P1:a/b P2:c/d QC:e/f T1:g
gloss JWBK182-McDowell April 25, 2008 16:35 Printer: Yet to come
Glossary 181bear market A market characterized by prolonged broad declining prices. Some
negative information has entered the market to create this condition. Generally the
downturn in price is in excess of 20 percent. Not to be confused with a correction.
bid–ask spread The difference between the bid and the ask. The spread narrows
or widens according to the supply and demand for the security being traded.
bid price The price a buyer is willing to pay.
black Monday Refers to October 19, 1987, when the DJIA fell 508 points after
sharp drops the previous week.
black box system This is a 100 percent mechanical system that requires absolutely
NO discretion. The concern with these systems is that they are unable to adapt to
ever-changing market cycles. The reality is that over time, all systems require some
form of discretionary decision making to be consistently profitable.ARTis not a
black box system.
blue chip company A large, nationally recognized, financially sound firm with a
long track record usually selling high-quality and widely accepted goods and ser-
vices. Examples: General Electric and IBM.
bond A debt investment. Investors lend money to an institution by buying bonds
and receive fixed interest payments in return. When the bond matures, the investor
receives the principal back.
bond market The bond market, also known as the debt, credit, or fixed income
market, is a financial market where participants buy and sell debt securities usually
in the form of bonds.
bracketed market This is also known as a consolidating, range-bound, drunk,
choppy, sleepy, channeled, sideways or nontrending market. When a market is
bracketed it is stuck in a price range between an identifiable resistance and sup-
port level. On a chart, a bracket will be seen as a sideways horizontal line. Some
of the most powerful and profitable trends come out of markets that have been
bracketed for more than 20 price bars.
breakout A sharp change in price movement after the market has traded sideways
for at least 20 price bars. This is beyond a previous high (or low) or outside the
boundaries of a preceding price bracket.
broker An individual or online firm that is paid a commission for executing cus-
tomer orders; an agent specializing in stocks, bonds, commodities or options and
must be registered with the exchange where the securities are traded.
bull Someone who believes that prices will rise and is generally optimistic about
future market returns.
bull market A market characterized by prolonged broad rising prices. Positive
information has entered the market to create this condition. Over 70 percent of
historic periods have been bull markets.