Trading News for Beginners – Five Words Newcomers Should Learn
In this article, you’ll learn about these five words which are often used in trading news:
When used in the context of market news, certain words can act as catalysts, like the platinum converting gases in a catalytic converter engine. These words carry entire stories, meanings and background information that often move markets.
You’ll see these words repeatedly in market stories and, depending on the context, they send signals to traders and investors about market conditions. Sometimes the signals are loud enough to shift sentiment.
The word assets is a hot button in the financial news, and it appears in stories whether the market is up or down. When market conditions are normal and investor confidence is robust, risk-on assets like stocks, currencies, and real estate tend to become favourites because their potential returns are perceived as higher than traditional risk-off assets like fixed-income bonds. As you can see, risk-on and risk-off assets are umbrella terms that cover a range of individual instruments.
Assets come in all shapes and sizes and even take on different states to become underlying. When an asset that’s offered on a public exchange becomes an underlying one, it becomes part of a contract known as a financial instrument. The most common foreign exchange instrument is the Contract for Difference (CFD). CFDs are traded on underlying assets like currency pairs and as stock investment becomes increasingly available through online brokers like Admirals, CFDs are also traded on shares.
When an asset underlies a CFD, the trader or investor does not own the asset itself. Instead, a positive or negative return is made on the difference in the opening and closing prices of the asset during a given period.
Volatility is another word to look out for in the news. It describes unusually sharp rises or falls in the price of an asset, a market sector or an entire stock exchange. Volatility normally indicates a riskier market environment and trading in these conditions requires a good level of expertise. When the word volatility starts appearing in the market news, it’s time to evaluate your strategy and doublecheck that careful risk management is in place.
If you had a dollar every time the word bullish is used in a market story, you wouldn’t need to trade and invest at all because it’s a daily occurrence when the economy is booming, and your bank account would be full! Bullish trends indicate that an asset’s price is rising, and that confidence is strong in the trading markets. The term is often used in the commodity and currency markets as well as to describe optimism in the stock markets.
What goes up must come down as the old saying goes. A bullish trend can quickly turn into a bearish trend, in other words, a market downturn in which the price of an asset, sector or market falls rapidly as traders and investors sell off riskier assets. This can happen during an economic recession or as a result of negative sentiment because of geopolitical factors.
Here we should take the opposite phrase: what goes down must come up. Every downturn reaches its lowest point, and the market turns around. If it turns sharply upwards and market sentiment sustains the rising trend, it’s called a rally. A rally relates to a previous downturn and indicates that investors and traders have revived their buying interest and regained their confidence.
That wraps up our overview of some commonly used words in trading news, keep in mind that the news can influence the markets and it’s well worth staying updated and researching your trades in the context of the latest news trends in the financial media.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.