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Daily Chart: A line graph that displays the intraday movements of a given instrument. This contrasts to longer term charts, such as those that show an instrument's movement over a period of days, months or even years
Daily charts display all of the price movement for the period and are typically used by day traders to implement short-term strategies.
Because the forex operates 24 hours a day, there is technically no stoppage of trading between one trading day and the next as there is in other markets. As a result, the convention is to consider a forex day to be from 5pm EST to the same time on the following day, and most daily charts are displayed this way.
Dark Cloud Cover: In candlestick charting, a pattern where a black candlestick follows a long white candlestick. It can be an indication of a future bearish trend.
Essentially, the large black candle is forming a "dark cloud" over the preceding bullish trend.
The dark cloud must have a closing price that is: within the price range of the previous day, but, below the mid-point between open and closing prices of the previous day.
Darvas Box Theory: A trading strategy that was developed in 1956 by former ballroom dancer Nicolas Darvas. Darvas' trading technique involved buying into instruments that were trading at new 52-week highs with correspondingly high volumes
A Darvas box is created when the price of a stock rises above the previous 52-week high, but then falls back to a price not far from that high. If the price falls too much, it can be a signal of a false breakout, otherwise the lower price is used as the bottom of the box and the high as the top.
In 1956, Darvas was able to turn an investment of $10,000 into $2 million over an 18-month period. While traveling for his dancing, Darvas would obtain copies of The Wall Street Journal and Barron's, but he would only look at the stock prices to make his decisions. It has been said that Darvas was less happy about the profits that he made than he was about the ease and peace of mind that he got from implementing his system.
Skeptics of Darvas' technique attribute his success to the fact that he was trading in a very bullish market. They also say that returns comparable to the ones he saw can't be attained if this technique is used in a bear market.
Death Cross: A crossover resulting from a instrument's long-term moving average breaking above its short-term moving average or support level.
As long-term indicators carry more weight, this trend indicates a bear market on the horizon and is reinforced by high trading volumes. Additionally, the long-term moving average becomes the new resistance level in the rising market.
Demarker Indicator: An indicator used in technical analysis that compares the most recent price action to the previous period's price in an attempt to measure the demand of the underlying asset. This indicator is generally used to identify price exhaustion and can also be used to identify market tops and bottoms. This oscillator is bounded between -100 and +100 and, unlike many other oscillators, it does not use smoothed data.
Technical traders primarily use this indicator as a method of identifying the riskiness of the levels in which they wish to place a transaction. Generally, values above 60 are indicative of lower volatility and risk, while a reading below 40 is a sign that risk is increasing.
Descending Triangle: A bearish chart pattern used in technical analysis that is created by drawing one trendline that connects a series of lower highs and a second trendline that has historically proven to be a strong level of support. Traders watch for a move below support, as it suggests that downward momentum is building. Once the breakdown occurs, traders enter into short positions and aggressively push the price of the asset lower. The chart below is an example of a descending triangle.
This is a very popular tool among traders because it clearly shows that the demand for an asset is weakening, and when the price breaks below the lower support, it is a clear indication that downside momentum is likely to continue or become stronger. Descending triangles give technical traders the opportunity to make substantial profits over a brief period of time. The most common price targets are generally set to equal the entry price minus the vertical height between the two trendlines.
Diamond Top Formation: A technical analysis reversal pattern that is used to signal the end of an uptrend. This relatively uncommon pattern is found by identifying a period in which the price trend of an asset starts to widen and then starts to narrow. This pattern is called a diamond because of the shape it creates on a chart.
Since technical traders use this pattern to predict a reversal of an uptrend, a short position is taken when the price falls below the lower ascending trendline. In general, price targets are usually set to be equal to the entry price minus the distance between the top and the bottom of the pattern.
Directional Movement Index - DMI: An indicator developed by J. Welles Wilder for identifying when a definable trend is present in an instrument. That is, the DMI tells whether an instrument is trending or not.
The scale for the DMI is from 0 to 100. The average directional movement index (ADX) is a moving average of the DMI.
Disparity Index: A technical indicator that measures the relative position of the most recent closing price to a selected moving average and reports the value as a percentage. A value greater than zero suggests that the asset is gaining upward momentum, while a value less than zero can be interpreted as a sign that selling pressure is increasing.
Extreme values of this indicator can be a very useful tool for contrarian investors to foretell periods of exhaustion. Once the price is excessively pushed in one direction, there are very few investors to take the other side of the transaction when the participants wish to close their position, ultimately leading to a price reversal. Similar to the ROC indicator, important signals are generated when the indicator crosses over the zero line because it is an early signal that momentum is building.
Displaced Moving Average: A moving average that has been adjusted forward or back in time in order to forecast trends. Displaced moving averages are constructed by taking the moving average and shifting it by a number of intervals, either positive or negative. If the number is negative, the displaced moving average will lag the original moving average, and if the number is positive the displaced moving average will lead the original moving average.
The aim behind displaced moving averages is to allow traders to center the moving average or make the displaced moving average fit better with the price movement, thereby removing some of the noise in the moving average. Some traders believe that displaced moving averages have more predictive power than basic moving averages such as simple and exponential.
Doji: A name for candlesticks that provide information on their own and also feature in a number of important patterns. Dojis form when a security's open and close are virtually equal.
A doji candlestick looks like a cross, inverted cross, or plus sign. Alone, doji are neutral patterns.
Donchian Channels: A moving average indicator developed by Richard Donchian. It plots the highest high and lowest low over the last period time intervals.
The Donchian Channel is a simple trend-following breakout system. The signals derived from this system are based on the following basic rules:
1. When price closes above the Donchian Channel, buy long and cover short positions.
2. When price closes below the Donchian Channel, sell short and liquidate long positions.
Double Bottom: A charting pattern used in technical analysis. It describes the drop of a stock (or index), a rebound, another drop to the same (or similar) level as the original drop, and finally another rebound.
The double bottom looks like the letter "W". The twice touched low is considered a support level.
Most technical analysts believe that the advance off of the first bottom should be 10-20%. The second bottom should form within 3-4% of the previous low, and volume on the ensuing advance should increase.
Double Top: A term used in technical analysis to describe the rise of a stock, a drop, another rise to the same level as the original rise, and finally another drop.
The double top looks like the letter "M". The twice touched high is considered a resistance level.
Downtrend Describes the price movement of a financial asset when the overall direction is downward. A formal downtrend occurs when each successive peak and trough is lower than the ones found earlier in the trend.
Many traders seek to avoid downtrends because they can drastically affect the value of any investment. A downtrend can last for minutes, days, weeks, months or even years so identifying a downtrend early is very important. Once a downtrend has been established (series of lower peaks) a trader should be very cautious about entering into any new long positions.
Dynamic Momentum Index An indicator used in technical analysis that determines overbought and oversold conditions of a particular asset. This indicator is very similar to the relative strength index (RSI). The main difference between the two is that the RSI uses a fixed number of time periods (usually 14), while the dynamic momentum index uses different time periods as volatility changes.
This indicator is interpreted in the same manner as the RSI where readings below 30 are deemed to be oversold and levels over 70 are deemed to be overbought. The number of time periods used in the dynamic momentum index decreases as volatility in the underlying asset increases, making this indicator more responsive to changing prices than the RSI.
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