Don’t get confused by financial jargon. Stocks are simple once you understand their language. Here’s a look at some terms that you’re likely to use in the financial markets.
Everyone in the financial market can benefit from monitoring shifts in sentiment. Volatility, which shifts a market, has the power to influence prices, but it’s not measured in terms of points or dollars. Any state of volatility is a spurt of momentum—not value or cost. Consider it as the behavior of a financial market. High volatility is confirmed when prices take larger strides than what’s found during normal conditions.
Some investors believe that volatility can make you more money. A highly volatile market, however, is a risky one. Predictability decreases as volatility increases. Volatility is not defined as a price increase. A volatile market goes in both directions—spurts of up or down. If a market isn’t volatile, it doesn’t mean that there are down-trending prices. Low volatility reveals less momentum along with shorter distances between price moves.
There are two common orders used in financial markets. New investors tend to rely on market orders, which are placed right where prices are at—live. Your second option is called a limit order. This order only activates when prices meet the point that you’ve specified. This order is used by successful investors, for with it, the market has to meet your analysis before putting you into a trade.
Each order is managed by three basic features. Modern brokers offer the option of setting a “stop-loss, a take profit, or a trailing stop loss.” A stop loss is activated when a position becomes risky. It “stops” you from taking large losses. A take profit takes you out of a position once your profit level is hit. A trailing stop loss incrementally adjusts your risk—as your position moves in a profitable trade.
The Bulls and Bears
Volatility measures sentiment in the same way that bears and bulls do. It’s not important who the bears and bulls actually are. These market entities result from a collective of buying or selling power. Rising prices display bullish sentiment. Falling prices are those that show bearish sentiment. The aggression of rising prices reveals the determination of bulls; the aggression in falling prices reveals a bearish conviction.
About The Author
Jason Bond is a Professional Trader, Entrepreneur, and Founder of the popular swing trading program, Jason Bond Picks. He originally became interested in stock trading after finding success with the help of fellow trader, Jeff Bishop. Together, they launched the well-known trading program, Raging Bull Trading, in 2010, as a way to help other traders find success in the stock market. Today, Jason Bond remains at Raging Bull as a trader and educator, where he also offers his program, Jason Bond Picks.