All industries have their own jargon—that includes investing. And not all jargons used in various Brokers Review and Forex Broker Reviews are easy to master. Before you dive deeper into the stock, currency, commodity, or futures market, here are the 10 investing terms that should be totally clear to you.

  1.   Diversification

When we say diversification, we’re talking about spreading the risk and opportunities across your portfolio. This is the process of buying different asset classes from various industries, sectors and markets. This is a very effective way of lowering risks.

  1.   Bull Market

A bull market is a market where share prices or interest and bullish sentiments rise. When you are a bullish trader, you are optimistic about the future of the market, which is at this time continuing an upward trend.

  1.   Bear Market

The bear market is the opposite of the bull market. In this market, traders and investors are bearish, which means they are pessimistic of the market’s prospects and futures. A bear market follows a downward trajectory, and many investors are scuttling around trying to protect their investments.

  1.   Long Position

Having a long position or going long on a trade is simply the same as buying a trade. You do this if you believe that the value of the stock or currency will go up, viewing to make a profit when it actually goes up. This is what most common investors do.

  1.   Short Position

Having a short position or going short on a trade is the opposite of going long. When you go short, you can sell now the stock or asset that you expect to go down in the near future. You sell a borrowed asset in the market for its initial price, and when its value declines you buy it back at a lower price.

  1.   Market Crash

A market crash is the quick spiralling down of market prices due to various reasons, which can be international catastrophes like war, economic recession, global epidemic, et cetera. During a market crash, lots and lots of people withdraw their money from banks and try to liquidate all assets. There’s a general panic, which affects and feeds the overall market crash.

  1.   Market Correction

Do not confuse a market correction for a market crash. A market correction is a downward movement of the overall market that is typically at least 10%. This often happens as the market’s reaction to an overvaluation.

  1.   Risk Tolerance

When we say risk tolerance, we’re talking about the amount of risk or uncertainty you are willing to endure. This associates your understanding and assessment of your ability to face large swings in market prices and investments. Knowing your risk tolerance is very important.

  1.   Volatility

When we talk about volatility, we refer to the market’s movements and the speed and amount of swings that can occur within a period of time. Volatility can be measured in different ways, including standard deviation. Typically, the more volatile an asset has the riskier it gets.

Conclusion

It is important to know these investing jargons because you will certainly encounter all of them in your whole investing career. The better you understand them and the deeper your knowledge about them, the more you can beat the market.

 

About The Author

Hattie Williamson