Definitions

Before continuing, there are some terms that should be defined.

Bear Market - Falling prices.

Bull Market - Rising prices.

Closing - On a "closing" basis. The final price of the trading day or period.

Contract - The total size and value of one trading unit of a single commodity. The value of a contract varies with each commodity.

Intraday - During the day. Intraday prices are those occurring during a daily trading session; see "Closing."

LI - A 63-degree line drawn from P2.

L2 - A 45-degree line drawn from P2.

L3 A 45-degree line drawn from P3.

Liquidate - Buy or sell a current position for cash.

Long - "Going long" the market.

During a bull market, buying a contract in anticipation of selling it later at a higher price.

Margin Market Order Minor High

Minor Low

Open Interest

The amount of capital required to be put "at risk" to buy or sell a contract.

An order which instructs your broker to buy, or sell, at the commodity's current market price.

A high prior to prices entering the Retracement Zone, from which S5 is drawn, and which:

1) Has higher highs before it,

2) Has lower highs after it, and

3) Is used in bear markets.

A low prior to prices entering the Retracement Zone, from which S5 is drawn, and which:

1) Has lower lows before it,

2) Has higher lows after it, and

3) Is used in bull markets.

The total number of contracts that, during a specific time period, have not been liquidated by delivery or transaction.

A significant high, or low, from which prices will be moving. This point will be the basis for determining the 50% Retracement Zone.

In a bull-to-bear market, PI will have lower highs before and after it.

In a bear-to-bull market, PI will have higher lows before and after it.

NOTE: PI of one range may become P2 of the next price range.

A significant high or low to which prices have moved from PI, and from which prices will move into the Retracement Zone.

In a bull-to-bear market, from the prior PI, P2 will have higher lows before and after it.

In a bear-to-bull market, from the prior PI, P2 will have lower highs before and after it.

NOTE: P2 of one range may become PI of the next price range.

P3 - A point on the horizontal price level of PI and on the vertical level of P2.

Position - The total number of contracts held by a trader.

RZH - Retracement Zone High.

The upper limit of the Retracement Zone. The RZH is the price level at which:

LI intersects L3 in a bull trend, L2 intersects L3 in a bear trend.

RZL - Retracement Zone Low.

The lower limit of the Retracement Zone. The RZL is the price level at which:

L2 intersects L3 in a bull trend, LI intersects L3 in a bear trend.

S4 - A 26-degree line drawn from P3.

(With gaps or a fast market, S4 could be 45-degrees.)

An initial "stop-loss" line used when prices EXIT the Retracement Zone.

A 45-, 63-, 75-, or 82-degree "stop-loss" line, drawn from a minor low or high, and used to liquidate a current position, after prices have ENTERED the Retracement Zone.

Short

"Shorting the Market."

In a bear market, "borrowing" one contract to sell, in anticipation of buying it back later, at a lower price.

Significant High

A high which:

1) has lower highs immediately before and after it, and

2) towards which prices had been rising, and

3) from which prices are now falling.

Significant Low - A low which:

1) has higher lows immediately before and after, and

2) towards which prices had been falling, and

3) from which prices are now rising.

Stop-loss Order - An order which becomes a market order only if a specific price (the "stop") is reached.

Buy stop - used in bear markets; the "stop" is placed above the entry price. Sell stop - used in bull markets; the "stop" is placed below the entry price.

Volume - The number of transactions made in one commodity during a specific time period.

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