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Glossary — E
EMA (Exponential Moving Average)
A moving average that gives more weight to recent prices, making it more responsive to new information than a simple moving average. Common periods include 9, 21, 50, and 200.
Engulfing Pattern
A two-candle reversal pattern where the second candle's body completely covers (engulfs) the first candle's body. Bullish engulfing appears at bottoms; bearish engulfing at tops.
Entry
The price or condition at which a trader opens a position. Aggressive entries are taken immediately on pattern completion; conservative entries wait for additional confirmation.
Evening Star
A bearish three-candle reversal pattern: large bullish candle, small-bodied star candle, large bearish candle. The mirror image of the morning star, signaling the end of an uptrend.
Exhaustion Gap
A price gap that occurs near the end of a strong trend, signaling that the move is running out of steam. Unlike breakaway gaps, exhaustion gaps are typically filled quickly.
Elliott Wave Theory
A technical analysis framework proposing that markets move in predictable wave patterns: five impulse waves in the trend direction followed by three corrective waves. Developed by Ralph Nelson Elliott in the 1930s.
Expectancy
A formula that calculates the average amount a trader can expect to win or lose per trade: (Win Rate x Average Win) - (Loss Rate x Average Loss). Positive expectancy is required for long-term profitability.
Equity Curve
A graph plotting cumulative profit/loss over time. A smooth, upward-sloping equity curve indicates consistent profitability. Sharp drawdowns or flat periods signal strategy issues.