Michael Fowlkes: Things of the market that every trader should know

1. MACD - The MACD, which stands for moving-average convergence/divergence line, is probably the most widely used technical indicator. It signals not only the trend, but also the momentum of a stock. The idea behind the MACD line is to compare the short-term and long-term momentum of a stock in order to estimate its future direction. Basically it is the comparison of two moving averages, which you can set for any time period you like, but typically the 12-day and 26-day moving average of the stock are used.

2. Head and Shoulders Pattern - The head-and-shoulders pattern is not an indicator like our first two examples, but instead a chart pattern that technical analysts look for. Simply put, a head-and-shoulders pattern appears when a stock rises to a peak to form the first "shoulder" and then falls. Then it rises above the previous peak to form the "head" and then falls below the first shoulder before rising again to the level of the first shoulder and falling, hence creating the second shoulder.

3. Gaps - Gaps occur when a stock opens much higher or lower than the previous day closing price. Typically, this occurs due to some news that is released when the market isn't open, such as earnings, which result in a sizable move during after-hours trading, and the stock picks up at this point when the normal trading day gets under way. Gaps are important because they create new support or resistance lines for the security.

4. Double Tops or Bottoms - Another chart pattern that forecasts a changing trend is a double top or bottom. Spotting this chart pattern is a fairly simple process. In terms of a double top, a stock on two occasions tests a specific price level, and in both cases the stock hits resistance. On the other side of the coin, a double bottom occurs when a stock falls to a certain price level and finds support on both occasions. A double top indicates future selling, while a double bottom indicates that the stock is getting ready to trade higher.