black or shaded red, it means the close was lower than the open; if the real body is empty or colored green, it means the close was higher than the open.
The speed at which a variable changes over a specific period of time. Rate of change is often used when speaking about momentum, and it can generally be expressed as a ratio between a change in one variable relative to a corresponding change in another. Graphically, the rate of change is represented by the slope of a line. Rate of change is often illustrated by the Greek letter delta. Many traders pay close attention to the speed at which one variable changes relative to another. For example, option traders study the relationship between the rate of change in the price of an option relative to a small change in the price of the underlying asset, known as an options delta.
A stock's low price and high price for a particular trading period, such as the close of a day's trading, the opening of a day's trading, a day, a month, or a year. A stock that trades in a range for an extended period of time is sometimes said to be in a channel.