Common stock market sayings

The stock market is central to both national and worldwide economies. Pension funds, house prices and many other areas of everyday life are dependent upon healthy stock markets. However, the world of investment can be a very strange and bizarre place with some unique sayings.

The trend is your friend

The trend is your friend is a very popular saying in investment circles. In simple terms, share prices are based upon public information and in many cases non-public information. So, while the public information on a particular company may be suggesting a share price direction very different to that on the market, take note of the trend. There may be things going on behind-the-scenes that you don’t know about – yet.

Dead cat bounce

This is one of the most bizarre and you could describe it as disturbing sayings on the stock market. The term “dead cat bounce” refers to a share price that has tanked and then bounced off the bottom. Without going into too much detail, anything that falls from a great height would hit the ground, bounce slightly and then fall back again. This is the trend that many people associate with a share price which is under pressure, experienced a sell-off and then a partial recovery. Inevitably the share price will go down again.

Insider trading

Everybody will have heard of the term insider trading which has been made famous in many stock market-related movies. This is basically information which is not in the public domain in which an individual has either dealt themselves or encouraged another to do so. If you talk to governments and regulators around the world they will suggest that insider trading is under control. Well, next time you watch a share price moving for “no apparent reason” we advise monitoring the shares to see when the real information is made public.

Bull market

A bull market is a market which is in a strong uptrend with good prospects for the future. We know that bulls are extremely strong animals, which is likely where the term originates. In fact, there is also a direct relationship between the term bull market and bear market which refers to bull and bear fights of years gone by. These animals are seen to be polar opposites hence the positive and negative stock market descriptions.

Bear market

The term bear market is a direct comparison to bull market and relates to a market which is going down. The term bear market is based upon the way in which bears attack their prey, striking them by swiping their paws downwards. When markets are in a bear phase they are traditionally moving downwards in the same direction as a swiping bear’s paw.

Blue-chip investments

The term blue-chip investment relates to a traditional poker set which consists of chips which are white, red and blue in colour. The blue chips are the highest denomination therefore blue-chip investments are seen as being of the highest quality.

Pac-man defence

The Pac-man defence is a term which was coined back in the 1980s and relates to the popular videogame of the time. In the game, Pac-man was being chased by ghosts, collecting various items as he attempted to evade their clutches. However, each element he collected made him grow and ultimately he was able to chase the ghosts and eat them. Overlay the strategy on a company which has received a hostile takeover bid from a third party. Using the Pac-man defence strategy the company will turn the tables and try to acquire the business that made the hostile takeover in the first place.

Over the next few weeks and months we will write about numerous other unique sayings from the world of investment. You will be surprised!

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