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Clear filtersThe Bull Flag Set-Up
A sharp advance, then a shallow drift against it, and a ceiling on that drift which is the one price the whole set-up is read from.
The Bear Flag Set-Up
A sharp decline, then a shallow drift back up against it, and a floor under that drift which is the one price the whole set-up is read from.
The Bull Pennant Set-Up
The same pause as a bull flag drawn as a triangle rather than a channel: the highs step down, the lows step up, and the range squeezes toward nothing.
The Bear Pennant Set-Up
A hard decline followed by a coil rather than a bounce: highs stepping down, lows stepping up, and a range that runs out of room.
The Gap-and-Go Set-Up
A stock opens well above the range it has been trading in and never trades back into it, with the first half-hour's range becoming the reference everything afterwards is read against.
The Gap-Down Continuation Set-Up
A stock opens well below its range on a repricing it cannot recover from, and the first half-hour's low becomes the reference the rest of the session is read against.
The Momentum Stair-Step Set-Up
An advance that moves in stages: a short run, a tight shelf that holds above the last one, another run, and a series of shelves that never gives one back.
The Ascending Triangle Set-Up
A flat ceiling with a rising floor underneath it: buyers arriving earlier at every dip while one price keeps capping the rallies.
The Descending Triangle Set-Up
A flat floor with a falling ceiling above it: sellers accepting less at every rally while one price keeps absorbing the declines.
The Cup and Handle Set-Up
A rounded decline and recovery back to a prior high, then a small drift below it, and a test of the level the whole structure is organized around.
The Double Bottom Set-Up
Two lows at roughly the same price with a rally between them, and the high of that rally as the level the reversal is confirmed at.
The Double Top Set-Up
Two highs at roughly the same price with a dip between them, and the low of that dip as the level the reversal is confirmed at.
The Rounding Top Set-Up
An advance that loses speed, flattens into a dome, and turns down over months — with the price the advance came from as the level that ends it.
The Three Rising Valleys Set-Up
Three successive lows, each higher than the last, under a ceiling formed by the rallies between them — a base that announces itself before the level goes.
Float and Shares Outstanding
Float is the number of shares actually available to trade: shares outstanding minus insider and restricted holdings. A small float explains a great deal of unusually fast price movement.
Bonds: Coupon, Par, Price and Yield
A bond is a loan cut into tradable pieces. Its price and its yield move in opposite directions by arithmetic necessity, and that single fact drives most of what happens in fixed income.
The Treasury Yield Curve
The curve plots what the US government pays to borrow across every maturity. Its level, its slope and its changes are the most watched picture in macro.
Foreign Exchange and the Dollar
Currencies are quoted in pairs, so every quote is a ratio between two things that both move. For equity traders the dollar is the pair that matters most.
How Commodities Trade
Commodities trade mostly as futures with delivery dates, which introduces a cost of carry that equities simply do not have.
OTC Markets and the Tiers Beneath the Exchanges
Thousands of securities trade without an exchange listing, under tiers that differ enormously in how much a buyer is entitled to know.
Short Selling, Borrow and Short Interest
Short selling is selling borrowed shares and buying them back later. The borrow, its cost and the disclosure schedule together explain why heavily shorted stocks behave as they do, squeezes included.
Options: Calls, Puts, Strikes and Expiry
An option is a right with a deadline. Because it expires, its value decays with time as well as moving with price, which is what makes it behave unlike a share.
Dilution, Offerings and Reverse Splits
Dilution is the shrinking of existing shareholders' ownership when a company issues new shares. Every new share shrinks the claim of the old ones, and all of it is disclosed, usually before it happens.
ADRs and Foreign Listings
A way of holding a foreign company through a US-listed security. The wrapper introduces a ratio, a fee, a currency exposure and a sponsor.
Circuit Breakers and Halts
A trading halt pauses trading in one stock, for pending news or a volatility band, or in the whole market after a large decline. Halts pause the move rather than prevent it.
Settlement and Clearing
A trade is agreed in an instant and completed a day later. What happens in between involves a clearing house that stands between the two sides.
How an Index Is Built
An index is a set of rules about what to include and how to weight it. Those rules determine what the index measures and produce mechanical flows when they change.
Going Public: IPO, Direct Listing and SPAC
Three routes to a public listing, with different mechanics, different disclosure and different consequences for the shares that arrive on the market.
The Cash Flow Statement
The statement that reconciles reported profit to cash that actually moved. It is the hardest of the three to dress up, which is why experienced readers start here.
EBITDA, and the Argument About It
Earnings before interest, taxes, depreciation and amortization is the most used and most criticized measure in finance. Both the use and the criticism are reasonable.
Free Cash Flow
The cash a business produces after the spending required to keep producing it. It is what funds dividends, buybacks, debt repayment and acquisitions.
GAAP and Non-GAAP
Filed statements follow standardized rules. The headline numbers a company puts in its press release frequently do not, and the reconciliation between the two is where the reading happens.
Debt, Leverage and Coverage
Borrowing magnifies returns in both directions. The ratios that matter are how much is owed relative to earnings, and how comfortably the interest is covered.
Leases
Lease obligations were once disclosed in a footnote and are now on the balance sheet. The change made a large existing liability visible without altering any economics.
Inventory Accounting
Which costs are assigned to goods sold is a policy choice. In a period of changing prices it changes reported profit, taxes and the balance sheet.
The PEG Ratio
An attempt to price growth alongside profit by dividing the P/E by a growth rate. Useful as a rough sort, fragile as a valuation.
Price-to-Sales and Price-to-Book
Two multiples that work where earnings do not: one anchored to revenue, the other to the balance sheet. Each is useful in a narrow set of situations and misleading outside it.
Enterprise Value and EV/EBITDA
Market cap prices the equity; enterprise value prices the whole business. Comparing companies with different debt loads requires the second one.
Valuing Against a Peer Set
A multiple only means something next to something else. Choosing what that something else is does most of the analytical work.
EV to Sales
Enterprise value divided by revenue. The multiple used where there are no profits, and the one that requires the strongest assumption to interpret.
Free Cash Flow Yield
Free cash flow divided by market value, expressed as a percentage. Harder to manipulate than an earnings yield and noisier than one.
MACD
MACD (moving average convergence divergence) plots the gap between a 12-period and a 26-period exponential moving average, with a signal line. It is unbounded, which makes it a trend indicator in an oscillator's clothes.
Bollinger Bands
Bollinger Bands are a moving average with bands set a number of standard deviations above and below it. The bands widen and narrow with volatility, which is the whole point of them.
ATR: Average True Range
ATR (Average True Range) measures how far a security typically moves in a period, gaps included. It has no direction, which is what makes it useful for sizing positions and placing stops.
The Stochastic Oscillator
Where the close sits inside the recent high-low range, expressed 0 to 100. It asks a different question from RSI and reaches extremes far more readily.
VWAP
VWAP (volume-weighted average price) is the average price every share traded at during a session, weighted by volume. It is an execution benchmark for institutions first and a chart reference second.
Fibonacci Retracements
Fibonacci retracements are levels drawn at set fractions of a prior move, such as 38.2, 50 and 61.8 percent. Their mathematical case is weak; their relevance comes from how many people draw them.
Pivot Points
Reference levels computed mechanically from the prior period's high, low and close. Their appeal is that they are fixed in advance and identical for everyone.