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Glossary — C
Candlestick
A type of price chart that displays the open, high, low, and close for a given time period. Originated in 18th century Japan for rice trading. Each candle shows the price range and direction of movement.
Channel
Two parallel trendlines containing price action — an ascending channel trends up, a descending channel trends down, and a horizontal channel is a range. Breaks from channels signal potential trend changes.
Chop (Choppy Market)
A market condition with erratic, sideways price movement and no clear trend. Choppy markets frustrate trend-following strategies and often lead to false signals from patterns.
Climax Volume
An extreme spike in trading volume that typically marks the end of a trend move. Climax buying volume signals a potential top; climax selling volume signals a potential bottom.
Close
The last price at which an asset traded during a given time period. In a bullish candle, the close is above the open; in a bearish candle, below.
Confirmation
A subsequent price action signal that validates a pattern. For example, a bullish candle following a hammer confirms the reversal. Trading without confirmation increases risk.
Confluence
When multiple technical signals align at the same price level or time, increasing the probability of a successful trade. For example, a bullish engulfing at a key support level with RSI oversold.
Consolidation
A period of sideways price movement after a directional move, where the market pauses to digest gains or losses. Often precedes a breakout in the direction of the prior trend.
Continuation Pattern
A chart pattern that suggests the current trend will resume after a brief pause or consolidation. Examples include flags, pennants, and rising/falling three methods.
Counterattack Line
A two-candle pattern where the second candle opens with a gap in the direction of the trend but closes at the same level as the prior candle's close, signaling a potential reversal.
Cup and Handle
A bullish continuation pattern resembling a tea cup: a rounded bottom (cup) followed by a smaller pullback (handle). Breakout above the handle confirms the pattern and targets a measured move.
Closing Marubozu
A candlestick with no shadow on the closing side — no upper shadow on a bullish candle or no lower shadow on a bearish candle. Indicates strong conviction held through the close.
Concealing Baby Swallow
A rare bullish four-candle reversal pattern at the bottom of a downtrend, consisting of two marubozu bearish candles followed by a gapped-down candle with a high wick into the prior body and another bearish candle that engulfs the third.
Correction
A decline of 10% or more from a recent price peak in a broader uptrend. Corrections are larger than pullbacks but smaller than bear markets, and they reset overextended conditions.
Change of Character (CHoCH)
In Smart Money Concepts, the first sign that the market trend is changing — when price breaks a key swing high in a downtrend or a key swing low in an uptrend for the first time.
Capitulation
The final stage of a sell-off where remaining holders give up and sell in panic, creating extreme volume and price decline. Often marks the absolute bottom before a reversal.
Confirmation Bias
The tendency to seek out and favor information that confirms an existing belief while ignoring contradictory evidence. In trading, this leads to cherry-picking bullish signals while in a long position.