Action: A very general term referring to any observable price or indicator activity. More specifically, a strong reversal indication. See also Reaction
Balance: An equilibrium between two indicators. Good balance generally indicates that the indicators confirm one another.
Bearish: A slippery, subjective term that indicates a general belief or impression that something will lose value. This term carries little or no concept of time frame, probability of outcome, no concept of magnitude of expected outcome, no concept of portfolio composition.
Bullish: A slippery, subjective term that indicates a general belief or impression that something will gain value. This term carries little or no concept of time frame, probability of outcome, no concept of magnitude of expected outcome, no concept of portfolio composition.
Clamped Signal: On occasion an artificial neural network, which is expected to output an analog range of values in response to a diverse set of inputs, will decide to output a set of discrete values. Thus, the signal is "clamped" to a finite set of values. In spite of this abnormal and undesirable behavior, my experience has shown that such networks are typically strangely effective.
Confirming Indicator: A metric or set of values that can be used to increase the confidence in another indicator or assertion of market or security condition.
Convergence: Convergence is the degree of agreement of direction of two indicators Typically, convergence is confirmation (similar to balance), while divergence indicates that one indicator has overshot a level at which it should have reversed.
Dense Set: A set of securities data that is considered complete, or dense, relative to another set that may be a logical subset. It is customary to consider continuous date sets to be dense, while sets based on events that occur less often than daily are considered sparse sets.
Derived Indicator: An indicator that results from application of some function to some other indicator, which may be a proxy, or a VOI, or even another derived indicator.
Discontinuous Classification: A condition in which classification (by human expert) of one or more highly similar feature vectors yields very different target definitions. Also, when the boundary between two or more adjacent classes is sharply defined.
Divergence: The degree of contrast or disagreement of direction of two indicators. Typically, divergence indicates that one indicator has overshot a level at which it should have reversed.
Dominance: The degree to which one indicator drives another. Sometimes one indicator is always driven by another, while other indicators may share the responsibility of driving.
Dynamic Resistance: Price resistance offereed at a level that varies with time or some other event.
Dynamic Support: Price support at a level that varies with time or some other event.
Event: An identifiable, determinable occurrence of nearly any sort. Such occurrences can represent the passing of time, such as a trading day or week or hour, or more commonly the occurrence of an identifiable chart pattern, such as a peak or valley, or a reversal.
Event Based Resistance: Resistance offered relative to an event, regardless of price or time.
Event Based Support: Support offered relative to an event, regardless of price or time.
Event Set: A set of securities data, each element of which is characterized by an event. The event may or may not be calendar-based.
Event Significance: A measure of the strength of a particular event, with a view to identifying the strength or significance that another event must reach in order to balance or counter the first event. A measure of the importance or relevance of an event. Typically this will be a historical perspective, having to do with the price action that followed the event, but sometimes it is determined from comparison of competing or supporting events, in which case the ensuing price action may be irrelevant.
Exclusion Zone: A number of events before or after an event that must not be examined or used for evaluation because the status of the event may not have been recognized at the time. This is especially true when studying P&F reversals.
Historical Network: A network that uses entirely historical data to determine a state or value. This is no different from a standard classifier.
Indicator: A value or set of values used to assess market or security condition or direction. The indicator may be derived from the values under study, or it may be related or believed to be related in some manner. An indicator may be leading, lagging, coincident, or variable with respect to the value to which it is related. It is not unusual for an indicator's relationship to the value of interest to be inconsistently leading, lagging, or coincident.
Key Point: A point or date to which significance can be attached relative to an objective evaluation such as price change or high or low MEG or MEL. Shooting stars and abandoned babies and hammers are potential key points.
Lagging Indicator: A lagging indicator is typically influenced by another indicator (the indicator of interest, or IOI) or confirmatory of certain action in the IOI. By observing the IOI one my be able to predict the values of the lagging indicator.
Leading Indicator: A leading indicator is typically used as an aid to predicting another indicator or important value. The relationship between the leading indicator and the value that it is intended to predict may be causal or may be due simply to the existence of some other relationship.
MEG: Maximum Expected Gain. The highest percentage gain from today's close over a specified period. The specified period may be in days or events, where events could be PnF columns, number of peaks, number of valleys, or number of peaks and valleys of some indicator.
MEL: Maximum Expected Loss. The greatest percentage loss from today's close over a specified period. The specified period may be in days or events, where events could be PnF columns, number of peaks, number of valleys, or number of peaks and valleys of some indicator.
MER: Maximum Expected Range. The difference between the highest and lowest prices over a specified period, expressed as a percentage of today's close. Similar, if not identical, to anticipated volatility. The specified period may be in days or events, where events could be PnF columns, number of peaks, number of valleys, or number of peaks and valleys of some indicator.
Point and Figure Pivot Point: The date at which the highest point in a column of X's or the lowest point in a column of O's occurs.
Point and Figure Reversal Point: The date at which a column reverses. This will not normally be the highest or lowest price in a column.
Positive Reinforcement: During the network training process, if the network makes a classification that can be considered "good" or "appropriate", even though the training set omits or even counters that classification, the network classification may be added to the training set, or corrected as the case may be.
Predictive Network: A network that uses entirely historical data to predict a state or value at some future date.
Proxy: A value used to assist in the price modeling of a VOI, other than the direct VOI itself. Volume can assist in price modeling, as can VIX or VXN.
Reaction: Typically, an overbought or oversold condition that occurs following a divergence or other action indication. While such overbought or oversold conditions are usually considered opportunities, they are traps when they occur as a reaction to a clear signal, and significant peaks or valleys that occur under such circumstances should be discounted. This concept is akin to the common axiom of "Never fade a signal." See also Action
Reversal: A change in direction of the trend. Typically, a reversal is identified after the fact, given that some event or events have 'confirmed' it. Confirmation is generally required due to the fact that trends do not reverse easily, and due to the fact that the end of a trend does not necessarily mean that a new trend has begun in the opposite direction. It is often the case that a trend will consolidate, or have some sort of congestion before continuing in its direction or giving up and allowing the opposite trend to take over. A reversal must relate to a specific trend, as it is possible to have trends over a variety of time periods that are in the same or different directions. See also event significance
Semi-predictive Network: A network that predicts a state or value at some date within the range of data that is used for the network inputs.
Sparse Set: A set of securities data that is a subset of some other set. Usually based on events that are less common than the dense set to which it is being compared.
Spur: A one-period change in direction that fails to exceed the value two periods ago. This formation is generally not considered a peak or a valley because it is an aberration to a trend.
Static Resistance: Price resistance offered at a given price level that is invariant with time.
Static Support: Price support offered at a given level that is invariant with time.
Value of Interest: Value of Interest, or VOI, is a useful term in technical analysis that refers to the value that motivates the study. This is customarily price. The values of Open, High, Low, and Close are useful details of price. The VOI is distinct from derived indicators, such as moving average or Stochastics, and Proxies, such as VIX or volume.
Trend: A trend represents a non-zero (zero would be defined as trend-less) direction that is ascribed to the market or to a security for a particular time period or set of events. A trend has much in common with the physical concept of object motion in a certain direction, especially with respect to the forces required to change the direction or velocity of such object. A trend may end in a consolidation period, or with a reversal. Until a consolidation or reversal is confirmed the trend must be considered to remain in effect.