Trading, returns and risk
Orders, long and short, gains measured right, and risk in numbers.
Start
- 3 lessons
- 19 min
About this section3 goals5 key words
How orders reach the market, what long, short and margin mean, how to measure a gain correctly, and how professionals put a number on risk.
What you will be able to do
- Choose between a market and a limit order, and explain long, short, margin and leverage with their traps.
- Turn prices into simple, total and yearly returns, and see why a loss needs a bigger gain to recover.
- Read volatility, drawdown, correlation and beta.
Five words to know
- limit order
- buy or sell only at your price or better
- short
- selling borrowed shares to buy them back later, cheaper you hope
- return
- the percent change in value, including any cash paid out
- volatility
- how much returns swing around, in percent
- drawdown
- the fall from a peak to a later low
- 01Orders, long, short and marginAn order is your instruction to a broker, and long, short and margin say which way you bet and whether you borrowed to do it.6 min
- 02Returns and percentagesA return is the gain or loss compared with what you paid, written as a percentage so that a 20 dollar stock and a 2,000 dollar stock can be compared.5 min
- 03Understanding riskFour numbers describe how much an investment can hurt: volatility (how bumpy), drawdown (how deep the worst fall), correlation (do two things move together) and beta (how much it moves with the market).7 min
Educational material about reading market data, not investment advice.