You now have an understanding of the basic vocabulary used in the trading an environment. To go over the basics again, just click here. Let's take the next step and add to your overall vocabulary.
- Volatility: A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction.
- Volume: Volume is the number of shares or contracts traded in a security. For every buy, or sell and each transaction contributes to the total volume. That is, when buyers and sellers agree to make a transaction at a certain price, it is considered one transaction. If only five transactions occur in a day, the volume for the day is five.
- Averaging: The idea here is to allow market swings to unfold and use them to establish a larger position at better prices than your current level. Medium to longterm trade strategies can typically benefit from averaging into a position. This refers to the practice of buying/selling at successively lower/higher prices to improve the average rate of the desired long/short position. This will move your overall position value in the desired direction. Sometimes adding to winning a position is acceptable, such as after a technical level breaks in the direction of your trade or you get a signal. This is generally considered too risky and can "pyramid" you into a less desirable position.
- Bulls and Bears: A bullish position is when a person has a positive outlook on markets overall. The bulls always run. A bearish position means that a person will feel negative about the market and expect things to go down.
- Leverage: Leverage is a concept that can enable you to multiply your exposure to a financial market without committing extra investment capital.
- Margin: In trading, the margin is the funds required to open and maintain a leveraged position. For more information on margins, please click here.
- FOMO: This is an acronym referring to "fear of missing out". This is a term that means aside from its literal meaning, that people sometimes make bad decisions based on the trades they have or may have missed.
You now have a comprehensive understanding of the common lingo used by traders all over the world. Using White Shark, everything is summarized to give you the most competitive edge to make that great trade. Whoever, understanding more of the trader world only enriches our experience overall. For part two of intermediate trading vocabulary, please click here.