Double Bottom

A very bullish technical reversal pattern.  A double bottom occurs when a stock or asset hits two consecutive lows with a slight increase between them.  Once the price rises above the high between the lows, bullish momentum is confirmed.  A double bottom is the...

Double Top

A very bearish technical reversal pattern.  A double top occurs when a stock or asset reaches a high two consecutive times with a slight decline between the highs.  Once the price falls below a support level equal to the low between the two highs, the bearish momentum...

Death Cross

A chart pattern indicating a major bearish shift.  A death cross occurs when a stock’s short-term moving average crosses below its long-term moving average.  The death cross is also considered a long-term indicator, as the most common moving averages used to...

Cup and Handle

A bullish trading signal where a security’s price chart shows an elongated “u” shape followed by a slight downward drift (forming a shape resembling a cup with a handle).  Generally, cups with a longer “u” bottom provide a stronger signal...

Compound Interest

The addition of interest to the principal sum of a loan or deposit.  Or, interest on your interest.  This interest calculated on the initial principal also includes all of the accumulated interest from previous periods.  Interest can be compounded on any schedule,...

“Falling Knives”

A shortened version of the colloquial term “don’t try to catch a falling knife.”  When it comes to trading, this term translates to “wait for the price to hit a bottom before buying it.”  There is no defined amount a stock must fall in...

Capital Gains Tax

A tax on the profit made from selling assets (eg stocks, real estate, or other investments).  The “capital gain” being taxed is the total price of the sale subtracted from the original cost of the asset.  When the assets themselves have been sold, the...

Blow Off Top

A trading pattern showing showing a rapid and substantial rise in price and volume preceding a rapid drop in price (ie, it produces a Λ shape).  These patterns appear in all markets and is a very volatile trading pattern.  It must be approached smartly, as a poorly...

Descending Wedges

The opposite of an ascending wedge pattern.  A descending wedge pattern is a bullish technical indicator.  They typically begin wide at the top and constrict as prices continue to lower.  This action forms a triangle shape as the reaction highs and lows converge. ...