The 200 day moving average is the traditional way to determine if the stock is up or down in the long term.  This technical level is a staple for institutional traders.

We generate an alert when a stock crosses its 200 day moving average.  We filter these alerts for noise, so you don't see the same alert repeatedly when a stock is near its 200 day moving average.

The 52 week high is the highest price a stock has seen in the last 52 weeks.  This typically includes yesterday's trading, but not today's trading.

There are many other highs that traders look at, but this one is especially popular because many exchanges publish this information.  Most data providers and direct access-trading platforms display the 52 week high because they can get this information directly from the exchange.

Our software tell you the exact date of each high.  You can set filters based on how long it has been since we've seen a price this high before today.  You can specify any time period.  If you specify 365 days, you will only see 52 week highs.

The 52 week low is the lowest price a stock has seen in the last 52 weeks.  This typically includes yesterday's trading, but not today's trading.

There are many other lows that traders look at, but this one is especially popular because many exchanges publish this information.  Most data providers and direct access-trading platforms display the 52 week low because they can get this information directly from the exchange.

Our software tell you the exact date of each low.  You can set filters based on how long it has been since we've seen a price this low before today.  You can specify any time period.  If you specify 365 days, you will only see 52 week lows.

ADR is short for American Depositary Receipt.  An ADR is an indirect way for foreign stocks to trade on American exchanges.  ADRs trade just like ordinary American stocks, and the exchanges provide us with the same data as for normal stocks.

We track each ADR just like a normal stock.  They move like a normal stocks, so we use the same algorithms to examine stocks and depository receipts.

AMEX is short for American Stock Exchange.  The AMEX lists numerous types of financial products including equities, options, exchange traded funds, and HOLDRS.

Our service analyzes exchange traded funds and HOLDRS just like normal stocks.

Absolute value is a mathematical function.  The absolute value of a number is the same number without the negative sign.

For example, the absolute value of -5 is 5.  The absolute value of 10 is 10.  The absolute value of -12.34 is 12.34.

We use absolute values when the direction of a move doesn't matter, only the size of the move.  Most of our alerts have two forms, one positive and one negative.  Our stock screener, however, often lists items which are closest to a certain point, regardless of whether they are higher or lower.

Accumulation in financial terms is synonymous with buying.

Our alerts service helps spot moments when stocks are being accumulated.

A traditional advance-decline line compares the number of stocks which have closed up for the day to the number which have closed down for the day.  This can be a quick way to view the strength of the market.  Most people display this number on a graph.  Because this number is so noisy, many people apply moving averages and other analytics on top of the advance-decline line.

We focus on real-time, intra-day analtyics.  Our users can create their own intra-data advance-decline lines.  Just create two alert windows side by side.  Configure one to show bullish alerts and the other to show the corresponding bearish alerts.  To create a more traditional advance-decline line, choose a simple alert like 10 minute highs and lows.  For a more focused approach, use alerts like running up and down which reqire statistical validation.

For the instantaneous view of the market, see which window is scrolling the fastest.  For a slightly longer term approach, hit the refresh button in each window when the market makes an important turn.  That will reset the counters in each window.  Watch the counters over time to see if the bulls or the bears are winning since the last reset.

If you do not set any other filters, you will compute something very similar to a traditional advance-decline line.  Most users will restrict the universe of stocks to show only stocks that they trade.

Another option is to put both the bullish and the bearish alerts into the same window.  This way you can react to the color of the window, like a heat-map, rather than looking at numbers.

An Advantage Player is term coined in gaming circles.  Someone who has an advantage that they use over the house is deemed an advantage player.  Although this term was coined in professional gambling circles it applies to trading stocks.  The goal of Trade-Ideas is to make our customers Advantage Players.  We do this by doing the type of processing behind the scenes that is simply too difficult to do for most people.  Our software spots trading opportunities in real-time and allows the end user to have an advantage over someone who does not use Trade-Ideas technology.

An alert is an interesting event in the market.  Events are reported as they occur, in real-time.  This differs from a board view, market view, stock screener, or portfolio, because an alert only shows things that are changing.

For example, a portfolio window will list all of your positions and say which ones are up or down for the day.  An alert, on the other hand, will occur when a stock transitions between being up and being down for the day.  A stock screener might, on request, tell you the 25 stocks which have moved the most since the open.  An alert, on the other hand, will occur each time a stock makes a move greater than the user defined threshold.

Traders typically use an alert to notify them that something interesting is happening with a particular stock, or to find out which stocks are doing interesting things.  Then they use other tools to take a closer look at those stocks.

Our alerts are based strictly on technical analysis, and on statistical analysis of the market.  Other services may provide alerts based on news or fundamental analysis.

An alerts server is a computer or a cluster of computers watching market data looking for specific patterns or events.  Alerts are almost always computed by an alerts server then distributed to the individual clients.  The networking, computation, and storage requirements to properly find market alerts in real-time is too great for most end users.

Our alerts service is the extreme case of this setup.  A user can watch for alerts on a low end computer with a slow dialup connection to the Internet.

Alerts software, as it relates to stock trading, is software that brings important market events to a trader's attention.  Serving the function of a trading assistant it allows the trader to focus on execution and money management instead of looking for opportunities.

Our primary product at Trade-Ideas is our alerts software.

An algorithm is a step by step procedure for solving problems in a finite number of steps.

Our software uses proprietary algorithms to compute values for channel breakouts, breakdowns and other alerts.

An ask price is the lowest price that a person is willing to accept in exchange for stock.

Strictly speaking, there can be many different ask prices for a single stock.  We use the term \"ask\" more loosely, as a shorthand for the \"best ask\".", "alert types" => array("NHA", "NHAF", "NLAF"), "see also" => array("Best Ask")), "Average Price" => array( "definition" => "

The average price of a stock purchase or sale is equal to the stock price of each lot multiplied by the share amount, divided by the total share bought or sold.

The average true range is a moving average of a stock's true range for the day.  A stock's true range is the high of the day minus the low of the day, if we pretend that yesterday's close was part of today's range.  This is a very simple way to estimate the volatility of a stock without using intra-day data or complicated formulas.

Trade-Ideas presents a stock's average true range on our free stock screener.  We also allow you to filter by the average true range in our real-time software.

Trade-Ideas also computes volatility directly, and gives you access to that.  Although average true range is available, we recommend that you look at volatility as an alternative.

Trade Ideas defines back testing as the use of historical data to help determine validity of trends.  In back testing one takes past data and supposes that trades were made based on certain signals.  Then one looks at the trades to see what would have happened in terms of positive or negative results.  Back testing allows a trader to test theories before risking capital in real market conditions.  One of the best analogies for back testing is in golf.  Going to a driving range to work on your game is very similar to back testing a trading strategy.  The important aspect of this analogy is understanding that just because something back tests very well does not guarantee that it will work out in real trading, however it does give you a good sense of what to expect and that is important for controlling risk while trading.

In Trade Ideas we take back testing to a slightly higher level by doing what we call \"event based\" back testing.  Our software does not know what stocks you will be trading at the time you are back testing.  Instead our software focuses on the event, such as a \"10 day high on 5x volume,\" and looks at every stock that had that event take place.  Then the software simulates going long or short on that event depending on what you specify to give you an idea if the event is a tradable signal or just noise.

1 basis point = 0.01%.  100 basis points = 1%

Basis points are a high precision way to present numbers that are relative to a price.  Some software requires the user to enter a number of basis points before performing a calculation.  Our alerts server typically computes basis points based on the volatility of a stock.

Prices are going down.

Our home page includes bullish and bearish sample alerts.  The bearish sample includes alerts typically associated with a rising stock price.  The bullish sample includes alerts typically associated with a falling stock price.

The best ask is the lowest price for which someone is willing to pay for a stock at this time.  If you want to buy a small amount of stock quickly, this is probably the price you will receive.

Many of our algorithms use the best bid and the best ask as estimates of the current because they are not as noisy as the last print price, and they give a range for reasonable print prices.  These are most helpful in the smallest time-frames.

The best bid is the highest price that someone is willing to pay for a stock at this time.  If you want to sell a small amount of stock quickly, this is probably the price you will receive.

Many of our algorithms use the best bid and the best ask as estimates of the current because they are not as noisy as the last print price, and they give a range for reasonable print prices.  These are most helpful in the smallest time-frames.

A bid price is the highest price a buyer is willing to pay for a stock.  The act of advertising that you are willing to pay a specific price for a stock, rather than accepting someone else's price.

Strictly speaking there can be multiple bid prices for a single stock.  We use the term \"bid\" more loosely, as a shorthand for the \"best bid\".", "alert types" => array("NLB", "NHBF", "NLBF"), "see also" => array("Best Bid")), "Black-Scholes Model" => array( "definition" => "

Black-Scholes is a way of modeling stock prices.  The Black-Scholes model focuses on the current stock price and the volatility of the stock price to determine the likelihood of future price moves.  This type of analysis is most often used to accurately price stock options based on the price of the underlying stock.

This type of analysis differs from traditional technical analysis because it does not select a direction for a move.  Linear regression and Gann angles, for example, assume that a stock price will move in a straight line.  A longer, straighter line means a stronger trend, so we can confidently predict that the stock price will continue to rise or fall at the same rate.  Black-Scholes says that a stock chart with a price rising or falling in a straight line is very unlikely.  A longer, straighter line is even less likely.

Bollinger Bands come closer to the Black-Scholes model.  The standard deviation formula used in Bollinger Bands is similar to the volatility formula used by the Black-Scholes model.  For that reason, neither one expects a sharp rise or drop in price to continue forever.  If you see a stock chart with a pattern like that, and you add Bollinger Bands to that stock chart, then you will see the bands get wider and wider over time.  The Bollinger Bands, like the Black-Scholes model, are saying that a stock like that becomes harder and harder to predict.

Black-Scholes differs, however, from Bollinger Bands, because Bollinger Bands expect an extreme move to be followed by a pullback.  The center of the Bollinger Bands is set by a moving average, under the assumption that the price is likely to return toward that mean.  Black-Scholes always centers its predictions around the current price, as in the efficient market theorem.

The Black-Scholes model is most obvious in our various running and consolidation alerts.  These alerts tell the user when a stock chart is unusual because the current stock price is far from the prediction of the Black-Scholes model.  We also use this model internally in many other places, allowing us to properly interpret the volatility of a stock.

A block trade is a single trade with large number of shares.  Block trades usually show institutional trading.  The exact definition varies, but usually is 20,000 shares, 50,000 shares or 100,000 shares.

Traders can use our service to watch for block trades.  Traders can configure this alert to set the minimum number of shares.

The body of a candlestick is the wide part of the candlestick.  The narrow parts are the wicks.  The body represents the first price of the day and the last price of the day.  If some prices go outside of this range, they are represented by the wick of the candlestick.

Bollinger Bands provide a statistical way to compare a stock price to the recent historical prices for that stock.  The Bollinger Bands formula typically looks at the 20 trading days preceding the time in question, and it gives you a range of reasonable prices for that period.  The center of that range is the average price during that historical period.  The size of the range is based on the volatility of the stock for that time period.  If the price goes outside of this range, that is a statistically significant event.  For the exact formula see http://www.bollingerbands.com.

Our software allows you to filter based on Bollinger Bands.  You can create an envelope based on the standard Bollinger Bands to see only stocks which are trading within their normal trading range.  Or you can set a minimum level of three standard deviations, to see only stocks which are trading far above expectations.  These filters are user configurable, so the possibilities are endless.

Bollinger Bands differ from many of our other types of volatility analysis because they are based on a trading range.  Bollinger analysis assumes that a price will typically move around within a range; if a stock suddenly jumps up, it is more likely to go back down than further up.  Most of our analysis is based on the efficient market theorem.  The efficient market theorem allows you to look at historical prices to estimate volatility, but does not allow you to predict a specific direction for the market based on historical prices.

Most of our volatility analysis is based on recent intraday data.  We also work with Bright Bands, which look at volatility over a year.  Bollinger Bands fill in the middle ground by looking at the closing prices for the last 20 trading days.

A topping tail is a candlestick pattern which some people believe marks the end up an upward move.  After several consecutive candles with large green bodies, the stock tries to make another large green candle.  But the price pulls back before the end of the last candle, leaving a large wick or tail at the top of the candle.

Prices are going up.

Our home page includes bullish and bearish sample alerts.  The bearish sample includes alerts typically associated with a rising stock price.  The bullish sample includes alerts typically associated with a falling stock price.

A candlestick is a traditional way of representing prices on a graph.  Each candlestick is represents all of the price action during a specified time period.  Each candlestick contains exactly four pieces of data, the prices of the first print, the last print, the highest print, and the lowest print inside of the candle.

Candlesticks were invented many years ago by Japanese rice trades to track the rice market.  They are now popular for tracking stock prices because they are so easy to compute and use.  We generally prefer statistical analysis to candlesticks because candlesticks leave out too much data.  Candlesticks are particularly misleading on intra-day charts.

The biggest problem with candlesticks is that a single, small print can change the shape of the candle.  A single print which is much higher or lower than the rest of the prints will make the biggest change to the candle.  The closing price of a candle comes from the last print before the candle ends.  For intra-day charts, these times are completely arbitrary; you almost randomly choose one print to highlight.  What if a large print happens a second before a small print at a different price?  Which one becomes the closing print of the candle?  The opening price of the candle is even more misleading.  When you make a 15-minute candlestick chart, you choose two adjacent prints to represent the entire 15 minute period.  Why plot two adjacent prints?  You would have a better representation of the data if you selected one print every 7 1/2 minutes.

Our statistical analysis avoids these problems altogether.  No one print stands out in our analysis.  A small print which disagrees with the rest of the data is discarded.  We also offer a limited number of traditional candlestick patterns.

A channel describes a chart pattern where the stock price does not move above the top of the channel or below the bottom of the channel.  The top and bottom of the channel are often horizontal lines called \"resistance\" and \"support\", respectively.

Trade-Ideas is most interested in channels which cover more time and volume but less change in price than expected.  These channels are called \"consolidation\" patterns. This pattern usually happen when the stock's volatility drops unexpectedly.

A channel breakdown occurs when a stock was trading in a tight channel, then starts trading at a price lower than the bottom of the channel.

Trade-Ideas continuously scans for consolidations patterns to define channels, then reports alerts when the price breaks down from the channel.  We offer different types of channel breakdown alerts depending on the type of confirmation that the user requests.

A channel breakout occurs when a stock was trading in a tight channel, then starts trading at a price higher than the top of the channel.

Trade-Ideas continuously scans for consolidations patterns to define channels, then reports alerts when the price breaks out of the channel.  We offer different types of channel breakout alerts depending on the type of confirmation that the user requests.

Churning is the process of buying and selling a lot of stock with little net effect except for generating large commissions.  Brokers are prohibited by law from churning a customer's account.  However, with the advent of direct access trading software, traders can churn more easily without any help.

Our software is specifically designed to help traders find the right trades.  Our primary value proposition is that we make traders more efficient.  Traders can make the trades they need to.  The brokers can still make money because the traders are trading more.  Because the traders are making better trades, the broker can retain his customers better.

Confirmation is an important part of our alerts.  Naively, if a stock trades at $10.00, then trades at $11.00, this is probably interesting.  If you look at the volatility of the stock, you will have a better idea of how quickly the stock price must move before it is considered interesting.  But important question is, how do you know the price change was real?  How do you know it was not a fluke?

We use the term \"confirmed by volume\", or just \"(confirmed)\" for short, to describe our strongest form of confirmation.  This says that there was a significant amount of volume at the given price levels, and that's how we know that the trend is real.  This allows us to throw away some prints if the price does not appear correct.

Volume confirmation comes at a cost.  If the price was $10.00, then we see a print at $11.00, we cannot immediately report on this sudden change.  Many of our volume confirmed alerts have \"fast\", \"short term\" or \"unconfirmed\" counterparts.  These make less use of volume and more use of other factors, like the bid and ask or the spread to confirm a trend.  These react to the market faster, but may report more noise.

Many alerts, such as the crossed above 200 day moving average alert, are always confirmed by volume.  The 200 day SMA exists on a very long time scale.  There is no reason to try to create a faster version of an alert which deals with this technical level.

Congestion describes part of a stock chart where there are many candles at the same price or at similar prices.  This often signifies that a price is interesting or important.  When drawing support and resistance or similar lines on a stock chart, people usually make the lines go through congested regions of the graph.

Although finding congestion is a common technique in technical analysis, the algorithm is not well defined.  When people do this by hand, the results are often very subjective.  We use statistical analysis to objectively automate the process of finding congestion on a stock chart.

Consolidation describes a chart pattern where a stock price moves a lot less than expected.

Our software uses an algorithm based on the Black-Scholes model, and recent volatility for a stock to determine the amount that you would expect each stock to move over time.  We then examine various time frames and report an alert if the stock moved significantly less than expected.

A continuation is which a stock price continues to move in the same direction as it was moving to start with.  This is the opposite of a reversal.

For example, the Gap reversal alerts always start with a gap in one direction or the other.  If the stock continues to move in the same direction, before turning around, that is called a gap continuation.  The amount that the stock moved between after the open, before reversing, is the size of the gap continuation.

A continuation pattern is a stock pattern where the price is expected to continue in the same direction.  For example, in a checkmark pattern, the stock has gone up a significant way before we report the alert.  The most common interpretation of this pattern is that the stock will continue in the same direction, so the chart will eventually look like a check mark.  Because the terms continuation pattern and reversal pattern are sometimes confusing, we always color our alert icons based on the most common interpretation of the alert.

Day Trading is a form of short term trading that involves buying and selling the same financial instruments throughout the day.  Often, but not always, day traders close out their positions at the close to avoid overnight risk.

Day Traders use Trade Ideas alerts software to help spot interesting trading opportunities in real-time and to manage risk.  Click here for more information.

The death cross is a chart pattern created when a shorter term moving average was above a longer term moving average, but it crosses below that moving average.  This is typically seen as a bearish signal.

The death cross is mostly used with longer term moving averages.  It's an especially strong signal when the 50 day moving average crosses below the 200 day moving average.

Discretionary Trading as defined by Trade-Ideas is the process of entering and exiting trades based on \"feel\".  The human brain is very adept at making different inferences while being inundated with a large amount of information.  Most traders today trade in this style because it is still difficult to create and then follow the rules of System Trading.  The most common form of discretionary trading is a concept called reading the tape or just tape reading.  This is a process where by watching the various gyrations of the market via either looking at a chart or seeing a ticker tape of negative and positive events a trader makes a decision to buy sell or refrain from trading.

Trade-Ideas assists in this type of trading by providing investors with an almost unlimited flexibility in creating tickers for reading the tape of the market.

A Doji is a traditional pattern found on Japanese candlestick charts.  A Doji requires only one candle.  A Doji occurs when a candle opens and closes at the same price, but the price changes within the candle.

A Dragonfly Doji is a traditional pattern found on Japanese candlestick charts.  A Dragonfly Doji requires only one candle.  A Dragonfly Doji occurs when the open, close, and high price of the candle are all the same, but the low is not.

E-Minis are \"mini\" futures contracts.  These are futures contracts small enough for an individual investor to trade.  Two very popular E-Minis are the \"ES\" series and the \"ND\" series, representing futures on the S&P 500 index and the NASDAQ 100 index, respectively.

Many investors trade these instruments, so they are very liquid.  Even more people monitor these instruments, to help them trade normal stocks.  At a high level, the E-Minis track the prices of the underlying indices.  However, some people see these as leading indicators of the market.  This is especially true in the 30 minutes before the NYSE opens, because the E-Minis trade 24 hours a day, and the actual stocks on the NYSE barely trade at all before the opening bell.

Enveloping means setting reasonable bounds on the price of a stock.  Typically when a stock price stays within these bounds, it is considered uninteresting.  When the price moves outside of these bounds, that is considered an interesting event.

There are numerous methods to create an envelope for a stock price.  One of the most popular is Bollinger Bands, shown below.  This algorithm uses the moving average of a stock price to set the center of the envelope.  It uses a standard deviation to set the size of the envelope.

Typically we use our own proprietary algorithm based on the random walk model to create an envelope for the price.  The primary difference between our model and the traditional models is the way we use time.  In the picture above, the bounds grow large when the price suddenly changes.  But it grows in both directions.  After the price has dropped significantly, the Bollinger Bands model suggests that the price is more likely to jump back above its original price than it is to stay at the current price or even to move up a little.  Our models pay more attention to more recent prices, but to older volatility numbers.  In this case, after the price has shown that it's not immediately returning to the original price its probably going to stay near the current price.

Also, our algorithms also pay more attention to volume to confirm a trend, where the traditional algorithms pay more attention to time.  And our algorithms are constantly watching a large number of time frames, where a trader traditionally only plots envelopes for one or two timeframes.  The number of charts that the trader can display on his monitor limits this.  Our algorithms all automatically do the math and alert the trader to interesting results, so there is no need to plot them on a graph.

Equities are traditional stocks.  If you own an equity, then you own stock in a company, you own equity in that company, and you own part of that company.

The term \"stock\" is often used loosely to include equities, and other products which are traded or tracked in a manner similar to equities.  We use the term equities when we want to make it clear that we are only talking about real stocks.

eSignal is a market data provider.  eSignal is especially well know for good delivery to end users connected via the Internet.  eSignal also provides server side products.

People who use our alerts and the eSignal client application can link them together; if you click on a stock symbol on an alert window, the eSignal client will automatically display that symbol.

On an equi-volume chart, candlesticks with more volume are wider, and candlesticks with less volume are narrower.  On a traditional chart, one horizontal inch always represents the same amount of time.  On an equi-volume chart, one horizontal inch always represents the same amount of volume.  Many authors state that stock price cycles are easiest to see on an equi-volume chart.

Many of the algorithms behind our alerts pay more attention to volume than to time.  These alerts become more clear when you look at the chart pattern on an equi-volume graph.

An exchange traded fund, or ETF, is a financial instrument which can be traded like a stock but tracks the value of a stock index.  The AMEX offers several exchange traded funds.  The most popular of these are QQQ, which tracks the NASDAQ 100, and SPY, which tracks the S&P 500.  The AMEX created these to compete with the futures which are traded on other exchanges.

Our alerts server treats these just like normal stocks.  We track each exchange traded fund which meets our price and volume criteria.

The alerts server often compares a stock to the futures or another stock.  Based on historical data, some stocks typically move up and down at the same time as the futures.  However, they don't always move the same amount.  The expected ratio is the number of dollars that the stock in question is expected to move, each time the futures or other stock moves one dollar.

For example, assume the historical background information for a stock says that the stock has an expected ratio of .57 relative to the futures.  Assume that the futures go down $1.  At the same time, we'd expect the stock in question to go down by 57 cents.

The expected ratio is based on the slope or \"m\" parameter found in linear regression formulas.

An exponential moving average is a type of moving average which gives more weight to more recent stock prices, and less weight to older, historical prices.

Leonardo Fibonacci of Pisa was an Italian mathematician responsible for the series 1, 1, 2, 3, 5, 8, 13, 21, ...  These numbers, called the Fibonacci series, are often found in nature.  Each number is the sum of the previous two numbers.

In many applications, including stock trading, people do not use Fibonacci numbers directly.  Traders typically use the golden ratio.  One way to compute the golden ratio is to divide a large Fibonacci number by an adjacent number from the series.  This ratio, like the Fibonacci series, is commonly found in nature.  If we were to use the precise mathematical terminology, we would say that people trade using \"The Golden Ratio\", but instead we will use the term \"Fibonacci\" as this term is common with traders.

The most common way traders use Fibonacci is to look for Fibonacci retracements.  Trade-Ideas offers several alerts which report Fibonacci retracements and similar patterns.

A Fibonacci retracement is a common technical analysis pattern based on the golden ratio.  When a stock price moves X dollars in one direction, then turns around and moves Y dollars in the previous direction, we say that there was a retracement of \$Y.  Many traders look for retracements where the X/Y is Phi, the golden ratio.  This is called a Fibonacci retracement because the ratio was the same as the ratio between two adjacent Fibonacci numbers.

This type of analysis is not limited to Phi.  Some traders look for a retracement with the square of that ratio.  This is the same as the ratio between one Fibonacci number and the number 2 positions further in the Fibonacci series.  Other common numbers are the square root of that ratio and one half.

Trade-Ideas automates the process of finding Fibonacci retracements.  The Fibonacci algorithms are not that hard.  And there are many software tools, some available for free on the web, which will compute these values for you if you input the highest and lowest recent prices for a stock.  The time-consuming part is finding all the support and resistance levels, entering these values into the Fibonacci calculator, then watching for the price of each stock to hit one of these levels.  The Trade-Ideas alerts server does all of that automatically.", "see also" => array("Alerts Server", "Algorithm", "Fibonacci", "Golden Ratio", "Technical Analysis"), "alert types" => array("FU38", "FD38", "FU50", "FD50", "FU62", "FD62", "FU79", "FD79")), "Frustration" => array( "see" => "How do you keep a trader in suspense?"), "Fundamental Analysis" => array( "definition" => "

Fundamental analysis is a method of analyzing stock values.  Fundamental analysis focuses on the underlying business.  This includes revenues, earnings, assets, debts, management teams, etc.  Fundamental analysis is an alternative to technical analysis which only looks at the price.

We do not directly use fundamental analysis.  Instead we focus on technical analysis.  Our alerts tell you when the fundamentals change by notifying you of sudden spikes in volume and sudden changes in price.

Futures are contracts which are traded similar to equities.  People pay a fixed amount of money up front for a futures contract, then expect to receive the items specified in the contract at future date specified in the contract.

Futures contracts can cover almost anything.  There are futures on oil, agricultural products, and a variety of other commodities.  Equities traders are especially interested in the futures on stock indices.

Traditionally, large institutional traders who want to accumulate large quantities of stock will start by buying index futures.  These are very liquid, so the trader can do this quickly, without moving the market too much.  Then, over time, they would sell their index futures and buy the actual stocks they wanted.  For this reason, day-traders would watch the index futures; they often serve as a leading indicator, since the large orders start there.  Now, with the introduction of the E-mini futures, any trader can use futures contracts to hedge their position, just like the institutional traders do.

Gann angles are a form of technical analysis originally developed by W. D. Gann (1878-1955).  This is a primitive system which predates modern computers and is easy to perform by hand.

Gann lines are drawn from a specific position on a stock chart using simple angles, like 1:1 (45°), 1:2 (63.75°), 1:4 (75°), 1:8 (82.5°), etc.  Because these all use whole numbers, they can easily be drawn on graph paper without even using a protractor.

The Trade-Ideas alerts server uses powerful computers to implement more modern theories.  Most notably, there are no fixed grids.  There are no fixed relationships between price and time.  In our models, the time axis of the graph is often adjusted based on relative volume.  The price axis is adjusted based on volatility.  That is to say, price changes in each stock are scaled based on previous movements in the same stock.

More importantly, the alerts server avoids straight lines, especially diagonal lines.  Instead we focus on the Black-Scholes and similar models.  These use advanced statistical analysis to make non-linear predictions.

This type of analysis is most visible in the running up and running down alerts.  Like with Gann analysis, we start with a particular point on a stock chart, and look for unusually deviations from the expected path of the stock price.  Price fluctuations within the expected range are written off as noise.  When the graph moves outside of the expected range, we report an alert.  The difference is that don't use the same angles for each stock, and we don't use straight lines.  Moving up at a 45° angle might be normal for one stock, but unusual for another.  More importantly, it might not be unusual for a stock to move up at 45° for two hours, but very unusual for the same stock to maintain the same angle for two days.

The most common definition of a trading gap is the difference between yesterday's closing price and today's opening price for a security.  If a stock closes at one price, and opens the next day at a higher price, we say it gapped up.  If it closes at one price and opens the next day at a lower price, we say it gapped down.  If the close and the following open were the same, we say there was no gap.

A gap is often a specific number.  If a stock closes at $10.00 and opens the next day at $10.05, we say the gap was 0.05, or we say the stock gapped up 0.05.  If a stock closes at $10.00, and opens the next day at 9.90, we say the gap was -0.10, or the stock gapped down 0.10.  If a stock closes at $10.00, and opens at 10.00, we say the gap was 0.00.

Trade-Ideas offers many alerts based on the gap.  These are listed below.  Additionally, you can filter all of our alerts based on the gap.

The golden cross is a chart pattern created when a shorter term moving average was below a longer term moving average, but it crosses above that moving average.  This is typically seen as a bullish signal.

The golden cross is mostly used with longer term moving averages.  It's an especially strong signal when the 50 day moving average crosses above the 200 day moving average.

The golden ratio is approximately 1.618 : 1.  This ratio is commonly found in nature and architecture.  Stock traders often look for this ratio in patterns on stock charts.

One way to compute this ratio is to compare any adjacent Fibonacci numbers.  For this reason stock traders often refer to this type of analysis using the term Fibonacci, as in \"Fibonacci retracements\".

Despite the common terminology, the golden ratio does not require Fibonacci numbers.  Another way to look at the golden ratio is to say that the larger number, often called Phi, is equal to its own reciprocal plus one.  This is useful in computation, and it is easy to show in a diagram.  Draw a rectangle where the length of the sides are related by the golden ratio.  Now, starting at the top left, draw the largest square which will fit in this rectangle.  The remaining part of this rectangle will be a smaller rectangle with the same proportions, but rotated 90 degrees.  Because the resulting rectangle has the same proportions, we can repeat this experiment any number of times producing smaller and smaller rectangles all with proportions matching the golden ratio.  When we perform analysis using the golden ratio we use this picture to remind ourselves of the underlying math.

A Gravestone Doji is a traditional pattern found on Japanese candlestick charts.  A Gravestone Doji requires only one candle.  A Gravestone Doji occurs when the open, close, and low price of the candle are all the same, but the high is different.

HOLDRS is short for HOLding Company Depositary ReceiptS, and is pronounced \"holders\".  HOLDRS are AMEX products similar to exchange traded funds.  HOLDRS are securities that represent an ownership in stock or depositary receipts of a specified group of companies.

The most popular of these are the Semiconductor HOLDRS (SMH), the Biotech HOLDRS (BBH), the Oil Service HOLDRS (OIH), and the Software HOLDRS (SWH).

Our alerts server treats these just like normal stocks.  We track each of the HOLDRS which meets our price and volume criteria.

The hammer stock trading pattern describes a candlestick which looks like this picture.  That is to say, the candlestick for the day looks like a large hammer.

There are two ways to create this shape for the candlestick.  The stock price always opens near the high, falls, then pulls back toward the high.  The stock's closing price will be slightly higher or lower than the the opening price.  In this picture the closing price is slightly lower, because the candle is red.  If you switched the open and close prices, the color would change, but the picture would still look like a hammer.  The name \"hammer\" refers to both patterns.

Trade-Ideas takes multiple approaches to candlesticks.  For daily patterns, we track all the motion within the candle, as illustrated by the green arrow.  Our pullback alerts can show you the same pattern.  These alerts notify you at any time during the day when a hammer pattern is forming.

We also report hammers on various intraday timeframes.  These are reported as soon as the candle ends.

A hedge fund is a special type of fund with fewer restriction on the types of investments it can make.  Of particular interest is a hedge fund's ability to sell short.  In exchange for the ability to use more aggressive strategies, hedge funds are more exclusive and fewer people are allowed to invest in hedge funds.  Hedge funds have attracted a lot of attention recently because, in the last few years, they have generally been much more successful than traditional funds.

Our software was developed with the input from many hedge fund traders.  While their trading styles are all significantly different, they all have an interest in making technical analysis easier to use.

Improving your trading results means making more money with less risk.  This definition is trickier than it sounds, because most trading software immediately reports your profit and loss based only on the price at which you buy and sell stock.  You may not see the tax consequences until the end of the year.  You probably don't see the commissions and other expenses that you pay until the end of the month.  If you're churning your account it's easy to make $100 on paper, then pay your broker $200 in commissions.

Improve Trading Results by spotting trade opportunities as they happen in real-time.  Trade-Ideas alerts software continuously scans the market for interesting trading opportunities and presents them to you in real-time.  You can configure this software to find stocks that meet your exact criteria.

An index is a compilation of related stocks.  The value of the index is the weighted average of the prices of the stocks in the index.

Our server tracks several indices just like stocks.

The inside market is the best bid and the best ask.  These two prices often give a very good idea of the current price of a stock.  These two numbers, together, offer an alternative to the common practice of just listing the price of the last print.

One advantage of looking at the inside market is that you can see the spread.  This gives you some idea of just how precise you can really be when you quote a price.  If you just use the last print price, you can fool yourself into believing that a formula can tell you more than it really can.

Another reason we like the inside market is because it is real.  Someone is willing to buy the stock at one price, and someone is willing to sell it at another.  When you see an individual print, that could mean anything.  There may be just one print at the high price of the day, and 10,000 traders staring at the chart, wishing they had sold there.  That print was just a fantasy.

The inside market also offers a predictive quality.  For a stock to trade, two people have to agree on a price.  The inside market shows the first half of that, before the second person comes in.

The inside market is also relatively stable.  The price of the last print can vary a lot, for no good reason.  In order for the inside market to move, a lot of traders all have to change their prices, and there can be no new traders can be willing to fill in.

In general we use the inside market to validate a lot of our short term alerts, including the ones listed below.  For the longer term alerts we use statistical analysis to aggregate large numbers of prints.

An institutional trader manages relatively large amounts of capital, compared to most traders.  Institutional traders will typically have larger positions and hold them for longer periods of time.  When they trade, they often trade large numbers of shares at once.

It's often said that institutional traders are the ones who really move the markets.  They create the large, sustained price changes.  Most of the noise in the markets comes from day traders, trying to see what the institutions are doing and acting accordingly.  The remaining investors do not make a serious impact on the market.

We offer a variety of longer term alerts, such as the VWAP and the 200 day moving average alerts, aimed specifically at the institutional investors.  We also offer a variety of shorter term alerts, like the block trade and running up alerts, specifically aimed at people trying to follow the institutional investors.

Intraday Trading is trading for that one day only.  Whereas some day traders hold positions overnight intraday traders maintain no overnight positions.  Scalp trading is a form of intraday trading.

Click here for more information.

Kurtosis is a property of a probability function which describes how well that function matches the bell curve.  If you have a bell curve, you should be able to measure the values in the middle of the curve, the most common values, and use these to predict the extreme parts of the curve, the special cases.  Kurtosis describes probability curves, like those often found in the stock market, where the special cases occur more or less often than would be predicted by the common cases.

Our alerts are based on separating the normal variations in stock prices from the interesting variations.  It is important to understand the kurtosis of a stock graph in order to know what is truly unusual.

Least squares is a common way to measure errors in statistical analysis.  The least squares formula is best known for favoring things with a lot of small errors over those with a few large errors.  Least squares keeps track of all errors, even if some are in one direction and some are in the other direction.

For example, assume that you want to evaluate a method to predict stock prices.  For six days you try to predict a value, then compare the predicted value to the actual value.  For five days in a row the prediction is perfect, the error is 0.  On the sixth day the predictions is off by $10.

Then you try a second method of predicting stocks.  This time your predictions are $2 above the real value each of the six days.

A third method predicts values which are $2 above the actual value some days, and $2 below the actual value on other days.

According to least squares, method B is better than method A because the sum of the squares of the errors is lower for method B.  Method B and method C are equally good, according to least squares.

Least squares is most often associated with linear regression.  However, it can also be used to measure errors in other calculations.  The formulas for volatility and standard deviation are almost identical to the equations listed above.

The alerts server uses least squares and related algorithms are used to optimize a variety of models.  These are all internal calculations, and the user does not have to know the details.

Leptokurtosis describes a probability function which is similar to the bell curve, but not quite.  The extreme cases, while still rare, are not as rare as expected.  This is often called \"fat tails\" because of the way this looks when you graph the probability function.

People studying the volatility of stocks usually find that the variance of a stock is leptokurtic.  This means that most of the time the stock moves around somewhat randomly.  But when it deviates from this random pattern, when for example it suddenly starts running in one direction or the other, it runs a lot further and a lot faster than you would expect.

Leptokurtosis is at the heart of what we do at Trade-Ideas.  We believe that the basic normal distribution of market moves is based on random noise.  Real trends exist, but they are hard to see through the noise.  Leptokurtosis shows that there is something in the stock price other than noise.  It can be small, and hard to see through the noise.  We use statistical analysis to identify these trends.

An example:  Let's say you are examining a stock on a daily bar chart, and a 5 minute bar chart.  Let's say that you see clear trends, patterns, or cycles on both charts.  First, notice that the patterns you see on each chart are not visible on the other chart.  The reason that you can see different patterns is that the 5 minute chart includes moves with a much sharper angle than the daily chart, but many of these moves cancel each other out, allowing the long term patterns to emerge.

Let's model what we see on each graph as a normal bell curve.  The blue curve on the graph below represents what you see on the 5 minute chart, and the magenta curve represents what you see on the daily chart.  The blue curve is narrower than the magenta curve because the changes (measured in dollars) are smaller; you have to zoom into your chart to see these changes.  The blue curve is taller than the magenta curve, showing a higher probability, because the small changes shown on the 5 minute chart happen more frequently than the large changes shown on the daily chart.  Again, you have to zoom in to see all of the changes. 

The yellow curve shows a combination of the blue and magenta curves.  As drawn above, the yellow curve shows price action driven 90% by the short term chart, and 10% by the long term chart.  This is a very reasonable model for a stock's movement.  The yellow curve looks a lot like a normal bell curve.  But it's different!

The yellow curve in the second picture was drawn by the same algorithm as the yellow curve in the first picture, but the second one is more leptokurtic, just so the example will be easy to see.  This curve represents a realistic model of a stock price.  The orange line is a normal bell curve which looks just like the yellow curve in the middle.  The yellow curve represents the naive model many people use for the stock price.  Notice that the orange curve is higher than the yellow curve near the middle.  Remember, the area near the middle represents smaller price changes.  So the normal bell curve is more likely than the leptokurtic one to have small changes in price.  As we move toward the ends, representing larger price moves, the yellow curve becomes higher than the orange one.  So, even though large price moves are rare for both curves, the leptokurtic curve is more likely to have a large price move than the normal curve.  (These are the \"fat tails\".)  If we did not exaggerate the picture, the same problem would exist.  It would be harder to see, especially in the middle, but the surprises would still exist in the extreme cases.

How is this different from normal?  A normal bell curve is created by a large number of independent random events.  Adding more random events distorts the curve in a very specific way, and creates another normal bell curve.  The example above was caused by events which were not entirely random or independent.  Many institutional traders recieve large buy or sell orders to complete by the end of the day.  If this is the major cause of price fluxuations, the amount total amount a stock moves between one close and the next might be random.  Durring the day, however, the stock motion is anything but random.  Initially, the trader working the large order will do everything in his power to hide his intentions and defer any changes to the stock price.  He may even buy a little to hide the fact that he needs to sell a lot.  Then, when he gets close to his goal, he'll use a large market order to finish his work for the day.  The stock price goes from artificially calm (or even moving in the wrong direction) to one large, sudden, unexpected move.

In the case above you could see some patterns on a short term graph which looked reasonable, right up until the moment where they failed big.  The short term trends and the long term trends are completely different.  It would be impossible to predict one just by knowing the other.  This is the nature of the problem of leptokurtosis.

A listed stock is a stock whose primary market is the NYSE or one of the regional exchanges.  These stocks are known collectively as listed stocks because they trade easily on any of these exchanges.  Depending on the mechanisms you use to trade, you might not even care which stocks comes from which exchange.

Our software makes it easy for you to group all of the listed stocks together, or to filter the stocks by exchange.

Linear regression is a method of organizing data.  Sometimes it is appropriate to show data as points on a graph, then try to draw a straight line through the data.  Linear regression is an algorithm for drawing such a line.  Linear regression typically uses the least squares method to determine which line best fits the data.  R-Squared is a measure of how well the data points match the resulting line.

Many trading strategies assume that the way a stock moves during a specific time of day can be used to predict the way a stock will move later in the day.  How would you verify or automate such a strategy?  Start by recording historical values.  Each day, record the size and direction of the change in the first period, and the direction and size of the second change, later in the day.  One point on a graph will represent each day's data.  If the original idea was correct, these points should look like a line.  If this is the case, a trader can look at the size of a move in the morning, and guess what the second move that day will look like.

Linear regression provides a deterministic way to this.  First, linear regression will provide an R-Squared value for the historical data.  If this value is too small, the data is not linear, so the original assumptions must change.  If R-Squared is large enough, then the linear regression will provide the best prediction of the second move each day based on the first move.

Imagine that the six points on the graph below represent the historical data that we collected above.  A common way to look at this is to say that the trend is obvious from five of the points, and the sixth point must be a mistake.  This type of reasoning leads to traders who are very successful right up until the day they loose it all.  The least squares method provides a more appropriate way to view the data, because it incorporates all of the points.  In this case it is clear that the strategy is risky, and requires more work.

Our alerts server does not endorse any strategy this specific.  Instead, it looks for and reports any unusual trading activity.  One way it does this is by using linear regression to make various predictions, then reporting when a stock diverges too far from these predictions.

Trade-Ideas uses the linear regression divergence formula to compare a stock's price movement to a straight line.  This formula is based on the way that many trading applications display the linear regression and the standard deviation on the same chart. 

If a stock price moves in a perfectly straight line, that stock has a linear regression divergence of 0.  This is sometimes called a \"bunny.\"

As the stock moves further from the mean, and closer to the lines drawn one standard deviation above and below the mean, the linear regression divergence approaches 1.  If the stock price is usually about half way between the mean and one of the standard deviation lines, the value would be 0.5 for this stock.

Mathematicians often use the R-Squared value to say how much a chart looks like a straight line.  Traders prefer to use the standard deviation because it is easy to show on a stock chart.  Our formula uses the standard deviation so our results will match what traders typically see.

The linear regression divergence will give a low value for stock prices which look very linear on a stock chart.  Like a typical stock chart, this formula sees how far the actual prices are from an ideal straight line.  These errors are compared to the overall motion of the stock price to decide how significant they are.  The idea is that if a stock price is going up very quickly, more noise is acceptable.

Trade-Ideas computes the linear regression divergence for each stock every night based on intraday charts for the previous 8 trading days.  This value is available in our our free stock screener, and in our real-time product.

A Long-Legged Doji is a traditional pattern found on Japanese candlestick charts.  A Long-Legged Doji requires only one candle.  A Long-Legged Doji occurs when the open and close price from a candle are the same, the high is significantly higher than the open, and the low is significantly lower than the open.

Stocks or other securities that you own.  If you buy a stock you are \"Long the Stock\".  Trader create a long position when they think the price will go up.

Our users typically create two stock lists, one for all of their long positions, and one for their short positions.  The alerts server will show bearish alerts for each of the user's long positions, so the user will know if one of his stocks is moving in the wrong direction.

The mean is the simplest and most common type of average.  It is computed by adding all the items in a list, then dividing by the number of items in that list.

The most popular use for the mean in stock trading is the simple moving average.  If you want to compute the 20 period moving average of a stock today, you do that by taking the mean of the last 20 closing prices for the stock.

Mean Reversion, is a process by which stocks that have moved up or down an unusual amount relative to a time frame, tend to reverse direction and move back to the averages.  Mean Reversion is also a type of stock trading strategy.  In a mean reversion trading strategy, once you are able to identify a stock or stocks that have moved an unusual amount, you take the trade in the opposite direction of the momentum.  If a stock moves up you will be trying to short sell and if a stock moves down you will be looking to buy.  Trade Ideas also has the Automated Trading Robot that allows a trader to automatically trade mean reversion strategies programmatically through their broker.

A moving average is a way to smooth out prices, or similar values, on a graph.  Rather than displaying the exact price of a stock at a certain time, you can average the current price with recent historical prices, and plot the result.  If you use more history, the graph will be further behind, but smoother.

There are several types of moving averages.  The most common types are the simple moving average (SMA), the exponential moving average (EMA), and the volume weighted average price (VWAP).

Traders can use moving averages in many different ways.  Our service generates alerts when a stock price crosses certain moving averages.

NYSE stands for the New York Stock Exchange.  This is the oldest stock exchange in the US.

The NYSE is closely related to the various regional exchanges.  All listed stocks on the various regional exchanges could be traded on any of the regional exchanges, and they were all traded by similar methods.  With the introduction of NYSE Direct Plus and other measures, the distinctions between the NYSE and the NASDAQ are slowly disappearing.

The NYSE still uses a specialist, a single hub for all orders.  This makes the biggest difference at the open, when the specialist has the most information about and control over the stock price.

Random variations in price and volume.  These can distract a trader from the real trend.  Noise becomes more noticeable when looking at shorter time frames.

One of the primary goals of the alerts server is filter out the noise and only report real trends.  This is especially important because the alerts server makes use of tick data.  If one trader buys 100 shares at an unusual price, that is not cause for alarm.  If most of the trades are at a different price, we label that one print as noise, and ignore it.

A stock is trading on high volume if it is trading more right now than it normally trades at this time of day.

Stocks trading on high volume often offer the most trading opportunities.  Our volume confirmed alerts work best with stocks trading on high volume.  Our unconfirmed alerts are sometimes more appropriate on stocks trading on low volume.

Users can filter alerts to see only stocks trading on high volume.  To do this, set the \"Min Current Volume\" filter to a value greater than 1.  Alternatively, users can create an alert window containing only stocks trading on low volume.  To do this, set the \"Max Current Volume\" filter to a value less than 1.

A stock is trading on low volume if it is trading less right now than it normally trades at this time of day.

A stock may be hard to trade when it is trading on low volume.  Users can filter alerts to remove any stocks trading on low volume.  To do this, set the \"Min Current Volume\" filter to a value greater than 1.  Alternatively, users can create an alert window containing only stocks trading on low volume, to go with a specific strategy.  To do this, set the \"Max Current Volume\" filter to a value less than 1.

Overbought is a technical analysis term describing a stock which has risen too far too fast.  Traders typically assume that there will be a correction in the stock price.  There are many formulas used to determine if a stock is overbought.  Most involve oscillators, such as the relative strength index.

This information is seldom used by itself.  Instead a trader will typically check that a stock is not overbought to confirm a buy signal.

Oversold is a technical analysis term describing a stock which has fallen too far too fast.  Traders typically assume that there will be a correction in the stock price.  There are many formulas used to determine if a stock is oversold.  Most involve oscillators, such as the relative strength index.

This information is seldom used by itself.  Instead a trader will typically check that a stock is not oversold to confirm a sell signal.

Painting the tape is the illegal practice of making a sale for the explicit purpose of changing the stock price.  A fund manager might, for example, buy 100 shares of a stock at an unusually high price right before the market closes at the end of the month.  Then he can report that his entire long position in that stock is worth that price.  Brokers have even more control over the tape.  If they have two orders they can buy the stock from one customer at one price then immediately sell it to another customer at a different price.

This practice works because traditional analysis gives so much weight to some prints while ignoring others.  Most analysis gives a very high weighting to the last print before the close.  This value can be manipulated, especially in low volume stocks and stocks with large spreads.

We use statistical analysis to avoid this problem.  When we see one small print which does not correspond to the general trend, we throw that point away.  This applies to explicit manipulation, like painting the tape, and to legitimate random noise in the market.

Although someone can request alerts based on the close price, this is the exception.  Most of our alerts do not give strong weighting to any one price, and they do not act differently when the market closes.  If there is a lot of volume after the market closes, we will continue to update the alerts.  Additionally the user can filter the alerts to remove stocks trading on low volume or with large spreads.  This allows the user to ignore stocks which are easily manipulated.

A point and figure chart is a type of chart which ignores small moves and focuses on large moves.

Our server does not support point and figure charting.  If you like this type of chart, you can get similar results from our running up, running down, running up confirmed, and running down confirmed alerts.  These alerts point out stocks making a well defined, statistically interesting move in one direction or the other.

Pre-Trade Analytics as it applies to Trade-Ideas, is the analysis of potential trade opportunities by looking at market data in real-time.  Specifically, Trade-Ideas software watches all markets for unusual trading activity which can signify an important trend or event.  This type of pre-trade analysis runs continuously throughout the trading day notifying users when specific events that they have selected occur.

A prime broker is a broker offering professional services specifically aimed at hedge funds and other large institutional customers.  While hedge funds can trade through a variety of brokers, they are virtually required to do some of their business at one or more prime brokers.  Prime brokers are typically large organizations with well known names, like Banc of America Securities, Bear Stearns, Goldman Sachs, Lehman, Merrill Lynch, Morgan Stanley, Pershing, and Speer, Leeds and Kellogg.  Prime brokerage services include helping a fund raise money and seeing to special compliance needs, in addition to all of the standard brokerage services.

Trade-Ideas offers a simple value proposition to prime brokers.  We help them compete for business.  We offer powerful technical analysis tools to the prime broker's customers, and the ability to integrate these with the research, portfolio reports, and other tools that prime broker already offers.  This allows the customers to trade more efficiently, and allows the prime broker to distinguish itself.

Whenever people buy or sell stock, they must report the transaction to the exchange.  The exchange then forwards that report.  The report of a single transaction is called a print.  This is short for \"print the tape.\"  The print includes the time, the stock symbol, the average price, and the total number of shares.

A print is the smallest piece of data related to buying stock.  Our alerts server looks at each print for all stocks that we track.  Some alerts can be based on a single print; these are the fastest alerts, but they also have the most noise.  The alerts server also accumulates data about all prints for a stock and performs statistical analysis on that data.  This allows us to filter out the noise.

Report a trade to the exchange.  The reference is to a tickertape machine.  Even though even though no one uses these machines, the idea is the same.  Sometimes people are more concerned with making sure other people know about a trade, than the trade itself.

This is the primary source of information for our alerts server.

R-Squared is a statistical term saying how good one term is at predicting another.  If R-Squared is 1.0 then given the value of one term, you can perfectly predict the value of another term.  If R-Squared is 0.0, then knowing one term doesn't not help you know the other term at all.  More generally, a higher value of R-Squared means that you can better predict one term from another.

R-Squared is most often used in linear regression.  Given a set of data points, linear regression gives a formula for the line most closely matching those points.  It also gives an R-Squared value to say how well the resulting line matches the original data points.

The alerts server uses linear regression to determine how well one stock tracks another.  Some stocks typically move in similar directions at similar times.  The server picks the highest R-Squared value to say which stocks are the best match.  The server also has a minimum value for R-Squared; if a pair of stocks has an R-Squared below this minimum value, then the server does not see this as a useful pair.  See our free stock screener for examples.

Reading the tape means watching every print and every change to the best bid and best ask of a stock.  This means working in the shortest time frame, to get the most up to date results.

Many of our alerts are specifically designed for people who read the tape.  The alerts which are labeled as \"confirmed by volume\" or \"(confirmed)\" work on a larger time scale.  Most of the other alerts report on the same time scale as reading the tape directly.

Even our slower alerts provide some of the advantages of reading the tape.  In particular, they do not discard any prints.  A person looking at a candlestick chart, for example has no way to know if the high value in a candle came from one small print, or if there was a lot of volume at that price.  A person reading the tape, or using our volume confirmed alerts, would know the difference.

Wilders Relative Strength Index, RSI, is a study that gives you another view of the price movement of a stock.  It is a type of momentum oscillator.

An indication of a top in the price is signified by the RSI crossing above 70 and conversely a bottom in the price action is signified by the RSI dropping below 30.  Different traders can use different values for these parameters.

Trade-Ideas provides access to the RSI as a filter.  This allows you to easily combine the RSI with other alerts and conditions.  For example, a momentum trader might look for our running up alerts, to find a strong trend.  He could then set the \"Max RSI\" filter 80, so he won't see alerts for stocks which are already overbought.  The reverse case works just as well.  Set the \"Min RSI\" filter to 20 to avoid oversold stocks when you are looking at running down alerts.

Stocks or other securities that you have sold when you did not own them.  To do this, you must borrow the stock.  Traders create a short position if they think the price will go down.

Our users typically create two stock lists, one for all of their long positions, and one for their short positions.  The alerts server will show bullish alerts for each of the user's short positions, so the user will know if one of his stocks is moving in the wrong direction.

Short Term Trading was once described as trading in and out of a financial instrument more than once in a year.  Today however the definition is more applicable to intra day trading where one is trading in and out of positions throughout the day.

Our alerts software helps spot interesting trading opportunities throughout the day for traders of all levels and styles.  Click here for more information.

A simple moving average is very common way to smooth data on a chart.

The algorithm is simple.  Let's say, for example, that you want to plot the 50 day moving average of a stock.  First you need to get historical data.  You need at least 50 days more data that you plan to plot. To plot today's value on the graph, add up the prices for today's close, yesterday's close, and every day's close for the past 50 trading days.  Divide the result by 50 and plot this on the graph for today. Then add up yesterday's close, the previous day's close, etc., for a total of 50 trading days, and plot that on the graph for yesterday.  Continue as needed.

Our service offers numerous types of analysis of stock prices.  Many of these are far more complicated than a simple moving average.  But we still do some work with simple moving averages because they are so simple to understand and they are so commonly used.  Traders are used to simple moving averages.

Single Stock Pre-Trade Analysis is the algorithmic monitoring of stocks on an individual basis for interesting and unusual activity. The Trade-Ideas Analytics servers directly monitor every stock and keep statistical baselines on them in real-time. Any time something unusual occurs actionable alerts are delivered directly to the end user's desktop.

Social Trading is the process of making investing/trading decisions based on content currently available on social networks like StockTwits, Twitter, Facebook, and Linkedin.  Social Trading is a relatively new way to make investment decisions.  The popularity of these networks has made it easy to share as well as gleam up to the minute market information.

Social Trading competes with as well as complements mainstream news sources like CNBC, Routers, and Bloomberg.  Big companies like Dell Computer have recently gone as far as posting their earnings on StockTwits before releasing them to mainstream news sources.

Trade-Ideas assists in Social Trading by having access to data that is streaming on the social networks.  Traders who use Trade-Ideas are able to spot unusual and interesting price action in any stock or ETF that is being actively discussed.

The spread is the difference between the bid and the ask.  The spread, in addition to any fees and commissions, is the cost of making a trade.

We use the spread, in addition to other factors, to confirm price movements.  If, for example, the spread is $0.05, then we expect print prices to vary by $0.05.  A price would have to vary by more than the spread, especially in the short term, before the move is interesting.

Our short term running up and running down alerts, for example, completely discount the spread.  First, based on volatility, we determine that a particular stock seldom changes price by more than $0.10 in a minute.  Then we see that stock change from $10.00 to $10.12.  To confirm this trend we look not only at the price history, but at the history of the spread.  If the spread is $0.01, we will probably report this alert.  If the spread is $0.03, we will not report this alert.  Even though the print prices moved a lot, some of that movement was overshadowed by the cost of buying or selling that stock.  A Trader could not reasonably expect to actually see that $0.12 gain.

A soft dollar broker is any broker who offers services in addition to executing trades, but does not charge directly for those services.  A soft dollar broker will typically charge more than other brokers for trading, then use the additional money to cover the costs of the additional services.  These services must be related to trading, and typically include research, high-end electronic trading platforms, and other tools to monitor and analyze the market.

Traders who use a soft dollar broker typically use several different brokers.  Traders often trade the minimum amount at each soft dollar broker to pay for their special services, then do the remainder of their trading at a less expensive broker.  Trade-Ideas offers services complementary to the services already offered by most soft dollar brokers.  Our service makes it easier for the broker's customers to trade, especially when we integrate with the broker's existing services, thus helping the broker generate more business.  Our white label services give the trader a constant reminder of which broker is providing their tools."), "Standard Deviation" => array( "definition" => "

The standard deviation is a mathematical formula for the average distance from the average.  This tells you how spread out a group of items is.

We don't care about the actual position of the points.  Imagine we have two lists of stock prices.  A = ($1.02, 1.04, 1.05, 1.05, 1.06), B = ($100.02, 100.04, 100.05, 100.05, 100.06).  A and B both have the same standard deviation, approximately 1.36 cents.  In both lists, the average distance between the each price in the list and the middle of the list is about $0.0136.

The order of the prints does not matter.  The standard deviation of ($1.06, 1.05, 1.02, 1.04, 1.05) is also $0.0136.  The formula for volatility is very similar to the formula for the standard deviation, but volatility takes order into account.

Repetition is important.  If we say C = ($1.02, 1.02, 1.02, 1.04, 1.05, 1.02, 1.06), we will get a different standard deviation.  Even though C and A have the same prices, some appear more in one list and some appear more in the other.  We assume that 1.02 is more important in list C than in list A.  This allows us to minimize the effects of any one print, and focus on the more common prices.

The standard deviation is often used to model noise.  We might said that A and B have the same noise, if you only look at dollars.  More often, we would say that A is a lot nosier than B because the standard deviation of A is a much larger percentage of the values A.

At first glance this may sound complicated, but traders use this concept all the time.  Stock charts almost never start from $0.  Instead, the bottom of the stock chart is near the lowest price, and the top of the chart is near the highest price.  By looking at the range of prices on the left axis of the chart, you can get an idea of the standard deviation of the stock prices.  The actual formula for standard deviation is more precise than this — it takes every point into consideration not just the high and low — but the basic idea is the same.

We use standard deviations ubiquitously in the alerts server.  When comparing a recent price action for a stock to the history of that same stock, you need precise measurements of how much the stock usually moves.  It is not enough just to know the high and the low.

Some traders use the term \"Standard Deviations\" synonymously with \"Volatility\", because the formula for volatility uses standard deviations.  For example, Bright Bands report when a stock moves a specific number of standard deviations away from the previous close.  Note that this term is not very precise, and usually needs some additional details.  In the case of Bright Bands, for example, we should point out that we scale the volatility so that one standard deviation is a normal amount for a stock to move in one day.

Statistical analysis refers to a collection of methods used to process large amounts of data and report overall trends.  Statistical analysis is particularly useful when dealing with noisy data.  Statistical analysis provides ways to objectively report on how unusual an event is based on historical data.

Our server uses statistical analysis to examine the tremendous amount of data produced every day by the stock market.  We usually prefer statistical analysis to more traditional forms of technical analysis because statistical analysis makes use of every print.  Candlesticks, by comparison, throw away an arbitrary number of prints before the analysis starts.

Trade-Ideas alerts describe stock movement using statistical analysis of price patterns.  For a complete overview of our proprietary analytics see Details of Statistical Analysis.

A stock scanner is software that watches the stock market in real time.  Professional and active retail traders use a stock scanner to help them watch many stocks simultaneously instead of trying to find specific tradable situations by hand.  Trade-Ideas software is a type stock scanner that allows users to configure exactly the kind of trading set up that they want to watch without having to use programming or scripting.  Sometimes terms such as stock scanner and stock screener are used interchangeably, however this is a mistake, a stock scanner updates information in real time as it happens whereas a stock screener typically updates once and waits for the user to request another update.

Support and resistance are important technical levels for a stock price.  Support describes a price level that the stock tried to cross below, but ultimately stayed above.  Resistance describes a price level that the stock tried to cross above, but could not.  The bare minimum requirement to draw a support line or a resistance line is that the stock must spend a significant amount of time or volume at the price level.  Specific types of support and resistance lines can be drawn based on additional chart patterns.

Trade-Ideas reports alerts labeled as \"support\" or \"resistance\" based on the simplest definition of support and resistance.  The stock price must trade a sufficient amount of volume at or near the price level, and very little if any volume on the wrong side of the price level.

Trade-Ideas also reports some alerts based on more specific types of support and resistance.  These are always labeled with more specific names, like \"channel breakdown\".

System Trading is often compared to Discretionary Trading where an individual makes trade entry and exit decision based on feel.  Using Trade-Ideas an individual is able to create many different System Trading rules across multiple time frames and test the results using our OddsMaker software.

There are several common examples of System Trading.  One that most individuals are familiar with is a system of buying a stock that when the stock prices crosses above the simple 200 day moving average on a closing basis and selling if the stock trades below the simple 200 day moving average on a closing basis.", "see also" => array("Death Cross", "Discretionary Trading", "Golden Cross", "Simple Moving Average")), "Systems Trading" => array( "see" => "System Trading"), "Technical Analysis" => array( "definition" => "

Technical analysis is the study of a stock, or the market as a whole, strictly by using the price and volume history of a stock.  Technical analysis uses little or no information about the actual business behind the stock.  The common belief is that a stock price represents all known information about a stock.  Technical analysis is an alternative to fundamental analysis.

Our service provides a very specialized type of technical analysis, performing real-time statistical analysis on all relevant market data.  Like many people we believe that changes in the fundamentals will be visible through technical analysis.

A technical breakdown is when the price of a stock or index closes below a price that had been resistance.

A technical breakout is when the price of a stock or index closes above a price that had been resistance.

Technical levels are important price points, such as support and resistance for stocks and indices.  Depending on whether stocks trade above or below technical levels could signify important trend shifts.

A chart showing the price of every print, and the prices of the best bid and ask at every time.  Tick charts are less common than candlestick charts because they require significantly more data.

Most of our analysis works from tick data, not candlesticks, so our documentation is filled tick charts.  These charts show users what they would be missing if they only used candlestick charts.

Tick data refers to any market data which shows the price and volume of every print.  Additionally tick data often includes information about every change to the best bid and ask.  The most common alternative to tick data is candlestick data.  Although the charts may be drawn different ways, it is common to compress tick data by grouping the ticks into candlesticks.  This compressed data is more commonly available than tick data because it requires significantly less memory, bandwidth, disk space, etc.  In addition to the computer hardware involved, most people can only take in a limited amount of tick data at one time.

Tick data is essential for certain types of analysis.  Our software requires tick data primarily to separate the noise from the real trends.

A topping tail is a candlestick pattern which some people believe marks the end up an upward move.  After several consecutive candles with large green bodies, the stock tries to make another large green candle.  But the price pulls back before the end of the last candle, leaving a large wick or tail at the top of the candle.

Tops refer to a stock price which is higher than nearby stock prices.  Bottoms refer to prices which are lower than nearby prices.  An ideal strategy is to repeatedly buy the bottoms and sell the tops.

Tops and bottoms are slightly different from highs and lows.  When you talk about highs and lows, you typically decide on a fixed timescale in advance.  For example, if you are looking at a chart where each candle represents one day, the very top of each candle is the high for the day, and the bottom of each candle is the low for the day.  Tops and bottoms, on the other hand, can come at any time.  Look at a chart, and look for any price that's higher than the ones near it, and that's a top.

There are many chart patterns which are typically interpreted as signals that the stock has hit a top or a bottom.  Trade-Ideas searches for the more common examples, listed below, and reports and alert each time it sees one.

Tops and bottoms are notoriously hard to predict in advance.  That's why these patterns typically take the most time to verify.  A book describing these patterns will typically show the pattern in the middle of the chart, long after the stock has moved in the expected direction.  Trade-Ideas attempts to recognize and confirm these as soon as possible, but these are some of the slowest alerts that we report.

In addition to reporting tops and bottoms directly, we sometimes use these internally.  Fibonacci retracement alerts, for example, are based on tops and bottoms.  The actual formula for a Fibonacci Retracement is trivial, with one catch.  You have to start with the price of the most recent top and bottom before you can apply the formula.  Trade-Ideas automatically finds the tops and bottoms for you.  We can report these alerts much more quickly, as the alert happens after we've had time to identify the tops and the bottoms.

Trading above describes a print which is at a higher price than the best ask at the time of the print.  This indicates an interesting event because someone was willing to sell the stock at one price, but someone else decided to buy the stock at a higher price.

Our analysis often compares the price of a print to the price of the best bid and ask at the time of the print.  This is especially useful for very fast analysis, when you can't wait for volume confirmation.

Trading below describes a print which is at a lower price than the best bid at the time of the print.  This indicates an interesting event because someone was willing to buy the stock at one price, but someone else decided to sell the stock at a lower price.

Our analysis often compares the price of a print to the price of the best bid and ask at the time of the print.  This is especially useful for very fast analysis, when you can't wait for volume confirmation.

Trading between describes a print which is at a lower price than the best ask and higher price than the best bid at the time of the print.  This often indicates a price negotiated as part of a large order; small orders will typically take place at exactly the bid or ask price.

Our analysis often compares the price of a print to the price of the best bid and ask at the time of the print.  For small orders, trading between makes us very confident of the price trend, because all available information is saying the same thing.  For block trades, however, this is actually an unusual event.  Block trades typically trade above the ask or below the bid.

Electronic Trading Software allows end users to place trades directly to the market through their PC.

Trade-Ideas alerts software is integrated with all the leading direct access trading software products.  This integration allows our users to spot an opportunity through Trade-Ideas, then place an order to buy or sell in just two clicks.  Click here for a list of integrated software products.

A trading strategy is a set of rules that guide a trader in his trading decisions.  In some cases, including many hedge funds, a strategy will be spelled out, at least in part, by a contract, and compliance officers will review all trading to make sure it matches the strategy.  Many independent traders have only their own determination and will power to ensure that they stick with a strategy.

Our service helps people maintain a trading strategy.  All alerts are generated objectively.  The filters can be customized to match a strategy.  This will help traders find opportunities that are consistent with their strategy.  The server will not lower its standards on slow days, and will only display alerts meeting the required standards.

A trailing stop is a feature of many trading applications which helps you lock in profits.  The software will watch each of your positions.  Each time one of your long positions goes up, the software adjusts your stop loss.  If the prices moves back down a predetermined amount, you will hit the stop loss, and the software will automatically sell your stock.  The software constantly compares the current price of each of your long positions the highest price since you owned the stock.  Short positions work the same way, but the direction is reversed.

Trade-Ideas uses trailing stops as a model for some of our analysis.  This allows us to examine price patterns completely independent of time.  This is a unique form of analysis.  Most back testing tools do not cover trailing stops because this type of analysis requires tick data.

Volume Weighted Average Price.

The VWAP is the average of the price of every print, weighted by the size of the print.  This is a common way to summarize the price of a stock on a given day.  For example, some brokers will accept an order where the client gets a price based on the VWAP.  Also, some institutions grade their traders by comparing the trader's performance to the VWAP.  The VWAP has become more important recently because of its use in algorithmic trading.

The alerts server computes the VWAP on every print.  Some alerts are based on the VWAP.

The average amount that a stock moves in a given amount of time.

This is one of the most important pieces of historical information for our alerts server.  This allows us to determine which moves are interesting, and which are noise.  In some cases the user can configure the server to show more or fewer alerts; this configuration is usually done in terms of the volatility, rather than pennies or basis points.

Our server uses a slightly different definition of volatility than most people.  Most people consider only price and time.  We also look at volume.  Our volatility is to the traditional type of volatility what a VWAP is to a simple moving average.

Volume weighted volatility is our own proprietary version of the standard volatility algorithm.  Roughly speaking, this is like the normal volatility algorithm, applied to an equi-volume graph.  We expect the stock price to move more when the stock trades more, and less when the stock trades less.

We use volume weighted volatility in most of our alerts.  Since alerts are intended to point out unusual events, the server needs to know how much each stock normally moves.

The wick of a candlestick is the thin part that is drawn above and below the body of the candlestick.  The highest part of the top candle represents the highest price in the candle.  The lowest part of the bottom wick represents the lowest price in the candle.

Wicks are traditionally drawn thinner than bodies because they are less important in traditional candlestick analysis.  Traditionally, most of the information about the trading for a day was described by the opening price and the closing price.  This tradition started with daily candlesticks, and might not apply to intra-day candles.

On a simple charts, some people draw trendlines that touch the highest point of the top wick or the lowest point of the bottom wick.  Other people draw lines that ignore the wicks and touch the edges of the body.  On busier charts, lines will often have to go through many wicks in many different places.  Some authors call this region \"congestion\".

A Z-Score is a statistical measure.  A Z-Score tells how a single data point compares to normal data.  A Z-Score says not only whether a point was above or below average, but how unusual the measurement is.

The algorithm to compute a Z-Score is simple.  Start with a list of numbers representing common values for something.  Compute the mean of this list.  The mean is just a simple average.  Then compute the standard deviation of the list of numbers.  The standard deviation is the average distance between each number in the list, and the mean of the list.  Now take a new number that you want to compare to the list of numbers.  Subtract the mean of the list from that number, then divide the result by the standard deviation of the list.  The final result will be the Z-Score of the new number compared to the list of numbers.

The algorithm used to compute a Z-Score is almost identical to the algorithm used to compute volatility.  The difference is that a Z-Score only looks at the values of the normal data.  Volatility also looks at the order of the normal data.

Trade-Ideas uses Z-Scores and similar methods internally when evaluating market data.  It is not enough to know that a stock price is changing by a certain number of pennies or even a certain percent.  We always compare this to the normal fluctuations in the stock's price, to see how unusual this even is.  If the Z-Score is too low, we do not report an alert; we consider this to be noise.  Z-Scores are often used in computing the stock specific filter values; larger Z-Scores lead to higher quality alerts.