Glossary

A list of some of the terms I use throughout this blog. I'll use my own explanation for some terms and others will have direct quotations from Master the Markets by Tom Williams.

  • Volume - "Volume shows the activity of trading during a specific period. If the volume is taken in isolation it means very little – volume should be looked at in relative terms. Therefore, if you compare today's volume with volume during the previous thirty days (or bars) it is easy to see if today's volume is high, low or average compared to the volume seen in the past. If you stand thirty people in a line, it is easy for you to see who the tall ones are, compared to the others. This is a skill of human observation, so you will have no problems identifying whether the volume is relatively high, low or average."

  • VSA / Volume Spread Analysis - Founded by Tom Williams and now heavily associated with Tradeguider. It is what it says, analysis of volume and spread.

  • Spread - Also known as range; the distance between the highest and lowest price traded. Like volume, this should be looked at in relative terms to the surrounding bars.

  • Up Bar - The price of the bar closed higher than the price of the previous bar, irrespective of the high and low price of the bar.

  • Down Bar - The price of the bar closed lower than the price of the previous bar, irrespective of the high and low price of the bar.  

  • SM / Smart Money - A name given to the market professionals / market makers / private syndicate traders.

  • Supply - Selling.

  • Demand - Buying.

  • Accumulation - "To accumulate means to buy as much of the stock as possible, without significantly putting the price up against your own buying, until there are few, or no more shares available at the price level you have been buying at. This buying usually happens after a bear move has taken place in the stock market (which will be reflected by looking at the Index)."  

  • Distribution - "At the potential top of a bull market, many professional traders will be looking to sell stock bought at lower levels to take profits. Most of these traders will place large orders to sell, not at the current price available, but at a specified price range. Any selling has to be absorbed by the market-makers, who have to create a 'market’. Some sell orders will be filled immediately, some go, figuratively, 'onto the books‘. The market- makers in turn have to resell, which has to be accomplished without putting the price down against their own, or other traders’ selling. This process is known as distribution, and it will normally take some time for the process to complete."

  • ND / No Demand - In VSA terms this is a name given to a single bar (in the right context!) that is a narrow spread up bar closing in the middle or high that has volume less than the previous two periods.

  • NS / No Supply - In VSA terms this is a name given to a single bar (in the right context!) that is a narrow spread down bar closing in the middle that has volume less than the previous two periods.

  • Test - Can appear in many forms, but for the purposes of this blog I pretty much take it to mean the same thing as No Supply, except that it closes near the high. Tests can have low, medium or high volume but it's important to know that it's actually testing something. Previous strength in the background for example.

  • Stopping Volume - "At some time during a bear move, or during a reaction, prices will start to resist further down-moves. These resistance areas are frequently seen on a down-day, on very high volume, closing on the highs. Buying must have entered the market for it to close on the highs.  

  • Selling Climax - "After substantial falls have already taken place (bear market), the market may open with wide spreads down, on very high volume. There will be panic amongst the herd! However, the next day (or bar) is up. This action represents a rapid transfer of stock, generated from panic selling to professional money (news will be doom and gloom to help this transfer of stock). This is known as a selling climax."  

  • Buying Climax - "Uninformed traders acting on emotional urges are rushing into the market and buying in huge amounts, while the professional money is busy selling to them. A buying climax is usually more difficult to recognise than a selling climax, simply because it does not happen so often. The news will be good; everybody will be feeling good about the market. Your judgement will be clouded by all the euphoria around you. You will have to be a very strong character and a good trader to recognise the weakness and act in the exact opposite direction to what everybody else seems to be doing."

  • Upthrust - "Up-thrusts usually appear on market tops. That is after a rally. Specialists know the market is weak; the price will have been marked up during the day to close on the low and at best in the middle."

  • 2BR / Two Bar Reversal - A term i've picked up from a friend i've met through trading. It's different to the VSA / Tradeguider definitions of a top and bottom reversal and is another signal that can be taken where a ND / NS doesn't exist.
  1. Buy - First bar pushes down and closes on the low with average volume, the second bar makes a lower low before closing on or near the high with less volume than the previous bar.
  2. Sell -  First bar pushes up and closes on the high with average volume, the second bar makes a higher high before closes on or near the low with less volume than the previous bar.

  • Volume Zone - An area marked on my charts, based on a specific bar determined by it's volume and spread. This zone is marked by a fibonnaci and carried into the future.

  • Fibonnaci / Fibs - I don't use fibonnaci in the traditional sense by any means. If you want more information on that I suggest checking out Baby Pips. I place my fibonnaci based on two criteria. 1; high volume. This is the most important aspect for me. 2; wide spread. Most of the time, these two criteria are combined, occasionally i'll place a fib if it is a wide spread but not necessarily the highest volume. I essentially only use fibs to find the 50% area. I'll always place the zone from high to low so that the following reads true.

  • High / 100% - the high price of a fibbed bar.

  • 50% - the mid price of a fibbed bar - dashed line on my charts.

  • Low / 0% - the low price of a fibbed bar.

  • Volume at Volume - When two volume/fibbed zones meet or are formed in the same area. For instance a new high volume wide spread bar appearing at the high of a previously marked zone.

  • PnF / Point and Figure - A huge game of noughts and crosses (tic-tac-toe) that got well out of hand somewhere in the 1920's. Jokes aside, it's another charting method based purely on price movements. Time isn't a factor. We use a time frame, for example 1hr, but we won't get a new column for every hour that passes. X marks a rise in prices, O marks a fall in prices. Very handy for finding support and resistance levels.