Technical analysis glossary
Plain-English definitions of the terms you meet when working with technical indicators — from "overbought" to "whipsaw".
Backtesting
Testing a strategy or indicator on historical data to see how it would have performed. Backtests are useful sanity checks but can mislead through overfitting, repainting or ignoring real trading costs.
Breakout
When price moves decisively beyond a defined level such as a range boundary, support or resistance, often signalling the start of a new move. Breakouts can be genuine or false, so many traders wait for confirmation.
Confluence
When several independent factors point to the same conclusion at the same place, such as a support level, a trendline and an oversold oscillator all lining up. Confluence raises the conviction of a setup.
Crossover
When one line crosses another, such as a fast moving average crossing a slow one or the MACD line crossing its signal line. Crossovers are common trade triggers but whipsaw frequently in sideways markets.
Death Cross
The bearish counterpart of the golden cross, when a shorter moving average crosses below a longer one (typically 50-day below 200-day), suggesting a longer-term downtrend. Like the golden cross, it confirms a move already underway.
Divergence
When price and an indicator move in opposite directions. Bullish divergence is price making a lower low while the indicator makes a higher low; bearish divergence is price making a higher high while the indicator makes a lower high. It warns of fading momentum, not a guaranteed reversal.
False Signal
A signal that suggests a move which does not materialise, leading to a losing or breakeven trade. All indicators produce false signals; confirmation and context are used to filter out the worst of them.
Golden Cross
A bullish signal that occurs when a shorter moving average (often the 50-day) crosses above a longer one (often the 200-day), suggesting a longer-term uptrend may be establishing. It is a lagging confirmation, not an early warning.
Histogram
A bar chart showing the gap between two lines, most famously the MACD histogram (MACD line minus signal line). Growing bars indicate accelerating momentum; shrinking bars indicate it is fading, often before a crossover.
Lag
The delay between a change in price and an indicator reflecting it. Lag is the price paid for smoothing — the calmer and more reliable a line looks, the further behind current price it tends to sit.
Look-back Period
The number of past bars an indicator's formula uses, such as the 14 in RSI(14). A shorter period reacts faster but is noisier; a longer period is smoother but lags more.
Mean Reversion
The tendency of price to move back toward an average after straying far from it. Mean-reversion strategies fade extremes — buying oversold, selling overbought — and work best in ranging rather than strongly trending markets.
Momentum
The speed and strength of a price move — how fast price is changing rather than its level. Momentum often peaks before price, which is why momentum indicators can give early warnings of a turn.
Moving Average
An indicator that averages price over a set number of past bars to smooth out noise and reveal the underlying trend. Simple moving averages weight every bar equally; exponential ones weight recent bars more heavily.
Oscillator
An indicator plotted in a separate panel that moves within a range or around a centre line, measuring momentum or extremes. Examples include RSI and Stochastic (bounded 0 to 100) and MACD and CCI (centred on zero).
Overbought
A condition where an oscillator such as RSI is high (commonly above 70), suggesting price has risen quickly relative to its recent history. It flags a possibly stretched move, but in a strong trend a market can stay overbought for a long time.
Overfitting
Tuning a strategy so closely to past data that it captures random noise rather than a real pattern. An overfitted strategy shows a perfect backtest but fails on new data because noise does not repeat.
Overlay vs Sub-panel
The two ways indicators are displayed. Overlays are drawn directly on the price chart in price units (moving averages, Bollinger Bands); sub-panel indicators sit in a separate pane below on their own scale (RSI, MACD).
Oversold
The mirror of overbought — an oscillator reading that is low (commonly below 30), suggesting price has fallen quickly relative to its recent range. It flags a possibly overdone decline, not an automatic buy, since it can persist in a downtrend.
Range / Consolidation
A market moving sideways between a roughly horizontal support and resistance, without a clear trend. Oscillators tend to work well in ranges, while trend-following tools tend to whipsaw.
Relative Strength
In the RSI context, the ratio of average gains to average losses over the look-back period, which is normalised to produce the 0 to 100 RSI. More broadly, relative strength can also mean one instrument's performance compared with another or with an index.
Repainting
When an indicator's past signal changes, moves or disappears after the fact, so what it showed live differs from what it shows in hindsight. Genuine repainting invalidates backtests; the current unclosed bar merely updating is normal, not repainting.
Resistance
A price level where selling has previously been strong enough to halt or reverse a rise. It acts as a ceiling until decisively broken, after which it can flip to support.
Signal Line
A smoothed version of an indicator's main line used to generate crossover signals, such as MACD's 9-period signal line or the %D line on the Stochastic. Crossings of the main line and signal line are common triggers.
Smoothing
Any technique that blends several bars of data to produce a less jagged line, such as simple, exponential or Wilder's averaging. Smoothing makes an indicator easier to read but always adds lag.
Standard Deviation
A statistical measure of how spread out values are around their average, used to gauge volatility. Bollinger Bands, for example, are placed a number of standard deviations away from a moving average.
Support
A price level where buying has previously been strong enough to halt or reverse a decline. It acts as a floor until decisively broken, after which it can flip to resistance.
Timeframe
The period each bar or candle represents, from one minute to one month. The chosen timeframe shapes what an indicator shows, and comparing several timeframes helps place short-term signals in a larger context.
Trend
The general direction in which price is moving over time — up (higher highs and higher lows), down (lower highs and lower lows) or sideways. Identifying the trend is the first step most trading approaches take.
True Range
A measure of a bar's full price movement that accounts for gaps — the greatest of the current high minus low, the high minus the previous close, and the previous close minus the low. It is the building block of the Average True Range (ATR).
Typical Price
The average of a bar's high, low and close, calculated as (High + Low + Close) / 3. It is used as the price input for indicators such as CCI and VWAP instead of the closing price alone.
Volatility
The degree to which price fluctuates over a period. High volatility means larger, faster swings; low volatility means calmer movement. Indicators like ATR and Bollinger Bands measure or respond to volatility.
VWAP
The Volume-Weighted Average Price — the average price over a session weighted by volume traded at each price. Widely used intraday on Nifty and Bank Nifty as a fair-value benchmark that institutions reference.
Whipsaw
A false signal in which an indicator flips one way and then quickly reverses, causing a losing trade. Whipsaws are most common when trend-following tools are used in sideways, range-bound markets.
Wilder Smoothing
A slow exponential averaging method devised by J. Welles Wilder and used in RSI, ATR and ADX. It gives more weight to older data than a standard exponential moving average, producing steadier readings.