Ever heard of people using the words:
Momentum
RSI
Alpha
If you don't know what these terms mean, you're more susceptible to being tricked or manipulated and will have a harder time researching stocks. Understanding these concepts is crucial for making informed investment decisions and protecting yourself in the stock market.
Basic word knowledge
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Alpha in the stock market measures how much an investment or portfolio outperforms or underperforms a benchmark index. Positive alpha means better performance than the benchmark, while negative alpha indicates worse performance.
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Momentum in the stock market refers to the tendency of a stock or asset to continue moving in its current direction—whether up or down—based on its recent performance. If a stock has been rising, it’s likely to keep rising, and if it’s been falling, it may continue to fall.
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Volatility in the stock market refers to how much and how quickly the price of a stock or asset fluctuates. High volatility means the price changes rapidly and by large amounts, while low volatility means the price is more stable.
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Market Cap (or Market Capitalization) is the total value of a company's shares of stock. It’s calculated by multiplying the stock price by the total number of outstanding shares. It gives a quick estimate of the company's size.
Market indicator word knowledge
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MACD (Moving Average Convergence Divergence) is a popular technical indicator in the stock market that shows the relationship between two moving averages of a stock's price. It helps identify potential buy or sell signals by highlighting changes in the strength, direction, momentum, and duration of a trend.
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RSI (Relative Strength Index) is a technical indicator used in the stock market to measure the speed and change of price movements. It ranges from 0 to 100 and helps determine if a stock is overbought (typically above 70) or oversold (typically below 30), signaling potential buying or selling opportunities.
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SMA (Simple Moving Average) is a technical indicator in the stock market that calculates the average price of a stock over a specific period of time. It smooths out price data to help identify the direction of a trend. Traders use it to spot potential buy or sell signals based on how the current price compares to the SMA.
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ROC (Rate of Change) is a momentum indicator in the stock market that measures the percentage change in a stock's price over a specific period. It shows how quickly the price is moving up or down. Traders use ROC to identify the strength of a trend and potential reversal points.
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VIX (Volatility Index) is a measure of the market's expectation of volatility over the next 30 days. Often called the "fear gauge," it reflects investor sentiment and uncertainty. A high VIX indicates increased market fear and expected volatility, while a low VIX suggests more stability and confidence in the market.