Market Theory & Advanced Technical Concepts
Older market theories, breadth, and the derivatives numbers technicians borrow. 30 topics.
Dow Theory
The classical trend framework from Charles Dow: confirmed moves, phases, and the idea that a trend persists until a reversal is signalled.
Elliott Wave Theory
Ralph Nelson Elliott's idea that crowd behaviour traces a repeating pattern of impulse and correction.
Elliott Wave Impulse
A five-wave advance or decline in the direction of the larger trend, under Elliott's rules.
Elliott Wave Corrective Waves
The countertrend structures Elliott used, most simply a three-wave move against the impulse.
Wyckoff Method
Richard Wyckoff's framework for reading accumulation, markup, distribution, and markdown from price, volume, and time.
Wyckoff Accumulation
A range near lows in which selling is absorbed and a campaign builds a long position, in the Wyckoff schematic.
Wyckoff Distribution
A range near highs in which demand is used to sell a campaign, in the Wyckoff schematic.
Wyckoff Markup
The advancing phase after accumulation, when price trends up out of the base.
Wyckoff Markdown
The declining phase after distribution, when price trends down out of the top.
Volume Spread Analysis (VSA)
Tom Williams's method of reading the spread of a bar, where it closed, and the volume, as a development of Wyckoff.
Market Profile
A way of organising the session by price and time, developed by J. Peter Steidlmayer, showing where the market accepted value.
Auction Market Theory
The view that markets are auctions moving between balance and imbalance as they search for value.
Efficient Market Hypothesis (EMH)
The claim that prices already reflect available information, so abnormal returns are hard to earn after costs.
Random Walk Theory
The claim that successive price changes are largely unpredictable, so the path looks like noise around a drift.
Intermarket Analysis
Using related markets, rates, currencies, commodities, and credit, to understand the one you trade.
Relative Strength
How an instrument is performing compared with another, usually an index or a sector, not the RSI oscillator.
Relative Rotation Graph (RRG)
A plot of relative strength and the momentum of that relative strength, used to see rotation between groups.
Advance-Decline Line
A cumulative total of net advancing issues, used as a breadth check on an index.
Advance-Decline Ratio
The number of advancing issues divided by the number of declining issues on a session or a window.
Market Breadth
Any measure of how many stocks are participating in a move, rather than how far the index has gone.
New Highs and New Lows
A count of issues making new 52-week highs or new 52-week lows, used as a breadth and leadership measure.
Put-Call Ratio (PCR)
The volume or open interest of puts divided by the same measure for calls, a rough gauge of how much protection or downside speculation is being bought.
Open Interest (OI)
The number of outstanding derivative contracts that have not been closed, exercised, or expired.
Long Build-up
A futures read in which price rises and open interest rises, suggesting new long positions are being opened.
Short Build-up
A futures read in which price falls and open interest rises, suggesting new short positions are being opened.
Long Unwinding
A futures read in which price falls and open interest falls, suggesting existing longs are closing.
Short Covering
A futures read in which price rises and open interest falls, suggesting existing shorts are buying back.
Max Pain
The strike at which the total intrinsic value of outstanding options is minimised, a popular expiry magnet story.
Option Greeks
The sensitivities of an option's price to the underlying, to volatility, to time, and to rates.
Gamma Exposure (GEX)
An estimate of how much option hedging must buy or sell as the underlying moves, based on open interest and gamma.