CHARTAISCAN Chart analysis glossary A–Z.
Every term you'll encounter when analyzing charts, explained clearly and concisely. Bookmark this page — you'll come back to it often as you learn.
40+ terms · Last updated: May 2026
A – D
Ask
The price at which you can buy an asset. Also called the "offer" price. The ask is always slightly higher than the bid — the difference is the spread. When you open a buy trade, you enter at the ask price.
ATR (Average True Range)
A volatility indicator that measures the average range of price movement over a specified period. Used for stop-loss placement and volatility assessment — wider ATR means wider stops are appropriate. AI analysis uses ATR to contextualize pattern significance.
Bid
The price at which you can sell an asset. The bid is always slightly lower than the ask. When you open a sell trade, you enter at the bid price. The bid-ask difference is the spread.
Breakout
A price move through a defined support or resistance level, often on increased volume. Breakouts from consolidation ranges are among the most tradeable chart patterns. AI detects consolidation zones and flags potential breakout levels.
Broker
A financial intermediary that provides access to financial markets. Retail traders need a broker to execute trades on stocks, forex, or crypto. Brokers earn from spreads, commissions, or both. Choose regulated brokers with strong execution quality.
Candlestick
A chart representation showing the open, high, low, and close of a price period. A green (bullish) candle means the close was higher than the open. A red (bearish) candle means the close was lower. Candlestick patterns are the foundation of technical analysis.
CFD (Contract for Difference)
A financial derivative that lets you profit from price movements without owning the underlying asset. Common in forex and index trading. Your profit or loss is the difference between your entry and exit price, multiplied by your position size.
Correlation
The statistical relationship between two assets. Markets often have correlations — for example, the US dollar and commodities tend to move inversely. Understanding correlations helps anticipate price movements across related instruments.
DXY (US Dollar Index)
An index measuring the dollar's value against a basket of six major currencies. The DXY is one of the most important indicators for multi-asset traders. A rising DXY typically pressures commodities lower; a falling DXY supports risk assets.
Drawdown
The peak-to-trough decline in your account balance. If your account reaches $10,000 and then drops to $8,500, you have a $1,500 (15%) drawdown. Drawdowns are inevitable — the goal of risk management is to keep them small and recoverable.
E – L
Entry
The price at which you open a trade. A good entry is at a price where risk is minimized and potential reward is maximized — typically near a support/resistance level, moving average, or AI-identified level. Entries can be at market (instantly) or via pending orders.
Fill
The execution of your order at a specific price. If you place a market order to buy at 150.20, your fill might be at 150.20 (exact fill) or 150.35 (slippage). Fill quality depends on your broker's execution speed and current market liquidity.
FOMC (Federal Open Market Committee)
The Federal Reserve committee that sets US monetary policy, including interest rates. FOMC meetings (8 per year) and the subsequent press conference are among the biggest scheduled market-moving events across all asset classes.
Fundamental Analysis
Analyzing economic data, earnings, central bank policy, and industry trends to determine an asset's intrinsic value. For stocks, this means studying financial statements. For currencies, it means analyzing economic indicators. Contrasts with technical analysis (chart-based).
Hedge
A position taken to offset potential losses in another position or portfolio. Hedging reduces risk but also reduces potential profit. Common hedges include options, inverse ETFs, and diversifying across uncorrelated assets.
Indicator
A mathematical calculation based on price and/or volume that helps identify trends, momentum, volatility, or market conditions. Common indicators include Moving Averages, RSI, MACD, and Bollinger Bands. AI analysis uses these alongside pattern detection.
Leverage
The ability to control a larger position than your deposit would normally allow. With 1:100 leverage, $1,000 controls $100,000 in market exposure. Leverage amplifies both profits and losses equally. Most experienced traders use effective leverage of 1:10 to 1:30.
Limit Order
A pending order to buy below or sell above the current price. A buy limit at 150 means your order executes only if price drops to 150. Limit orders let you enter at better prices but risk never getting filled if price doesn't reach your level.
Liquidity
The ease with which an asset can be bought or sold without significantly affecting its price. High liquidity means tight spreads and minimal slippage. Major stocks and forex pairs are highly liquid; penny stocks and exotic pairs are not.
Lot
The standard unit of trade size in forex and some other markets. A standard lot in forex = 100,000 units of the base currency. Mini lot = 10,000 units. Micro lot = 1,000 units. For stocks, position size is measured in shares.
M – R
Margin
The deposit required to open and maintain a leveraged position. If your account equity drops below the maintenance margin level, your broker issues a margin call. Margin requirements vary by broker, instrument, and regulation.
Margin Call
A notification from your broker that your account equity has fallen below the required margin level. If you don't deposit more funds or close losing positions, the broker will automatically close your trades (stop-out). Proper position sizing prevents margin calls entirely.
Market Order
An order to buy or sell immediately at the current market price. Market orders guarantee execution but not price — during fast markets, you may experience slippage. For volatile instruments during news events, slippage on market orders can be significant.
Moving Average (MA)
A technical indicator that smooths price data by calculating the average over a specified period. The 50-period and 200-period MAs are the most widely watched. Price above the 200 MA = bullish trend; below = bearish. MA crossovers signal potential trend changes.
NFP (Non-Farm Payrolls)
A monthly US employment report released on the first Friday of each month. NFP data affects all major markets through its impact on Federal Reserve rate expectations. Strong jobs data typically strengthens the dollar and can pressure commodities.
Order
An instruction to your broker to execute a trade. Orders can be market (immediate execution), limit (execute at a specific price or better), or stop (execute when price reaches a specific level, used for stop-losses and breakout entries).
Pattern
A recognizable formation on a price chart that has predictive value. Common patterns include Head and Shoulders, Double Top/Bottom, Flags, Pennants, Triangles, and Cup and Handle. AI pattern detection scans for all of these simultaneously across any instrument.
Position
An open trade in the market. A long position profits when the asset rises. A short position profits when it falls. Position size (measured in shares, lots, or contracts) determines your dollar exposure. Managing position size is the most important aspect of risk management.
Pullback
A temporary reversal in the direction of a stock or instrument's price that goes against the prevailing trend. Pullbacks offer opportunities to enter a trend at a better price. AI analysis helps identify high-probability pullback entry zones at key moving averages or support levels.
Resistance
A price level where selling pressure historically outweighs buying pressure, causing price to reverse or stall. Resistance levels are identified from previous highs, round numbers, and moving averages. When resistance breaks, it often becomes support — a concept called "polarity."
Risk-Reward Ratio (R:R)
The ratio between potential loss and potential gain on a trade. If your stop-loss is $1.00 away and your take-profit is $2.50, the R:R is 1:2.5. A minimum 1:2 R:R is recommended. With 1:2 R:R, you only need a 34% win rate to break even.
S – Z
Scalping
An ultra-short-term trading style targeting small, rapid profits. Scalpers may take 10–30+ trades per session on the M1–M5 timeframe. Requires fast execution, tight spreads, and intense concentration. Not recommended for beginners.
Slippage
The difference between your expected execution price and the actual fill price. Slippage occurs during fast-moving markets when prices change between order submission and execution. Brokers with fast execution minimize slippage.
Spread
The difference between the bid (sell) and ask (buy) price — your implicit transaction cost. Tight spreads mean lower trading costs. Spreads widen during low-liquidity periods and high-impact news events.
Stop-Loss (SL)
A pending order that automatically closes your trade at a predetermined loss level. It's your primary risk management tool. Every trade should have a stop-loss placed at a logical level where your thesis is invalidated. Never trade without one.
Support
A price level where buying pressure historically outweighs selling pressure, causing price to bounce. Identified from previous lows, round numbers, Fibonacci levels, and moving averages. Traders buy at support with a stop-loss below it. When support breaks, it often becomes resistance.
Take-Profit (TP)
A pending order that automatically closes your trade at a predetermined profit level. Combined with a stop-loss, it defines your risk-reward ratio. Place take-profits at logical technical levels, not arbitrary distances.
Technical Analysis
Analyzing price charts, patterns, and indicators to predict future price movements. Based on the premise that all known information is reflected in the price and that patterns repeat. AI supercharges technical analysis by automating pattern detection and level identification.
Timeframe
The time period each candlestick represents on a chart. M1 = 1 minute, M5 = 5 minutes, H1 = 1 hour, H4 = 4 hours, D1 = 1 day, W1 = 1 week. Higher timeframes show broader trends; lower timeframes show detail. Multi-timeframe analysis combines both.
Trend
The overall direction of price movement. An uptrend is characterized by higher highs and higher lows. A downtrend by lower highs and lower lows. "The trend is your friend" is the most fundamental trading principle — trading with the trend is significantly more profitable than trading against it.
Trendline
A straight line connecting significant price highs (downtrend) or lows (uptrend) to show trend direction and slope. Trendlines help identify potential support/resistance and trend strength. AI draws trendlines automatically by connecting the most statistically significant swing points.
Volatility
A measure of how much and how quickly price changes. High volatility means large, fast price swings — more opportunity but more risk. Low volatility means smaller, slower moves. AI analysis accounts for volatility when assessing pattern significance and stop placement.
Volume
The number of shares, contracts, or lots traded in a given period. High volume confirms price moves — a breakout on high volume is more reliable than one on low volume. Volume is a key confirming indicator for pattern validity. Available for stocks and futures; forex uses tick volume.
Frequently asked questions.
What is support and resistance?
Support is a price level where buying pressure historically outweighs selling pressure, creating a floor that price bounces off. Resistance is the ceiling where selling pressure outweighs buying, pushing price down. These levels form the foundation of all technical analysis. AI identifies them automatically by analyzing where price has consistently reversed in the past.
What's the difference between stop-loss and take-profit?
A stop-loss is an order that automatically closes your trade at a loss when the price reaches a level that invalidates your trade thesis — it limits your downside. A take-profit automatically closes your trade at a profit when the price reaches your target. Together, they define the risk-reward structure of every trade.
What is a chart pattern?
A chart pattern is a recognizable formation on a price chart that tends to repeat and has predictive value. The most common are Head and Shoulders (reversal), Double Tops/Bottoms (reversal), Flags and Pennants (continuation), and Triangles (consolidation). AI pattern detection scans for all these simultaneously, with confidence scores for each.
What is a trendline?
A trendline is a line drawn along price swing points to show the direction and slope of a trend. In an uptrend, it connects successive higher lows. In a downtrend, it connects successive lower highs. AI draws trendlines automatically by analyzing the most significant price swings, removing the subjectivity of manual trendline placement.
What is position sizing?
Position sizing determines how many shares, lots, or contracts you trade based on your account size and risk tolerance. The goal is to risk a consistent small percentage (1-2%) on each trade. Proper position sizing is the most important and most overlooked aspect of risk management — it's what separates traders who survive from those who blow up.
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