10 market terms made simple
This post looks at 10 market terms that might be difficult to understand, and makes them simple
A paid subscriber recently suggested that I produce an article (or a glossary) whereby some difficult market terminology was explored and made simple.
Thank you for that kind suggestion and here is said article.
The explanations are in Layman’s terms.
Please do give this article a like and also restack so that others can benefit from it.
10 Market Terms made simple
1 - Blow Off Top
This occurs when prices shoot up fast and then crash just as quickly. It is like a balloon popping.
It’s the final burst of excitement before a sharp fall!
2 - Dead Cat Bounce
A quick rise in prices during a bigger downtrend. It looks like recovery, but the fall isn’t over.
If not traded properly then this can often trap investors.
3 - Yield Curve Inversion
This happens when short-term bond yields become higher than long-term ones. This is very unusual and is often seen as a warning that a recession might be coming.
I wrote about Bond Yields in this recent article.
Bonds: Yields, Curves, Inversions and simple examples
Today’s post explores bonds. The aim of the post is to deliver a plethora of information about bonds but also to do so in Layman’s terms. It is crucial that we understand how they work and what they signal. Thank you for the continuing feedback with regards to all podcasts/posts.
4 - Short Squeeze
Traders that are betting against a stock/commodity are forced to buy it quickly, making the price jump even more.
It’s like being caught in a trap with no easy exit.
Silver bugs would absolutely love for this to happen!!
5 - Pump and Dump
People hype up a stock to raise the price, then quickly sell for profit.
Everyone else is left holding something that just dropped in value.
Think recent meme coins i.e. Trump Coin, Melania Coin
6 - Liquidity Trap
This occurs when people don’t borrow or spend much, even when interest rates are low.
Money stays stuck in the system instead of flowing through the economy.
7 - Derivative
A financial contract whose value comes from something else, like a stock or commodity.
It’s like making a bet on how the price will move without actually owning the item.
8 - Margin Call
A margin call happens when someone borrows currency to invest, but the losses get too big. As a result, your broker wants more cash to cover the positions.
If you don’t pay, your investments may be sold to repay the loan.
9 - Stagflation
Prices rise (inflation) but the economy is not growing (stagnation), and unemployment may also be high.
It's the worst of both worlds!
10 - Flash Crash
A sudden, sharp drop in prices that happens in minutes.
Often caused by fast computer trades triggering each other (or Trump tweeting something as has been the case recently!)
Please do give this article a like and also restack so that others can benefit from it.
