Looking On The Bright Side of Finances

Financial Terms You Should Brush-Up on Before Trading

The periodic declines in the value of world stocks which has been witnessed in the previous years have always accompanied a bunch of technical terms that most of us are not conversant with. This has necessitated most financial investors to take a refresher lesson on the most important them. You most likely fail to trade successfully in the unstable worldwide market if these terms are not known to you.

A term that has gained widest popularity in the near past has been the term correction. It may appear straightforward but it has a twist to its meaning. This usually occurs because a certain asset like a stock declines in market value by a minimum of at least ten percent from a previous high value. It is, notwithstanding, imperative to take note that this term suggests a drop in the value of an asset like a stock, commodity or a bond.

Another awfully common term is market close. It is common for a large number of market watchers to wait for the market t close until they can declare that an asset has indeed entered correction. During bull markets, it is a common phenomenon for corrections to occur. There is likewise a probability for the market to go quite a while without a correction. The term bull market usually refers to a rise in stock indexes by twenty percent or more. Following the steep fall in the price of most stocks, the market has seen a continuous recovery that can be traced back to 2009.

A bear market occurs when the value of stocks fall by twenty percent or more for a given period which is at least two months. It is common for a given disturbance in one economy also disrupts other economies. This condition is known as a contagion since turbulent market influences are continually spreading from economy to economy. An excellent incidence of contagion is when sell-offs in Asia affect sell-offs in other markets like America.

Being a fairly new term, algorithmic trading has seen a rise in its use among stock traders. An algorithm is essentially a coded message that guides a computer to play out a progression of activities. In the case of the stock exchange market, the algorithms being referred to are utilized to enable modified computers to place stock trades at surprisingly high speeds. These algorithms enable the computer to perform the tasks without suffering fatigue or boredom and at a faster speed than any one human being. Because it sets the speed at which trading occurs, algorithms hold a great influence on the stock market.

There are various other financial terms that will be worth learning however these will go a long way in helping you understand the market. It is advisable that you continue learning new financial terms if you are to trade effectively in the modern market.

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