As of 12/20/2024   Indus: 42,840 +498.02 +1.2%     Trans: 15,892 +32.54 +0.2%     Utils: 986 +14.76 +1.5%     Nasdaq: 19,573 +199.83 +1.0%     S&P 500: 5,931 +63.77 +1.1%	YTD  +13.7%   0.0%    +11.9%    +30.4%    +24.3%	Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,100 or 17,700 by 01/01/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/5/24

As of 12/20/2024   Indus: 42,840 +498.02 +1.2%     Trans: 15,892 +32.54 +0.2%     Utils: 986 +14.76 +1.5%     Nasdaq: 19,573 +199.83 +1.0%     S&P 500: 5,931 +63.77 +1.1%	YTD  +13.7%   0.0%    +11.9%    +30.4%    +24.3%
Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,100 or 17,700 by 01/01/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/5/24

Bulkowski's Glossary of Terms

This page serves as glossary and term definitions for methods used to measure performance of chart, event, and candlestick patterns as described on ThePatternSite.com website.

Updated 6/16/2023.

 A   B   C   D to F   G to L   M   N to O   P   Q to S   T   U to Z 

-- A --

Actionary waves

An Elliott wave term. Actionary waves or trend waves are those whose direction agrees with the trend of one higher degree of which it is a part.

Average rise or decline

Average is the sum of the samples divided by the number of samples. The average rise/decline measures from the opening price the day after the breakout to the ultimate high or ultimate low.

-- B --

Bear market

The decline in the S&P 500 Index from March 24, 2000 to October 10, 2002 and from October 12, 2007 to March 6, 2009. Both of those represent a 20% drop from a high.

Best 10-day performance rank (candlesticks)

Ten days after the breakout, the price move is evaluated and displayed is the best rank from the combinations of bull/bear markets and up/down breakout directions.

Best average move in 10 days (candlesticks)

Ten days after the breakout, the average price move is evaluated and shown is the best result from the combinations of bull/bear markets and up/down breakout directions.

Best percentage meeting price target (candlesticks)

Usually the height of the candle pattern added to the top or subtracted from the bottom of the candlestick pattern to get a target price. This is the best result from the combinations of bull/bear markets and up/down breakout directions.

Break even failure rate.

A measure of the number of patterns that fail to rise (upward breakout) or decline (downward breakout) by at least 5%. Think of the break even failure rate as the percentage of patterns that fail to cover the cost of trading.

Breakout

When price pierces a chart pattern trendline or above the top or below the bottom of a chart pattern. In the case of a head-and-shoulders, a neckline pierce is used or the right shoulder armpit.

Breakout volume

The volume on the day of a chart pattern breakout as compared to the average of the prior 3 months.

Bull market

Everything outside of the March 24, 2000 to October 10, 2002 and October 12, 2007 to March 6, 2009 bear market . Both of those bear markets represent a 20% drop from a high. You know you're in a bull market when the index rises of at least 20% from a low.

Busted patterns

Price that moves no more than 10% after the breakout before reversing and zipping to the other side of the chart pattern, starting a trend in a new direction. The move busts the original breakout direction. For example, if a double top busts, you'll see price breakout downward and drop no more than 10% before reversing and closing above the top of the highest peak in the double top. When that happens, it busts the downward breakout. Busting can continue if price fails to move more than 10% away from the chart pattern before reversing and closing on the opposite side of the chart pattern. A double bust for the double top means price busts the downward breakout as described above, moves higher by no more than 10% before reversing and closing below the bottom of the double top. For the statistics, I stopped counting at three busts, so a "triple bust" means three or more busts.

-- C --

Change after the tend ends

After a breakout, measures the move from the end of the price trend until price peaks or hits bottom and then moves more than 20% in a new direction. Similar to the measure for the ultimate high or ultimate low. The thinking here is that a trader would short an upward breakout after the upward trend ends and then ride price lower, or go long at the end of a downtrend.

Confirmation

The price at which squiggles on a chart become a valid chart pattern. Usually occurs when price breaks out of the chart pattern trendline boundary.

Continuation

When price enters and exits a chart pattern in the same direction.

Corrective waves

An Elliott wave term. Corrective waves retrace prior gains or interrupt the primary trend as opposed to motive waves that propel price movement. Corrective waves have a three wave structure or a combination of three waves. They are more difficult to recognize because they come in many variations, such as zigzags, flats, and triangles. They can be strung together to create complex corrections. In impulse waves 2 and 4, the configuration tends to alternate and not repeat (a zigzag as wave 2 followed by a zigzag for wave 4) for example. If you see a flat as wave 2, a zigzag will appear as wave 4.

-- D to F --

Divergence

Price diverges from an indicator. Price will make higher highs but the indicator will make lower highs or price will make lower lows and the indicator will make higher lows. See Divergence.

Expectancy (Mathematical expectancy)

"Trading expectancy is a calculation that shows what the typical profit is for each trade placed. If it's negative, the strategy is a loser. If it's positive, the strategy is a winner." -- from vantagepointtrading.com

Here's an example. Expectancy = (Percentage Winners x Average Win Size) - (Percentage Losers x Average Loss Size). If you have a trading setup that wins 35% of the time and makes an average of $1,000 per trade, but loses an average of $450 per trade 65% of the time, then the expectancy is Expectancy = (.35 x 1000) - (.65 x 450) or $57.50 per trade. You could expect to make $57.50 per trade using your setup. If your numbers are per share, then the $57.50 is per share, per trade. So if you trade 100 shares, you'd expect to make $57.50 x 100 or $5,750.00 per trade. I include expectancy in my Pattern Pairs articles to help gauge which pattern pairs give the most profit.

Extension

An Elliott wave term. An extension is an unusually long wave, composed not of 5 subwaves but 9 (or even more, like 13). In the 1, 3, or 5 wave sequence, only one of the waves will be an extension. Thus, if wave 1 extends, then waves 3 and 5 will be normal length. If waves 1 and 3 are normal, then look for a long move on wave 5.

Failure rate

See break even failure rate

Flat base

If you know what a rectangle chart pattern looks like, then you know what a flat base is. Look for a price area in which the stock touches the same value multiple times over several weeks or months. The bottom or top of this area appears flat, hence the name. Many chart patterns appear at a price just below the base, like a pothole in a road, before price takes off.

Frequency rank (candlesticks)

How often a candle occurs in a historical price series, based on the number of appearances in a standard database.

-- G to L --

Gaps

Occur when yesterday's high is below today's low (bull gap) or yesterday's low is above today's high.

Horizontal consolidation region (HCR)

Is a congestion area marked by a flat top, flat bottom, (or both), or prices that share a common value. A HCR means any area in which price moves horizontally.

Impulse wave

An Elliott wave term. A five wave pattern with subwaves 5-3-5-3-5 and no overlap between waves one and four.

Linear regression

A method of drawing a line such that the distance between the points and the line is at a minimum.

-- M --

Market capitalization

The number of shares outstanding for a stock multiplied by the breakout price.

Market trend

The difference in the S&P 500 index from the day the chart pattern ended to the day it started.

Mathematical expectancy.

See Expectancy

Measure rule

A method, usually using the chart pattern height, to determine the minimum price move after a breakout

Minor high

A significant turning point in a stock, resulting in a peak.

Minor low

A significant turning point in a stock, resulting in a valley.

Motive waves

An Elliott wave term. Motive waves are those that propel the market as opposed to corrective ones that retrace prior gains or interrupt the primary trend. Motive waves have a five wave structure or a combination of a five wave structure. They obey the rules that subwave 4 will not overlap subwave 1, and subwave 3 is not the shortest wave. Wave 2 will not retrace all of wave 1, and wave 4 will not retrace all of wave 3. Wave 3 always travels beyond the end of wave 1. Wave 3 is often the longest wave of waves 1 and 5. Motive waves often follow a trend channel -- two roughly parallel lines of trend. One of the subwaves, 1, 3, or 5, is usually longer (extended) than the others.

-- N to O --

Neckline

In a head-and-shoulders chart pattern, a line joining the armpits, extended into the future to show trading signals when price crosses it.

One higher degree

An Elliott wave term. If you were a wave of water, then a wave of one higher degree would be the tide. On the price chart, if you were a subwave, then a wave would be one degree higher. Think of it like a camera. If you zoom in, you see the subwaves. When you zoom out, you see the waves.

Overall performance rank (candlesticks)

A ranked sum of the percentage price changes from 1, 3, 5 and 10 trading days after the breakout, using all combinations of bull/bear markets and up/down breakout directions.

Overall rank

A sorted and ranked sum of the ranks of: the average rise or decline, the break-even failure rate, and the change after the trend ends. A rank of 1 is best.

Overlap

An Elliott wave term. When wave four moves into the territory of wave one. By definition, this cannot happen in an impulse wave.

Overshoot

When price rises briefly above the start of a chart pattern.

-- P --

Partial decline

After a chart pattern is formed, obeying all of the identification guidelines, price drops but does not touch the bottom trendline before staging an immediate upward breakout.

Partial rise

After a chart pattern is formed, obeying all of the identification guidelines, price rises but does not touch the top trendline before staging an immediate downward breakout.

Pattern height

The difference between the highest high and lowest low in the chart pattern divided by the breakout price.

Percentage meeting price target

Measures how often price fulfills the measure rule. The measure rule is usually the chart pattern height added to (upward breakouts) or subtracted from (downward breakouts) the chart pattern. The result gives a target price. The measure rule computation varies from pattern to pattern and is usually inaccurate. Try multiplying the measure rule height by the percentage meeting the price target to get a final target price. See measure rule for more information.

Performance for upward breakouts

A rank of the rise from the breakout price to the ultimate high.

Performance rank

I rank each chart pattern in 3 ways: by failure rate, by average rise or decline, and by the average decline or rise after the original trend ends (the change after the trend ends in case you want to reverse the direction of the last trade). The performance rank is a sum of the scores of each rank, sorted again, and ranked. A rank of 1 is best. A rank of 3 out of 23, for example, means it ranks third out of 23 other chart pattern types (that is, those with the same breakout direction in the same bull or bear market).

Position trade

I may define this differently than others. In my view, this is a long term trade that you seek to exit before the trend changes. A trend change is a move of at least 20% opposite the current trend. In other words, if you are long, a trend change occurs when price drops by 20% from high to close. If you are short, a trend change is a rise of at least 20%, measured low to close. This is similar to buy-and-hold except you're trying to time the market; you're trying to exit before disaster strikes.

Price target

This is an estimate of how far a stock might move after the breakout. After the breakout from a chart pattern, the move can be estimated using the measure rule for the chart pattern. Often that's the height added to or subtracted from the breakout price. It is an estimate only.

Pullbacks

Price breaks out downward, drops, and then returns to the breakout price within 30 days.

Prevailing price trend

This is the intermediate-term (3-6 months) price trend leading to the start of the chart pattern.

Profit factor

The ratio of gross profit to gross loss.

-- Q to S --

Rank, candlestick

A rank of 1 is best out of 103 candle patterns.

Reversal

When price enters and exits a chart pattern in opposite directions.

Swing trade

Entering a trade at the swing low (minor low) and exiting at a swing high (minor high), or the reverse. You're trying to capture the move from low to high or high to low, on a short-term basis.

Subwaves

An Elliott wave term. A subwave is the smaller price movements that make up a wave. If you were a wave of water, then a subwave would be a ripple. If you were a camera, you would zoom in to see the subwaves and zoom out to see the waves.

Swing measure

For flags and pennants, measure from the breakout to the swing high or low (usually the nearest minor high or low after the breakout, where the short term trend ends). I use this method because these chart patterns are small and many suggest that they appear midway in a price trend. Gaps, measured moves, and some event patterns do not have a conventional breakout or ultimate high/low, so their performance is not ranked or the method does not apply to the standard measure (that of finding the highest high or lowest low before a 20% trend change).

-- T --

Target price

This is an estimate of how far a stock might move after the breakout. After the breakout from a chart pattern, the move can be estimated using the measure rule for the chart pattern. Often that's the height added to or subtracted from the breakout price. It is an estimate only.

Tested performance (candlesticks)

How the candlestick actually behaved, found through testing. See Theoretical performance.

Theoretical performance (candlesticks)

How the candlestick is supposed to behave, in theory. See Tested performance.

Throwbacks

Price breaks out upward, climbs, and then returns to the breakout price within 30 days.

Throwback/pullback rate

The percentage of stocks that throw back or pull back to the breakout price after the breakout.

Traps

Occurs when price breaks out in one direction, moves less than 10% before reversing trend and moving in the new direction by either 20% or closing on the side opposite the breakout.

Trend start

Where the price trend begins, as measured from a major price turning point. To determine the trend start, look from the beginning of the chart pattern backward in time for the lowest valley or highest peak before which the stock rises or drops, respectively, at least 20%. The lowest low or highest high represent where the trend starts. Whether to search for the lowest low or highest high, I use whichever drops below or rises above the bottom/top of the chart pattern first (looking backward in time).

-- U to Z --

Undershootltimate high

The highest peak before price declines by at least 20%, measured from the high to the close. If the stock did not have a 20% move before the end of data or if price closed below the bottom of the pattern first, then the highest peak was used as the measure.

Ultimate low

The lowest valley before price rises at least 20%, measured from the low to the close. If the stock did not have a 20% move before the end of data or if it closed above the top of the pattern, then the lowest valley reached was used as the measure.

Undershoot

A brief price dip that happens just before the start of a chart pattern. Does not have any significance regarding performance, but it can prevent an accurate calculation of the where the trend starts.

Volume trend

Use linear regression to determine if volume trends upward or downward from the start to end of the chart pattern.

Yearly price range

The difference between the highest high and lowest low of the prior year, starting from the day before the chart pattern begins, split into thirds: highest third, middle third, and lowest third.

-- Thomas Bulkowski

Three kinds of people: those who can count and those who can't.